Consumer advocate to petition Legislature to delay sale of plants

Wednesday, Jan. 17, 2001 | 11:59 a.m.

CARSON CITY -- To protect Nevadans against big rate increases and power shortages such as those in California, state Consumer Advocate Tim Hay said Tuesday he will try to delay the sale of coal-fired generating plants to out-of-state companies.

Hay will petition the state Public Utilities Commission to delay the sale by Nevada Power Co. and its sister company, Sierra Pacific Power Co., of their plants until he has a chance to present a plan to the Legislature that will keep rates from rising.

Hay wants the Legislature to enact a law that would require these generating plants to sell enough of their power at cost to supply the basic needs of homeowners at a low rate.

"Once these plants are sold, there is no guarantee that Nevada consumers will benefit from the low-cost electricity generated at the plants," Hay said.

The sale of these assets was a condition of the merger between Sierra Pacific and Nevada Power. The two Nevada-based utilities, in negotiating to sell the plants, have contracts to buy back electricity at a low rate.

But that deal ends Feb. 28, 2003, and that's when the problem will start to fester, Hay said.

Steve Oldham, senior vice president of corporate development and strategic planning for parent company Sierra Pacific Resources Corp., said the sale of the plants is nearing completion.

"We're obligated under legal contracts and by state and federal regulatory orders to sell all our power plants. And we are attempting to complete those sales.

"In addition, the buy-back contracts of the energy produced by these plants will generate power supplies for our customers at very favorable prices up to March 2003 and result in significant savings."

Oldham said he will be monitoring any petition Hay gives to the PUC.

Once the sale of these plants is approved, the state loses jurisdiction over the new out-of-state owners. They will come under the authority of the Federal Energy Regulatory Commission.

The plants will be able to sell on the open market and probably at higher prices. They would be free to ship more electricity out of Nevada, especially in the southern part of the state because of its more abundant transmission lines, and sell it at higher prices elsewhere.

Hay said these plants might sell their power to the large customers in Nevada and the electricity would "not be available to small business and residential customers in the state."

"This moratorium on the sale of the plants will provide the governor and the Legislature an opportunity to explore alternatives to the complete deregulation of the electricity market in Nevada, such as a nonprofit public power authority that could operate the plants and purchase additional power needed to meet Nevada's energy needs," Hay said.

In California, public utilities have sold their power generating plants to out-of-state companies that have increased the rates. Critics accuse these companies of shutting down the plants for unscheduled maintenance to push the demand for power higher and thus raise the rates.

"Nevada needs to be certain that the impact of California's electric crisis does not affect our residential and small-business consumers," Hay said.

"By reconsidering the sale of the coal-fueled generation assets, Nevada can protect the long-term interests of our most vulnerable customers."

Nevada Power and Sierra Pacific Power are expected to present their sales applications to the utilities commission by the end of this month or early February. The commission has 60 days to act on the applications.

The utilities have contracted to sell nine generating facilities for $1.7 billion, which doesn't include the buy-back provisions. Only three of the plants are coal-fired, and those are the sales that Hay wants to stop.

Nevada Power is selling its interest in the coal-fired Reid Gardner plant in Southern Nevada to NRG Energy of Minneapolis and Dynegy of Houston. That plant produces 590 megawatts, of which the California Department of Water Resources is entitled to 200 megawatts.

Nevada Power also is selling its 14 percent interest in the Mohave Power Plant near Laughlin to AES Corp., of Arlington, Va. It has not yet sold its 11.3 percent interest in the Navajo Power Plant near Page, Ariz. Sierra Pacific is selling its 50 percent interest in the Valmy plant in Northern Nevada to NRG Energy.

Hay said he will file a petition to delay the sale of these coal-fired generators until the Legislature acts on his proposal to establish basic affordability rates tied to the cost of producing electricity.

These coal-fired plants now produce energy at below 4 cents per kilowatt hour. Under the Hay plan, the Legislature would permit the utilities commission to require that a certain amount of the energy produced by these plants be sold at a price tied to the cost of production, not what the market will bear.

"We can't count on FERC to act only in Nevada's interest once the plants are on the open market," he said.

The advocate said the utilities commission, with legislative authority, could require the plants to sell the low-cost power to cover the basic needs of a household. For instance, he said the threshold for receiving the lower cost power might be 250 to 300 kilowatts.

"Conceivably, the entire energy needs of the smallest households could be met from electricity within the affordability rate, and there would be a large incentive for these households to conserve energy in order to remain in that rate," he said.

"The affordability rate will also provide larger households that consume energy at levels that exceed the first tier a greater incentive to conserve because the higher levels of energy consumption would come at a higher cost," he said.

There is a question of whether the utilities commission could order these low rates on its own authority, rather than waiting for the Legislature, Hay said.

"If the Legislature doesn't act, I will oppose the sale of these generating assets," he said.