Editorial: Don’t give utilities a blank check

Monday, March 26, 2001 | 10:01 a.m.

Gov. Kenny Guinn says he wants Nevada's electric utilities to have the ability to pass on to consumers the actual costs that the companies absorb when they pay for their fuel. But before a serious hearing is given this proposal -- which if approved could cost consumers millions of dollars in higher rates -- the public needs to be assured that utilities will once again face much more scrutiny from state regulators than they currently receive.

One perfect example of why this issue needs some serious investigation is that last month the state Public Utilities Commission approved a rate increase for Sierra Pacific Resources that would hike the average Nevada Power Co. residential bill by 17 percent. The $300 million boost was approved hastily by state regulators, who didn't even bother holding hearings as they usually do to determine if the increase was justified. The commission abdicated its responsibility, saying it would review the case later to assess whether the company in fact needed the additional money.

It also is worth noting that the same day the Sun reported on Guinn's proposal to help out the utilities, the newspaper ran a story that left electricity customers fuming. Sierra Pacific Resources, the parent company of Nevada Power, revealed in a filing with federal officials that two of its executives received hefty severance packages last year worth a combined $6.1 million. Ex-chairman Michael Niggli obtained $3.5 million and former company president Malyn Malquist received $2.6 million after their employment contracts were terminated by the company. And don't forget the 25-cents-per-share dividend that Sierra Pacific paid out to its shareholders earlier this year, a decision that cost $20 million. If the company was indeed near the brink of financial disaster -- as it hinted at prior to securing the $300 million rate increase -- then its business decis ions should have faced a grilling by state regulators.

While the state Public Utilities Commission needs to become more aggressive, the same can be said for the Federal Energy Regulatory Commission. This previously little-known federal agency oversees the wholesale electricity marketers, who recently have been accused of gouging the utilities in the West. Maybe Nevada Power can make a case that they themselves are being taken advantage of and that some of these energy costs should be passed along to consumers. But until state regulators give an indication that they are going to be tougher on these monopolies, the public has no way to know what the utilities' true plight is.