Guinn’s plan at center of power debate

Monday, March 26, 2001 | 11:15 a.m.

CARSON CITY -- Gov. Kenny Guinn believes efforts to stop the sale of Nevada Power Co. and Sierra Pacific Power Co. power plants will cost consumers more in the short run but will pay dividends after 2003.

But there's uncertainty about how hard customers will be hit in the next two years, and some suggest consumers would suffer from rate shock if the plan espoused by Guinn and others is not carefully tailored.

The Assembly Special Committee on Energy, which passed the bill to halt the $1.7 billion sale of power plants by the two utilities, takes up the rates issue Thursday.

Part of Guinn's energy plan, in addition to sidetracking the sale, is to return to the old way of regulating the utilities.

If the sale is stopped, the utilities, both owned by Sierra Pacific Resources of Reno, must be able to recover what they pay for the increasing price of fuel to run their plants, Guinn said. They would need periodic rate increases to recoup their full fuel costs.

That would mean millions of dollars in higher rates in the short term. Under the present system, the utilities are permitted to recover only a fraction of their higher fuel costs.

If the power plants were allowed to be sold, the short-term savings to customers might be $815 million over the next two years, Guinn said. By keeping the power plants, the public will benefit by $1.6 billion to $3.2 billion in the next three to five years, according to the governor.

The state can't stop the sale of the power plants without returning to the utilities what is called "deferred energy accounting," the right to fully recover what it costs for fuel, such as natural gas, Guinn said.

The governor said rising energy prices won't be stopped, but the plan to keep the power plants and allow higher rates for fuel would mitigate them.

The special Assembly Committee on Energy approved a bill Thursday to stop the two utilities from selling off the plants until 2003. The bill also blocks a sale from 2003 until 2007 unless there is a financial emergency.

The committee did not deal with the "deferred energy accounting" but will tackle that issue Thursday when it looks at the rates.

State Consumer Advocate Tim Hay says there would be rate shock for consumers if deferred energy accounting were put into effect immediately after the sale of generating plants was stopped. Hay says there must be a transition period to allow a comprehensive examination of whether the utilities would be collecting too much from their users.

Hay noted both Nevada Power and Sierra Pacific have been boosting rates by about 1 percent a month since last summer. In addition, the state Public Utilities Commission granted each a 17 percent rate increase effective March 1.

"They are trying to put a scam over on us," Hay said.

Larry Semenza, a lobbyist for Dynegy, which is trying to buy two of the power plants from Nevada Power, had urged the Assembly committee to permit the sale to go through. After the hearing, he too predicted a rate shock for consumers in Southern Nevada this summer, with prices skyrocketing 20 percent to 40 percent.

Dynegy predicts that permitting the sale will mean a benefit of more than $400 million for consumers over the next five years.

Meanwhile, the Senate Commerce and Labor Committee is expected to vote sometime this week on its version to stop the divestiture of the plants.

The Assembly bill would scrap the present law allowing open competition. The Senate version would permit big customers such as casinos and mining properties to find other suppliers.

The governor does not favor full repeal of the deregulation law. He wants to permit big users to shop around for their electricity outside the two major utilities. When the major users such as casinos and mines leave the system, Guinn said, it will mean more low-cost power for the small user.

In an interview Friday Guinn also expanded on the comments of his legal counsel Keith Munro, who last week said the governor favors deferred energy accounting.

The provision actually protects ratepayers, since it allows the companies to buy fuel to keep the lights on in Nevada and avoid the rolling blackouts experienced in California, Guinn said.

Nevada Power has lost millions of dollars on its fuel purchases. But Guinn said he's not going to permit the utilities to collect on losses since last summer.

Deferred energy accounting will come in only when the law is changed to stop the sale of the plants, he said. Then the utilities would be able every six months or once a year to ask that rates to be adjusted to cover fuel costs. This system, Guinn said, "will ease out payments for the less fortunate over a period of time."

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