Guinn seeks Bush’s help to reverse energy policy

Wednesday, Nov. 21, 2001 | 10:42 a.m.

CARSON CITY -- Gov. Kenny Guinn has asked the Bush Administration to reverse an energy policy that has helped California but has socked it to electric users in Nevada by the tune of hundreds of millions of dollars.

"It's a big freebie for California," Guinn said Tuesday in referring to the decision by the Federal Energy Regulatory Commission last summer to put a ceiling on the sale of power.

"I've talked to the White House and they are working on the problem," the governor said.

Nevada Power Co. in Las Vegas is preparing to file an application by Dec. 1 to raise rates by $926 million over the next three years to recover the higher costs it paid for its fuel. Company President Mark Ruelle said the change in the policy last June added an estimated $200 million to $400 million to the latest rate change application.

To help California the federal commission put a ceiling on the price of power.

In the past, Ruelle said Nevada Power could sell its excess power on any day for "hundreds and hundreds of dollars" a megawatt hour on the spot market. That money was used to offset fuel costs for the Las Vegas utility.

But the ruling by the federal commission limited the price to $75 to $125 a megawatt hour, penalizing the utilities that had the excess power through prudent planning.

Guinn said the chairman of the Federal Energy Regulatory Commission, which adopted that policy, has been replaced.

Nevada is not alone, said Guinn. He said he talked with other governors and that they feel they same way -- that their states took a hit to benefit populous California.

"Washington and Oregon feel the same way," Guinn said. "So does Arizona, Idaho, Utah, New Mexico." He said he intends to call the White House again next week to follow up.

Ruelle agreed this "policy was principally designed to benefit California."

California purchased most of its power on the "spot market" where the costs are higher.

Ruelle said the federal policy should be extended to those utilities that signed longer-term contracts for fuel purchases in planning for the future. For instance, he said Nevada Power has entered into one- or two-year contracts for $150 a megawatt hour but in today's market the price might be $40.

"If they are going to intervene in the marketplace, there is no reason to limit it to one sector of the market," Ruelle said. The Las Vegas company has been a leader, he said, in trying to get the federal commission to change its mind.

Nevada Power, he said, is asking their power suppliers to re-negotiate the contracts to lower the prices. Some are talking but others are not, he said.

Nevada Power generates about 50 percent of its electric needs from its own plants and then purchases the rest.

Recovering the $929 million in higher fuel costs may mean a 25-30 percent increase for Las Vegas customers. A new law allows the utility to spread that over three years and the company is going to do that, he said. That money does not go into higher profits but reimburses the utility for the money it spends on higher than expected prices of energy.

"A lot of people are critical of the power prices and we understand that," he said. "Our job is to keep the lights on at the least possible cost. And we are working our tails off to do that."

Ruelle also said the merger of Nevada Power and Sierra Pacific Power Co. of Reno has resulted in big savings.

Democratic legislative leaders have called on the state Public Utilities Commission to thoroughly examine whether the merger has saved money as promised. Assembly Speaker Richard Perkins, D-Henderson, Assembly Majority Leader Barbara Buckley, D-Las Vegas and Senate Minority Leader Dina Titus, D-Las Vegas, have questioned whether the ratepayer has benefited.

About $8 million was spent on the merger and Nevada Power is seeking to recover that amount in its present rate case before the utilities commission. That expense is included in a rate application by Nevada Power for a $42 million increase.

Ruelle said he welcomes close scrutiny by the utilities commission and the evidence will show the merger has "paid off handsomely." For instance before the merger the utility had one employee for every 250 customers. After the merger, the company serves 325 customers for every employee on the payroll.

In negotiating contracts for such things as insurance and purchases of equipment, there are bigger discounts realized because of the large size of the company, he said.

Meanwhile, Don Soderberg, chairman of the Public Utilities Commission, said today that consumer sessions will be held next month in Henderson and Reno to discuss utility rates and other issues.

The session in Clark County will be Dec. 13 at the Henderson Convention Center, 200 Water St. The commission said that issues on water and sewer will be taken up at 9 a.m.; telecommunications at 10 a.m.; natural gas at noon and electric rates at 1 p.m.

Soderberg said, "We have scheduled these sessions to hear what the public has to say. We'll be there to listen to concerns, to answer questions and to help people understand the role of the commission in the regulatory process."