Friday, May 10, 2002 | 4:27 a.m.
WEEKEND EDITION: May 12, 2002
In light of the financial uncertainties surrounding Nevada Power Co., it should be no surprise if the Nevada Legislature makes reliable electricity one of its top priorities next year.
Lawmakers are bracing for possible debate over whether Nevada Power can be counted on to deliver electricity to homes and businesses in Southern Nevada.
Likely debate topics include whether the Southern Nevada Water Authority should have a role in providing power, whether residential and small-business customers should be allowed to buy retail electricity on the open market and whether Nevada Power should be allowed to sell its generating plants.
"It has got to be one of the top five issues," Sen. Ann O'Connell, R-Las Vegas, said. "Everything needs to be put on hold until we get a better look at this.
"We have an awful lot of issues that still aren't resolved. We don't know where the federal government is on all of this or how much (it) will interfere with what is going on locally. We don't know what is going on with renewable resources and how that will affect the portfolio of Nevada Power."
Many of those discussions will depend, of course, on Nevada Power's financial condition leading up to the 2003 legislative session. The utility has said that it was placed in financial jeopardy after the state Public Utilities Commission ruled March 29 to give it only $485 million of the $922 million it was seeking from ratepayers for energy used last year.
Nevada Power's parent, Sierra Pacific Resources, has also said that it will suffer further damage if the PUC denies a request by Reno subsidiary Sierra Pacific Power Co. to collect $205 million from Northern Nevada ratepayers for energy used last year. The PUC has until June 1 to rule on that rate case.
Nevada Power spokeswoman Andrea Smith said utility officials haven't had time to think about future energy policy as they fight for its survival.
"We're concerned with day to day," she said.
Lawmakers, however, have already begun thinking about whether to recommend new energy policies next year or maintain the status quo.
Assemblyman Doug Bache, D-Las Vegas, who chaired the lower chamber's Select Committee on Energy last year, is among those who believe that the state should continue to prohibit residential and small-business customers from buying retail electricity on the open market.
That option will be available this year but only to large customers such as casinos and mining companies that have the capacity to use on average at least one megawatt of power at a time. That is roughly equivalent to the amount of power used by 500 homes during the summer or 1,000 homes during other times of the year.
"I don't think we should enter into new deregulation," Bache said. "Leaving it the way it is for the next few years is our best option. Small customers do not have the expertise to buy electricity on the open market. Whether we have a different provider of service is a totally different issue."
Carl Linvill, Gov. Kenny Guinn's energy adviser, said Guinn would like to see how large users buying electricity on the open market affects everyone else before determining whether other customers should be allowed to choose their electricity retailers.
"At the present time our policy is that there would have to be a benefit to all customers who remain with Nevada Power, and right now we don't see how that would work," Linvill said of possible deregulation.
But state Consumer Advocate Timothy Hay said his office would support legislation that was defeated last session that would allow groups of customers, such as entire cities or neighborhood associations, to buy electricity on the open market. That process is known as aggregation.
"That would seem equitable to us," Hay said. "Those customers would have the same opportunity that large customers have under existing law."
There is little appetite among lawmakers to allow Nevada Power and Sierra Pacific Resources to sell generating plants. A law passed last year that put deregulation on hold for residential and small-business customers also prevented the utilities from selling plants before July 2003.
"They may find themselves in a situation where they want to sell the plants because they need the money," Sen. Randolph Townsend, R-Reno, said. "If they take that to the PUC and to the Legislature, that's one tough call. I just don't see the Legislature or the governor signing a bill that will allow them to sell their plants."
Bache agreed. "The energy generated by Nevada Power is at a lesser price than they can pay on the open market."
And Linvill said that "at the present time we don't feel comfortable going down that road."
The issue that could generate the most debate is whether the Southern Nevada Water Authority -- Nevada Power's top customer -- or other government entities should be allowed to sell electricity.
Water authority General Manager Pat Mulroy has not ruled out the possibility that her agency would push for repeal of Senate Bill 425. Enacted last year, it prohibits local governments from selling electricity without permission of the power companies that are already serving those consumers.
"We're open to anything that helps ensure a reliable supply of electricity at reasonable rates," authority spokesman Vince Alberta said.
O'Connell, who sits on the Senate Commerce and Labor Committee that studies energy legislation, said she would oppose any move to replace Nevada Power with the water authority because Nevada Power pays property taxes to Clark County and other taxes to the state through use of its power lines.
"I'm not for it mainly because of the tax situation," she said. "Especially when we're looking at state funds in short supply we have to be thoughtful about all the taxes we take in and shouldn't diminish that."
Public power companies say they subsidize lost taxes by making other payments to local governments, including discounts on electricity rates. But O'Connell said she is not convinced that a public agency can do a better job of distributing electricity than can Nevada Power.
"Government can't respond as quickly as the private sector can," O'Connell said. "The private sector has an advantage when it comes to adopting new innovations that come on the market."
The Guinn administration still believes Nevada Power is capable of providing reliable electricity and therefore should not be replaced, Linvill said.
"Nevada Power has been a reliable provider of energy to the Southern Nevada community for years," he said. "We feel confident it is (its) intent at this time to comply with all the provisions of its certification. We don't see any need to change that.
"In the event that their difficulties overtake them we believe the Public Utilities Commission will be ready to act to apply what regulatory power (it has) to ensure that reliable electricity will be provided."
But Assembly Majority Leader Barbara Buckley, D-Las Vegas, who sat on the energy committee with Bache, said the water authority or another public agency may be able to relieve Nevada Power by providing electricity to government facilities such as the Sawyer State Office Building and Clark County Government Center.
"Let's see what they can do to serve the needs of large government buildings," Buckley said. "If Nevada Power is having trouble supplying power, maybe government could step in and take the strain off the system."
Townsend, who chairs the Senate Commerce Committee, said another possibility is for the water authority to partner with Nevada Power to build and operate new power lines to help keep up with population growth.
"The value of partnering is the ability of the Southern Nevada Water Authority to get bonds at low interest rates and to build infrastructure that would be controlled by Southern Nevadans," Townsend said.
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