PUC OKs utility truce

Kevin Rademacher

Wednesday, May 18, 2005 | 10:57 a.m.

Without comment or fanfare, the state Public Utilities Commission on Tuesday approved a deal between Nevada Power Co. and the Southern Nevada Water Authority which settles years of legal wrangling between the entities.

The final approval of the deal is expected to come at a meeting of the SNWA board on Thursday.

State regulators had to sign off on terms of the agreement that would allow the Las Vegas electric company to manage the Water Authority's 25 percent interest in the Silverhawk power plant about 20 miles north of Las Vegas.

The eight-year deal will give the electric company more control over power generation resources. The Water Authority, in return, will get 75 megawatts of firm power resources from the utility.

The overall agreement settles a series of lawsuits and regulatory actions between Nevada Power, SNWA and the Colorado River Commission. Many of those battles began amid the fallout of the 2000-01 Western energy crisis and included a $3.2 billion bid the water authority made to buy the power company.

In addition to mandating executive meetings and settling litigation, other elements of the deal would increase the cooperative dealings between the organizations, including quarterly meetings between executives and strategic partnerships to maximize utility resources.

Additionally, Nevada Power also will provide scheduling and balancing services for SNWA, assuring that there is sufficient power coming into the local grid in order to meet demand. That service is currently contracted to a New Mexico utility.

A stipulated agreement filed prior to the meeting indicated that the deal should benefit Nevada Power and its customers since the new Silverhawk plant was more efficient that plants which currently sell power to the electric company. As such, the need for natural gas -- which has seen prices soar in recent years -- will be reduced.

The deal also means that Nevada Power will have to buy less electricity on the open market -- which is subject to dramatic price volatility -- to serve its customers.

In other PUC news, the commission approved a 4.4 percent rate increase for Nevada Power's Reno-based sister company Sierra Pacific Power Co.

The utility said the increase was needed due to rising costs for natural gas needed to fuel power plants. The price for natural gas also is pushing higher the cost of additional electricity the company buys on the open market.

"It's a very tough issue," PUC Chairman Don Soderberg said. "A nation that seems to have abundant reserves is having a natural gas crisis."

Regulators and utility executives have pointed to government policies that currently prevent additional natural gas exploration and drilling while natural gas has been the only realistic alternative to coal and nuclear power for fueling large power plants.

The Sierra Pacific Power rates will become effective June 1 and will push the typical residential customer's bill higher by $3.67 a month.