NV Utilities Try Not to Become Engulfed by CA Crisis
Taking steps to ensure Nevada does not fall prey to the
"financial and operational chaos" of the California energy market,
Sierra Pacific Resources introduced an emergency package of
proposed long-term contracts, tiered price increases, low income
assistance and conservation programs to stabilize energy markets in
Under a plan filed last week with the Public Utilities
Commission of Nevada, utility subsidiaries Nevada Power and Sierra
Pacific Power proposed short-term price increases from 0% for
certain low electricity usage customers, to as much as 29% for the
state's largest power users to correct imbalances between the cost
of wholesale power and retail prices. On average, the company said
customers will see a 17% rate increase on their electric bills.
"Nevada, despite a good energy policy, is not immune from what
is happening in California" said Walt Higgins, CEO of Sierra
Pacific Resources, at a news conference yesterday in Las Vegas.
"This situation is unprecedented, unanticipated and potentially
disastrous for Nevadans if we do not exercise the leadership it
takes now to correct these imbalances in supply and demand and
between cost and price. No business can continue selling a product
for less than it costs them to buy it on the wholesale market.
"We know any rate increase is painful, but there is no escaping
the fact that the consequences of inaction are much more severe to
the residents and businesses of this state, as California clearly
shows. Nevadans simply cannot let the lights go out with the kind
of irresponsible inaction we've witnessed over the hill. Even with
this increase, our rates will still be lower than in California,"
In the plan, the companies set out a program to meet the state's
short- and long-term energy needs, looking toward new mechanisms to
recover the soaring cost of wholesale power, which will immediately
decrease when prices fall. Sierra Pacific Resources petitioned that
new power plant development be looked into, and that long-term
power contracts be given accelerated approval. The plan also
provides assistance for low income families and businesses
attempting to manage their total energy costs.
Nevada Power customers who use 400 kWh or less per month, and
Sierra Pacific customers who use 300 kWh or less per month would
see no change in their rate from the proposed plan, the company
During the conference, Higgins also supported Nevada's ease-in
approach toward electricity deregulation. "The Nevada legislature
and commission have shown a lot of foresight in how to handle
energy deregulation in the state, and there is no reason to go
backward," said Higgins. "What we need is to continue forward but
in a way that clearly anticipates the impact of market forces in
The utilities proposed for the new mechanism to take effect on
March 1, 2001, and be adjusted on March 1, 2002, or sooner to
reflect a drop in wholesale prices.
"We are losing millions and millions of dollars now and it will
get much worse if this plan is not adopted. We stand to lose
hundreds of millions more because the caps on price increases are
keeping rates artificially low. When the settlement was negotiated,
no one expected prices for fuel and purchased power would continue
to skyrocket to unheard of levels," Higgins said. "We've saved over
$30 million in operating efficiencies since the Sierra
Pacific-Nevada Power merger, but we simply do not have the same
ability to control $1.5 billion annually of fuel and purchased
power expenses in an energy marketplace that's gone haywire."