Despite a plea from Nevada regulators to postpone action, theFederal Energy Regulatory Commission last week readily approved a$4 billion merger of the state’s biggest electric and gas providers- Sierra Pacific Power and Nevada Power.

The Nevada Public Service Commission (PSC) urged FERC to delayacting on the proposed transaction until it could determine whetherthe merger partners had violated certain aspects of the PSC’scompliance order, which required the utilities to submit a plan tocarry out the divestiture of their generation facilities. Nevadaregulators gave a nod to the utility combination last December butplaced numerous conditions on their approval, including thesell-off of the utilities’ generation plants. Sierra Pacific ownsmore than five generation facilities totaling 1,056 MWs, whileNevada Power owns about 2,190 MWs of generation capacity.

The Commission made clear that its approval of the SierraPacific-Nevada Power transaction in no way “preempts or interferes”with the Nevada regulators’ merger-approval authority. In fact,”our approval of the merger is premised in part on the applicants’representation that divestiture of their generating units will takeplace…If the applicants do not divest the units, the approval inthis order is a nullity,” FERC said in its order [EC99-1]. AssumingSierra Pacific and Nevada Power carry out the planned divestitureof their merger assets, as ordered by the Nevada PSC, this would be”sufficient to ensure that the merger would not adversely affectcompetition,” FERC staff said. Other federal agencies still mustrule on the deal.

In the event the deal passes muster, both Reno-headquarteredSierra Pacific Power and Las Vegas-based Nevada Power will becombined into Sierra Pacific Resources to serve more than 800,000electric users and 100,000 natural gas customers in southern andnorthern Nevada and in the Lake Tahoe area of California. SierraPacific Resources also owns a 50% interest in Tuscarora GasPipeline, an interstate line built in 1995 to provide the regionwith greater access to gas reserves in western Canada.

Susan Parker

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