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Merger of Nevada Utilities Conditioned on Plant Sales

Merger of Nevada Utilities Conditioned on Plant Sales

Despite a plea from Nevada regulators to postpone action, the Federal 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 delay acting on the proposed transaction until it could determine whether the merger partners had violated certain aspects of the PSC's compliance order, which required the utilities to submit a plan to carry out the divestiture of their generation facilities. Nevada regulators gave a nod to the utility combination last December but placed numerous conditions on their approval, including the sell-off of the utilities' generation plants. Sierra Pacific owns more than five generation facilities totaling 1,056 MWs, while Nevada Power owns about 2,190 MWs of generation capacity.

The Commission made clear that its approval of the Sierra Pacific-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 take place...If the applicants do not divest the units, the approval in this order is a nullity," FERC said in its order [EC99-1]. Assuming Sierra Pacific and Nevada Power carry out the planned divestiture of their merger assets, as ordered by the Nevada PSC, this would be "sufficient to ensure that the merger would not adversely affect competition," FERC staff said. Other federal agencies still must rule on the deal.

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

Susan Parker

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