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 Nevada.

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," Higgins said.

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 said.

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 state."

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."

Alex Steis

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