The Nevada legislature this week is expected to pass a new comprehensive energy law that delays for at least two years state efforts to restructure the electricity industry and to provide assurances that the state’s two major power utilities can recover all of their future costs. The governor is expected to sign the bill (AB 369), effectively freezing any more deregulation efforts, including the utilities’ divestiture of nine power plants (see Daily GPI, April 9).

Sierra Pacific reported a full-year loss of $39.8 million in 2000 after wholesale power price spikes last year saddled its utilities with $889 million in unanticipated power costs. The suspension of its quarterly dividend will provide an extra $20 million.

In the midst of the West’s continuing high wholesale power costs and the uncertainty among state policymakers, Sierra Pacific Resources, the Reno, NV-based holding company for the two utilities, announced it was suspending its first quarter dividend as a means of conserving cash. Along with the potential cash flow issues related to ever-higher wholesale power costs, Sierra Pacific faces the delay of the power plant sales, estimated to carry a $1.7 billion value for seven of them, and the likelihood it will be unable to complete a proposed $2 billion acquisition of Portland General Electric.

The new legislation, passed last week by the state senate, will be before the house this week, and “looks like it will be the bill that will stop divestiture throughout Nevada,” said Karl Walquist, a Reno-based spokesperson for Sierra Pacific Resources, which owns both Sierra Pacific Power and Nevada Power, the two state-regulated electric utilities.

Blockage of the power plant sales also affects California since six of the plants in northern Nevada service about 30,000 customers on the California side of Lake Tahoe. A new law already in effect blocks off the sale of any generating plants serving Californians. Sierra had applied to the California Public Utilities Commission for an exemption from the law, but was turned down, Walquist said.

“Nevertheless, it doesn’t really matter if the Nevada legislature goes ahead and stops divestiture, and that certainly appears to be where they are headed,” he said, noting that the bill also would provide assurances the utilities can recover their future purchased power costs.

The legislation also includes a provision to give the Nevada regulators more oversight on the proposed Portland General acquisition and any future mergers and acquisitions involving either or both of the two utilities, “We know it is going to be real tough to obtain approval, but the legislation doesn’t have any direct impact on it,” Walquist said.

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