By Ann de Rouffignac
OGJ Online
HOUSTON, Apr. 4�Electricity deregulation is hanging by a thread in Nevada. The state legislature assembly last week unanimously passed AB 369, a bill that would stop deregulation of Nevada�s power industry in its tracks. The bill, which still must be approved by the senate, also stops Sierra Pacific Resources Co. from selling any power plants.
Sierra Pacific Power Co. was ordered to sell its interest in nine power plants as a condition for its merger with Nevada Power Co. The combined companies became Sierra Pacific Resources. Under deregulation, regulators determined the combined company would be able to exercise market power, if it did not dispose of some power plants.
�The commission gave final approval for the sale of Sierra Pacific�s interest in Mojave power plant last year,� said Cynthia Messina, spokeswoman for the Nevada Public Utilities Commission. �That sale now has a 60-day temporary hold.�
The commission also put on indefinite hold all the rest of the plant sales until after the legislative session is completed. Sierra Pacific has already negotiated final contracts for seven of its nine plants that it was ordered to sell.
�First the state legislature mandates us to sell the plants. Now public policy is dictating that we don�t sell them,� said Faye Andersen, spokeswoman for Sierra Pacific. �That puts us in an interesting position.�
Deregulation on hold
With a number of bills at various stages in the state legislature that scrap or postpone deregulation, �deregulation is indefinitely on hold for us,� Messina said. AB 661, for example, essentially repeals the entire deregulation legislation. A hearing on AB 661 is scheduled for Friday.
Gov. Kenny Guinn is known to have severe reservations about deregulating Nevada�s electric industry at this time. He asked the commission to establish several new dockets to reevaluate the entire deregulation issue earlier last month. Competition and choice of electric providers was supposed to start Sept. 1.
Even though Sierra Pacific is not publicly admitting that deregulation and the power plant sales are dead, the company is quietly preparing for that eventuality. First, the utility quickly negotiated fuel contracts for those plants that were supposed to be sold by the summer.
The company also negotiated additional purchased power contracts to get through the summer peak period.
And more directly, Sierra Pacific is actively working with the legislature to protect its interests in the various bills to slow down or stop deregulation.
In written suggestions circulated in the legislature, Sierra Pacific asked for deferred accounting for fuel costs. If the utility can accrue fuel bills and pay them over an extended period of time, some of the volatility of fuel costs could be cut out of customer bills, according to Sierra Pacific�s suggested amendments.
The company also asked to be reimbursed for costs incurred pursuing sales of the power plants. The utility wants reimbursement for liquidated damages and penalties specified in the contract, if and when the sales are stopped. Sierra Pacific also wants the state government to step in if the company is held liable as a direct result of its inability to abide by the contract to sell the plants.
Finally, it�s even looking at specifying the conditions under which a large customer using 1 Mw or more of power can leave the utility system to self generate or purchase power. Interested customers must file an application with the commission detailing the alternative power purchase. The purchase of energy and capacity must be shown to increase the supply of generating capacity for the benefit of Nevada.
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