Nevada repeals power deregulation plan

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Nevada repeals power deregulation plan Thursday April 19, 5:52 PM EDT

By Vibeke Laroi

SAN FRANCISCO, April 19 (Reuters) - Nevada, worried that California's power crisis could spread across its border, became the first state to officially kill a plan to deregulate its electricity market, industry experts said on Thursday.

Late Wednesday, the Nevada legislature passed an emergency bill, signed shortly thereafter by Nevada Gov. Kenny Guinn, that repealed its own electric deregulation plan and put a moratorium on the sale of power plants.

The emergency legislation, applauded by the state's utility officials, was taken to assure the credit-worthiness of the utilities and protect consumers from unexpected rate hikes.

"This was a bold move by the legislature and the governor to focus on the real problem that threatened every consumer and business in Nevada," Walt Higgins, chairman, president and chief executive of Sierra Pacific Resources Corp. (SRP), said in a statement issued on Wednesday night.

Sierra Pacific is the parent company of the state's two largest utilities, Sierra Pacific Power and Nevada Power Co.

Deregulation, which breaks down traditional utility monopolies, is intended to give consumers a choice of their electricity provider and drive down retail power prices.

But California has become the poster child for deregulation gone wrong.

STATES TAKING ANOTHER LOOK AT DEREGULATION

Rolling blackouts have hit California four times this year, with more expected this summer. Meanwhile, wholesale prices have skyrocketed and and ratepayers' bills are rising.

This has resulted in almost a third of the states that have already committed to deregulating their power markets to slow down the process or take another look at deregulation.

For instance, Montana, Arkansas and New Mexico have already delayed the scheduled start of retail competition, according to the Wash. D.C.-based Edison Electric Institute (EEI), the trade group for shareholder-owned utilities.

Oklahoma and West Virginia are hesitating to implement retail competition, while court rulings in Arizona may delay retail access and legislation is pending in Oregon for a delay.

"We believe that Nevada is the first state to repeal a law bringing retail electric competition," said EEI spokesman Jim Owen. So far, 24 states states and the District of Columbia have moved to deregulate their retail power markets.

Nevada Gov. Guinn has said he will not support electric deregulation, barring any significant change, as long as he is governor. Guinn was appointed to a four-term term in 1999, two years after the original bill to deregulate Nevada's electricity market passed the state legislature with the provision that the governor has the final say.

Last year, Guinn rescinded a bill to implement electric competition in March 2000, putting deregulation on hold.

After signing the latest bill into law late Wednesday, Guinn said he would support partial deregulation for some larger users if it would support lower power costs for consumers, a spokesman for the governor's office said Thursday.

SAVED FROM POSSIBLE BANKRUPTCY?

Sierra Pacific spokesman Karl Walquist said the company spent $600 million more for power purchased on the open market in 2000 than it expected, about 66 percent more than budgeted.

Under California's flawed 1996 deregulation law, the state's investor-owned utilities were forced to buy all their power on the volatile spot market, but were prevented from passing on these costs to consumers due to a rate freeze.

As a result, the state's top utility, Pacific Gas & Electric, a unit of PG&E Corp. (PCG), filed for bankruptcy protection earlier this month.

"We haven't been able to recover what we've been spending on power purchases. We could only do that for so long before our financial situation would deteriorate to a point where we would be faced by the same situation as PG&E," Walquist said.

Assembly Bill 369, which tolled the death knell for Nevada deregulation, takes effect immediately and allows the state's utilities to recover their soaring costs for wholesale power over time.

Rates would stay at their April 1 levels, reflecting all recent increases to date, and remain stable until early next year, when they would be adjusted to reflect actual costs of wholesale power and fuel over that period.

If wholesale costs remain high, the legislation allows for the rates to be spread out over several years.

Walquist said Sierra Pacific buys only a "small percentage" of its power needs on the wholesale spot market. The company's own generating plants provide about half its power needs, and it signed long-term power supply contracts in recent months.

http://money.iwon.com/jsp/nw/nwdt_rt.jsp?section=news&news_id=reu-n1966208&feed=reu&date=20010419&cat=INDUSTRY

-- Martin Thompson (mthom1927@aol.com), April 19, 2001


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