July 1, 2001
L.A. Loves a Loophole
There's no getting around it...
Nevada's Power Poker
The governor delays restructuring, gambling on a summit in Vegas. But the utility calls, then sues, when talks break down.
Hold 'em or fold 'em? On March 28, Sierra Pacific Power and Nevada Power filed suit in federal district court to have the state's electric restructuring law declared unconstitutional, saying it threatens losses on purchased power contracts, fails to guarantee recovery of stranded costs, and has pushed the company's stock price down about 50 percent (for the eight months from July 28, 1999, the day when Sierra Pacific and Nevada Power had closed their merger, forming Sierra Pacific Resources as the new holding company). The suit also would attempt to overturn a series of orders from the state public utility commission to carry out the law, which have reduced or disallowed certain company rate requests.
The lawsuit came after Nevada Gov. Kenny Guinn had delayed the March 1 start of competition among electric suppliers, citing unsolved problems regarding deregulation, and only after talks had broken down at closed summit sessions convened by Guinn in Carson City and Las Vegas to try to iron out the mess.
Guinn said that some of the problems to be solved included setting distribution rates, access to transmission lines, and setting up and financing the Mountain West Independent System Administrator to oversee the grid. He acted under authority granted by the state legislature, giving the governor discretion to decide whether competition should move ahead on the planned March 1 startup date.
Now, however, with funding uncertain at Mountain West, and the legislature out of session until February 2001, the outlook for electric competition in Nevada certainly is clouded, not to mention the merger between Sierra Pacific and Portland General Electric, which is planned to close in the fall.
Yet, as this issue was going to press, the stock price for Sierra Pacific was on the rebound, closing at $15.25 on Thursday, April 25, up from a low of about $13.50 on the first day of the week. Did investors like what they saw?
The governor convened his energy summit in closed session in Carson City on March 7. He invited representatives from Nevada Power, Sierra Pacific Power Co., the state PUC (the staff, not the commissioners), the state's consumer advocate, and yes, casino gaming and mining interests, who would likely benefit most from lower electric prices. But after all that, Guinn simply opened the meeting and then left, leaving his chief of staff to run the show.
Missing from Carson City were the state's alternate energy suppliers. They were slated to be invited to future meetings - and, in fact, a second session was held March 14 in Las Vegas - but after all was said and done, the talks apparently collapsed.
Among other things, the closed sessions were supposed to have considered the question of rate allowances for Nevada Power to be granted by the state PUC.
In fact, the PUC had intended to release a rate order during the last week in March, and some observers were troubled that