Nevada seeks to ease the pain of deregulation

RENO - Advocates for competition in Nevada's electricity marketplace believe the state can avert the meltdown California felt last week when skyrocketing power bills ignited ratepayers' ire.

The San Diego area is the first region to enter the deregulation age and it's been a painful debut.

San Diego Gas and Electric Co. customers have seen their bills rise as much as 200 percent due partly to deregulation and exacerbated by summer heat and crushing consumption across the West.

The controversy has not gone unnoticed in Nevada, one of 23 states that have approved opening the electricity marketplace to competition.

It was supposed to start last winter, but Gov. Kenny Guinn delayed it after Sierra Pacific and state regulators could not agree on the final provisions. The utility filed one lawsuit to recoup a denied rate hike for the Las Vegas area and another claiming the legislation was unconstitutional.

Then two weeks ago, Reno-based Sierra Pacific Resources, regulators and others settled the matters, reopening the door for deregulation to begin this fall when the biggest commercial users will be allowed to shop for their electricity needs.

The agreement, among other things, sets limits on how much Sierra Pacific Power Co. in northern Nevada and Nevada Power Co. in southern Nevada can boost rates to recoup the rising costs of fuel and purchased power.

Last month's out-of-court settlement came just as California's firestorm erupted.

''That's exactly what all the parties are trying to prevent with this agreement,'' Mark Ruelle, senior vice president and chief financial officer for Sierra Pacific Resources, told the Reno Gazette-Journal.

''We can't do anything near what you're seeing in San Diego. I'm encouraged we won't have the fallout they have in California, where they have no provisions limiting how fast you can pass costs on.''

Even state Consumer Advocate Tim Hay is confident that residential consumers are protected. Under the new plan, they will be able to pick their electricity suppliers starting in September 2001.

''I think we've more than adequately protected ratepayers from the shock of what we're seeing in San Diego,'' Hay said.

Additionally, a legislative cap on basic rates remains in effect until March 2003 for those customers who remain with Sierra Pacific.

That has boosted Hay's comfort level.

''But unless we augment (energy) sources in a fast-growing state, problems will continue,'' he said.

To that end, Hay believes it is ''pretty likely'' that the market will be ready when residential consumers begin choosing their power providers 13 months from now.

''By the time we're ready to phase in residential, choices will be out there,'' he said.

And by then, too, there should be more electricity generated across the nation, Hay and others say.

For all the assurances and safeguards, though, deregulation still has its detractors.

State Senate Minority Leader Dina Titus, D-Las Vegas, reminds anyone who will listen that she voted against deregulation in 1999.

''I don't think - I know - there are people unhappy,'' she said. ''I think the public will be outraged when their power bills start going up.''

She cites a 4.7 percent raise in Nevada Power bills begun last week to recoup rising costs, the likelihood of a similar rate hike for Sierra Pacific's customers this fall, and the allowance, under the agreement, for 1 percent or less rate hikes monthly through 2002.

Titus said the issue will be back on the table when lawmakers convene again in February 2001.

''This is so complicated, the public doesn't understand,'' she said. ''But when the power bills start going up, they'll understand it plenty.''

But the legislation's prime mover, Sen. Randolph Townsend, R-Reno, believes that having choices means lower rates in the long run, and he plays down any talk of a fight in 2001.

''We did the right thing,'' he said. ''I'm not sure there's anything more legislatively that we can do. I don't see any basic plan better than the one we put forth.

''This stuff doesn't come free,'' he said. ''But price spikes don't last long. Whether it's phones or airlines or trucking or the Internet, it's the customer who'll drive the market.''