Electric deregulation brings changes for Sierra Pacific
Technological changes have altered the economics of the power industry and electrical generation is no longer a natural monopoly, so the market forces of competition can keep electricity rates low, according to a state regulator.
“It used to be that the cheapest way to produce electricity was with one large coal-fired or nuclear generating plant,” Greg Cook, electrical policy advisor for the Nevada Public Utilities Commission, said Tuesday.
“Now, we can have small plants that are just as efficient or more efficient that the large plants used to be.
“There’s no longer any reason for just one company to provide electrical generation,” he said.
So deregulation is the thrust of utility regulatory agencies across the country, with Nevada changing to a competitive electric power industry on March 1.
The policy is behind Sierra Pacific Power Company’s need to sell its generating facilities, such as the large twin generating units at Valmy and a smaller power plant east of Reno.
“Sierra Pacific had to agree to divest the generating plants to get approval for its merger with Nevada Power Company,” Cook said, “because they owned the majority of generating plants in Nevada.
“They will split them into three groups and sell to different buyers, so there wouldn’t be just another generation monopoly.”
That sale, expected in about a year, will provide about $2.1 billion for the planned purchase of Portland General Electric. Sierra Pacific’s intent to buy the utility serving the Portland, Ore., area was announced Monday.
The technology that opened the industry to competition was development of the natural gas-fired combined cycle combustion turbines, Cook said. The new turbines that spin electrical generators are smaller and more efficient than earlier designs.
“There are a lot in place in Southern Nevada and at least one in Northern Nevada,” Cook said. “They represent the vast majority of new generation being built today.”
The sale of the plants will leave Sierra Pacific still active in the two other facets of the industry – transmission and distribution, according to company spokeswoman Faye Andersen. Transmission is the delivery of electricity from generation plants to localities, while distribution is administering the provision of power to individual commercial and residential customers, she said.
Sierra Pacific can expect competition in the distribution part of the business fairly soon. Enron, the company that is being sold to Sierra Pacific, and a California-based company called Utility.com, already are approved to market electricity in Nevada, while applications from other companies are pending, Cook said.
The change has some similarities to the break-up of AT&T during telephone deregulation. However, consumers will not see their power bills subdivided by generator, transmission company and distribution company, Andersen said. The distribution company will bill a single amount and pay the generation and transmission companies for their services.
The most visible changes will be when distribution companies will provide a variety of rates and services as they try to distinguish themselves in the marketplace, Anderson and Cook said.