Nevada consumer advocate calls for power plant sale halt

Feb. 1, 2001—The Nevada Consumer Advocate filed a petition with the Public Utilities Commission of Nevada calling for a moratorium on the sale of power plants by the state’s utilities.

Nevada is in the midst of deregulating its electricity industry and Sierra Pacific Power Co. and Nevada Power Co. also recently completed a merger. As a condition of approval, the utilities agreed to divest power plants to prevent the exercise of market power once the industry is deregulated.

But conditions have changed making a second look at divestiture and deregulation imperative, says Timothy Hay, chief deputy attorney general for Nevada. Wholesale gas and electricity markets have become so volatile and prices have risen so much Sierra Pacific filed for a 25-29% rate increase last week on top of monthly adjustments for natural gas costs.

“This filing created some consternation,” says Hay. “We want the PUC to look if the divestiture is still in the state’s interest. It may not be timely or appropriate to give up the low cost base load resources.”

The utilities are planning to sell their interests in coal-fired generation plants located in Nevada. Sierra Pacific will submitting documents next week to obtain approval of the sale.

“We are still moving forward with it,” says Karl Walquist, spokesman for Sierra Pacific.

A commission spokeswoman said it has 60 days to respond to the petition filed by the consumer advocate’s office.

“The commission is waiting for some guidance from the governor,” says Cynthia Messina, spokesperson. The governor has already suspended action on deregulation of Nevada’s retail electricity market. Legislation is under discussion that reportedly will “roll back” any further electricity industry deregulation and stop the divestiture of the power plants, she says. The legislature is back in session next week.

The consumer advocate filed the petition because sale of low cost coal-fired generation means there is no guarantee that Nevada consumers will benefit from the electricity generated at some of the plants.

“New owners would be able to sell all the electricity they generate outside the state or back to Nevada at higher market based prices,” the petition states. “Given these risks, it would be prudent for this commission to issue a moratorium on divestiture sales in Nevada.”

Both Sierra Pacific and Nevada Power have signed a number of deal to divest power plants, including:

• Reliant Energy Power Generation Inc., an unregulated unit of Reliant Energy Inc. agreed to purchase the Sunrise power plant from Sierra Pacific Resources, together with a power purchase agreement relating to an adjacent generation facility for about $33 million. Under the proposed agreement, Reliant Energy will purchase a total of 372 MW of generation capacity. The power purchase agreement involves three adjacent gas turbine generation units, known as Sun-Peak. Reliant Energy has agreed to purchase 222 MW of power from Sun-Peak.

• Pinnacle West Energy, a unit of Pinnacle West Capital Corp., agreed to buy the 72 MW Harry Allen power station from Nevada Power Co. The sale price of the generating plant was $69.81 million, subject to closing adjustments. In conjunction with the purchase, Nevada Power Co. negotiated the right to buy energy and ancillary services from Pinnacle West Energy for about $4.61 million, resulting in a net price for the generating plant upon closing of $65.2 million.

• NRG Energy Inc. and Dynegy Inc. agreed acquire 1,330 MW from Sierra Pacific Resources in a deal worth $634 million. The assets include the 740 MW gas-fired Clark generating station and 590 MW of the 605 MW, coal-fired Reid Gardner generation station.

• WPS Power Development Inc., a unit of WPS Resources Inc. agreed to buy the 525 MW Tracy/Pinon power station for $249.8 million from Sierra Pacific Power Co. In conjunction with the purchase, Sierra Pacific Power negotiated the right to buy energy and ancillary services from WPS Power Development for agreed upon prices, subject to a collar, from closing up until March 1, 2003, at a cost ranging from $80 million to $150 million.