Lawmakers send deregulation rules back to PUC

The Legislative Commission voted Monday to send proposed rules to implement electric deregulation back to the Public Utilities Commission for more work.

The decision came after more than three hours of often-complicated testimony in the latest phase of a dispute between the unified Sierra Pacific Power-Nevada Power utility group and the PUC over "stranded costs."

In a nutshell, utility officials say it's unfair for the state to demand they reveal financial information about their existing generating plants, infrastructure investments and longterm contracts with outside providers until they know exactly how the state will use that information to determine stranded costs.

But state officials say the utilities should give them the information so they can best decide how much of that financial commitment the utility is entitled to get back as deregulation proceeds.

Sen. Mark Amodei, R-Carson City, who is not on the Legislative Commission, said lawmakers should simply focus on the fact that the proposed regulation isn't right.

"What we have here is an opportunity for the Legislature to reassert its rule in the process," he said. "To say if we're not comfortable with it, you've got to go try again."

The Legislative Commission voted to do just that, sending the proposed regulations back to the commission for more work and giving it a 90-day deadline.

As the electric utilities are deregulated, existing utilities with huge mortgages on existing generating plants worried they would be stuck holding the bag. Those contracts may no longer be the best deal, and their generating plants could be too expensive to survive in a competitive market.

So the law says utilities should get back appropriate "stranded costs" from customers, stockholders or alternative providers as deregulation takes effect.

The regulations before the Legislative Commission on Monday are designed to deal with stranded costs, but utility officials say they could leave them in financial ruin.

Nevada Power and Sierra Pacific Power filed a federal court suit last week challenging deregulation in part for the same reasons raised Monday.

Bill Peterson of Nevada Power said the regulations don't give the utilities any idea how the commission will decide how much money they get back, when or how it will happen. He argued that asking the utilities for information and commitments isn't fair.

"We don't even have advance notice of what's important to prove our case," he said. "And the PUC has not provided a direct and unavoidable method of recovering these costs."

Without those regulatory orders spelling out how everything will be done, he said, the utility's stock is falling in value and it could wind up in severe financial trouble.

"In essence, you're saying the game's afoot but only one side knows the rules," said Legislative Commission Chair, Sen. Anne O'Connell, R-Las Vegas.

Doug Pond of Sierra Pacific Power agreed: "Somebody said last night it's like Lucy holding the football for Charlie Brown."

Commission member Judy Sheldrew said the laws approved by the 1997 and 1999 legislatures specifically give the commission the power to decide how much utilities can claim in stranded costs and how they will be paid. But she said those decisions can't be made until commissioners know how much money is involved. She said the utilities, contrary to what Peterson said, were never promised they would get every dime they claimed in stranded costs.

"The big problem was that we could never get any numbers from the utilities on what they thought their stranded costs would be," she said.

Her argument was backed by Harvey Whittemore, who represents the Nevada Resort Association, which originally pushed for deregulation of electric companies.

"Why we are here today is to put a roadblock to the process of deregulation," he said.

Lawmakers, however, refused to either approve or toss out the regulations, instead ordering the commission and the utilities to find a compromise in 90 days.