Nevada Juice

Sierra Pacific Power Company has not

done well in the transition to deregulation.

The utility industry as a whole has gone

from a monopoly that provided reliable

electrical and natural gas service.

Once, the industry's common stocks

maintained a stable stock price and provided

consistent dividends for widows and

orphans. Many investors turned to utility

stocks for above-average rates of return

that they couldn't get from bank certificates

of deposit or money market funds.

Citing the success of deregulation in the

airline industry in the 1970s, the telephone

industry in the 1980s, and the cable industry

in the 1990s, the public was convinced

the time had come for the utility industry

make its way into the new millennium.

But take another look at the earlier stories

of deregulation:

Airlines: Certainly airfares dropped

drastically. The growth of new market

entrants led to new low-fare operations.

Competition used to be based on service;

now was based on price. Several of the

established brands were unable to adapt

their operations to the change in the landscape.

TWA, Pan Am, Eastern, Braniff

and many others went bust.

Telephone: AT&T, the lone operator

since the days of Alexander Graham Bell,

was confronted in the courts under

antitrust provisions. MCI drove a wedge

into the marketplace after seeing that the

mighty AT&T was broken up into Baby

Bells which could operated only in local

markets. MCI ran into the heart of

AT&T's earnings long distance.

Competition did enter the market, and the

courts decided that the owners of the

pipeline had to let competitors use their

system networks for a fee. AT&T had to

provide access to the marketplace on their

own systems. The price wars were on!

Long-distance rates plunged, but so did

service. AT&T is no longer an investment

for widows and orphans and MCI is

mined in red ink as part of the Worldcom

mess. Apparently you can't make money at

7 cents per minute.

Cable: What a mess. Service is not a

factor, because you can't get any.

Programming is bad, and you have to buy

stuff you don't want anyway. And the pricing

structure is outrageous. The industry is

mired in fraud.

Utilities: Perhaps this biggest mistake

of all the trips traveled down the deregulation

highway is the mess surrounding

deregulation of the energy markets. The

government's regulators/deregulators have

done a horrible job of attempting to introduce

competition into the energy markets.

What has become painfully obvious is that

all the fears of our educational system in

crisis have come true. When math and

science test scores began to fall in the

1950s, 1960s and 1970s have now caught

up with the fiascoes in the accounting

industry and in the mega

corporations. These people can't add.

The creation of a computer commodities

marketplace run by a consortium

of energy producers damn near crippled

the most powerful country in the world.

The summer of 2001 brought havoc to the

marketplace, rolling blackouts and soaring

prices. The seventh largest economy in the

world (that would be the economy of

California) was being hijacked by companies

artificially driving up the price of

electricity through artificial means.

Companies were bidding against themselves

to drive up prices and sell power

back to the utilities for massive profits in a

matter of seconds. The state's industries

were shut down or capacity was reduced

due to blackouts. The state borrowed heavily

to buy power on the open market.

Well, it wasn't an open market. Companies

such as Enron had created havoc in the

industry. I believe that some of our current

economic malaise is directly attributable to

the fiasco of the attempt to deregulate the

utility industry.

Under the precepts of deregulation

the utility industry could be a producer of

electricity or a distributor, but not both.

Producers could sell power to anyone,

anywhere. Distributors, however, were

stuck only with the areas where they

could service customers.

Essentially prices doubled almost

overnight. Distributors now changed fee

for your connection to the grid and its

billing services. The fee is the same as

your cost of power. (Look at your

SPPCO bill and note the fee and the cost

of kilowatt hours.) Sierra Pacific Power

was embracing deregulation, preparing to

sell its power-generation facilities. Those

plans are now on hold. The trick is not

own the pipe - but rather to own what

flows through the pipe.

The other factor is that companies

want to be net producers of power.

SPPCO should look at becoming a

net producer of electricity. (Produce more

electricity than it needs for its own customers

and sell the balance on the "open"

market.) Not only are the non-traditional

methods of wind and solar energy a

possibility, but SPPCO should conduct a

profit/loss study on developing highcapacity

nuclear power generating facilities

in rural central Nevada. Not only

would these facilities produce inexpensive

electricity, but the remaining power

could be sold to neighboring states.

These energy farms would create construction

jobs, increase tax revenues and

generate power for Nevada industry and

consumers.

Deregulation for the utility industry

seems like a method of ruining a

perfectly good industry. The industry

provided a consistent source of energy

at a fair price for decades. The

industry was also a consistent source

of income to investors. These energy

farms would add another level of

diversification to our economy and

assist in providing the energy needs

for years to come.

You've heard of Florida Orange Juice?

Now it's time to brand Nevada Juice.