Regulators to utilities: Try again with applications

The Public Utilities Commission has asked Nevada Power to resubmit a request to serve customers through an affiliate company.

Commissioners voted 2-1 today to deny applications from Sierra Pacific Power Co. and Nevada Power Co. for authority to provide competitive services through separate companies.

Sierra Pacific and Nevada Power have merged, but the application process began before the merger took effect.

Nevada Power officials said they were disappointed with the decision and that it could delay their efforts to market new services to customers.

Commissioner Michael Pitlock said today the decision shouldn't result in a delay, since the utilities can resubmit the application and apply for licensing simultaneously.

When the Nevada Legislature voted to restructure the utility industry in the state, it ordered that existing utility companies apply for authority to compete through affiliates before submitting documentation for licensing. The requirement sets guidelines for how monopoly utilities could become licensed participants in the competitive environment.

State officials wanted to avoid giving the monopolies a competitive advantage when new competitors came to the state to do business. The state did not want to allow the monopolies the opportunity to subsidize the new affiliates, especially since the monopolies would still control the transmission lines.

An independent system administrator (ISA) will monitor the region's power grid to assure competitive retail power companies are treated fairly by the owners of the transmission lines.

Competition is scheduled to begin next March.

Commissioner Judy Sheldrew, who authored a draft order denying the applications, said the documentation wasn't specific enough in explaining how the affiliates would work independently of the parent company. In some cases, she said, Nevada Power was planning to maintain too close a relationship with the affiliate.

"The commission must conclude significant damage could occur to the competitive markets if the applications were approved in their current form," Sheldrew said Wednesday.

"The applicants believe the commission can rely on the companies' statement of commitment to comply with statutes and regulations which pertain to the proposed operation of RetailCo and MeterCo to find that the regulatory expenses required to prevent anti-competitive behavior will be minimal. These arguments were unimpressive."

"RetailCo" and "MeterCo" were the temporary names Sierra Pacific and Nevada Power gave to their affiliates in their applications.

"The companies have proposed all corporate officers be allowed to direct the activities of the potentially competitive affiliates from the holding company level, which once again blurs the line between regulated and competitive affiliates and furthers concerns about cross-subsidization and anti-competitive behavior," Sheldrew said.

Commission Chairman Don Soderberg cast the vote against denial.

"The first thing that jumped out at me is I generally disagree with the concept that we need to bar these people from being a competitive affiliate until the date the ISA is operational," Soderberg said.

Soderberg said the separation of holding companies from affiliates shouldn't be ordered at the expense of customers.

"We don't want to rob the customers of those operational efficiencies," he said. "The last thing we want to be telling these two companies or any company is that we want two or three separate legal departments because we're more comfortable with that.

"It's our job to monitor compliance. It's our job to make sure that there's no cross-subsidization and I think a shared services agreement could have been a compliance item that we could have been comfortable with here and could have been reviewed by our staff post-decision."

Soderberg also said he doesn't want to judge Nevada Power and Sierra Pacific as anticompetitive before the restructured system even begins.

Sheldrew encouraged Sierra Pacific to resubmit a more detailed application and attributed the company's failure to win approval as "a misunderstanding about the importance and purpose of these particular regulations." She speculated that Sierra Pacific and Nevada Power hadn't formulated enough details about how they intend to compete in the market before delivering the application.

But Nevada Power is on a tight schedule and began working on the application late last year. Company officials were disappointed in the vote.

"This decision could effectively delay our ability to begin marketing our competitive services to customers," said Nevada Power spokeswoman Sonya Headen. "Yet, other entities are currently being licensed by the commission to provide services in the deregulated market.

"We will review the commission's order when it is received in final form and we will then consider our options for pursuing our right to participate in the competitive marketplace on a level playing field with competitors," Headen said.

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