Consumers warned of electricity rate hikes

CARSON CITY -- Democrat and Republican Assembly members warned Tuesday that homeowners, particularly in Las Vegas, may be hit with major rate shock during the early years of competition in the electric industry.

Assembly Minority Leader Lynn Hettrick, R-Minden, said, "At the end of four years, it will hit the fan big time. There will be whopping increases in residential rates."

Assemblywoman Barbara Buckley, D-Las Vegas, said, "In five years, all hell will break loose in residential rates."

Their comments came as an Assembly select committee considered SB438 to permit open competition among companies that supply electricity starting in March 2000.

The bill freezes rates when competition arrives for three years.

But after that, homeowners can expect major increases, said the two lawmakers. Hettrick suggested the residential user who will be supplied by Nevada Power Co. could face a 24 percent increase.

Buckley said this bill has the potential "for socking it to the ratepayer."

Representatives of Nevada Power and Sierra Pacific Power Co., which are planning to merge, told the committee that competition and efficiencies should do much to protect the homeowner.

At present, rates for homeowners in Clark County don't cover the cost of the service of Nevada Power. And the big users are subsidizing the small customers. Rates would probably have to be increased by about 24.7 percent for the homeowner to cover the cost of his or her service in Clark County.

Steve Rigazio, vice president of finance for Nevada Power, and Doug Ponn of Sierra Pacific Power in Reno, explained that once merged, the new company would sell off its generating plants.

The utility would use part of the money to continue to subsidize homeowners during the three years of the rate freeze. The company would also use part of the money for so-called "stranded costs," which are other outstanding debts.

Hettrick said when the money from the sale of generators is used up and the rate freeze expires, "The small guy is going to get burned big time."

Ponn said the combined company is "wagering through efficiencies in the market and efficiencies in the merger, they will offset some future increases."

Rigazio said there have been five rate decreases in the last five years for customers of Nevada Power. And the utility intends to file for an increase of 4-5 percent soon to recover the higher costs for fuel it paid.

The committee will meet again Thursday to further review the bill, which must be passed out by Friday. But the comments and testimony Tuesday showed there were many questions still to be answered.

The committee also heard testimony from a room full of plumbing and mechanical contractors in Las Vegas who spoke through a television hookup with Carson City.

Richard Kerzetski of the Plumbing and Mechanical Contractors Association of Nevada and others opposed a section in the bill that would allow Nevada Power and Sierra Pacific Power to continue to use their present names and logos as they branch out into other businesses.

Kerzetski said it would permit these giants to abuse their present market power to drive the small contractors out of business.

Larry Smith, also a Las Vegas contractor, told the committee that small business people should not become "a casualty of deregulation," by permitting the utilities to expand into other fields using their long-time names.

For instance, they could get into the business of selling appliances and have an advantage because of their names.

Committee Chairman Doug Bache, D-Las Vegas, also expressed concern about the use of the name and logos as they go into other businesses.

But Bob Crowell, an attorney representing both utilities, said the name and logo are "near and dear to the heart of the companies." He said the telephone companies and the gas companies didn't have to shed their names when competition arrived.

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