Electric Restructuring Trend Pauses In Some States


Twenty-four states had embraced electric utility deregulation as of the end of 1999, but the story has been different in 2000. Last week, Iowa's Legislature tabled a bill to open up the sale and production of electricity in the Hawkeye State, and uncertainty in Nevada led Gov. Kenny Guinn to pull the plug on a Mar. 1 implementation deadline.

Not everyone is shying away, however. Big businesses -- which save more on electric costs than residential customers in deregulated environments -- are arguing that Alabama Power Co.'s electric monopoly must end.

States that already have deregulation, which is supposed to foster competition and bring about lower electricity prices, are: Arizona, Arkansas, California, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Michigan, Montana, New Hampshire, Nevada, New Jersey, New Mexico, New York, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, Texas, Virginia, West Virginia.

The death of Iowa's deregulation bill came as no surprise to lawmakers or lobbyists on either side of the issue. Enthusiasm in Iowa's House of Representatives was virtually nonexistent, despite the best efforts of Iowans for Electric Choice, a coalition of business groups and utilities.

By last week, it was obvious to even the most optimistic deregulation proponent that the policy was dead in the Iowa Legislature. "Unfortunately, the arithmetic just didn't add up," House Majority Leader Christopher Rants told the Des Moines Register . "It's time that we move on."

Among other things, deregulation opponents convinced legislators that electric rates for the average homeowner would not decrease appreciably if deregulation came to Iowa. In fact, that's been the case in states that have actually implemented their deregulation programs

That's because power marketers have gravitated toward big- and medium-size businesses, which represent far more lucrative targets than mom-and-pop businesses and individual households.

In Nevada, the Legislature can't be blamed for that state's sudden decision to back away from deregulation, also known as electric utility restructuring. Two days before the Mar. 1 deadline to start deregulating Nevada's $2 billion electric industry, Gov. Guinn pulled the plug.

"I'm very disappointed we weren't able to meet the March 1 deadline, but I am absolutely opposed to proceeding with deregulation before we are ready, and we're not ready," Guinn said.

Guinn was alarmed that Nevada and the state's chief power supplier, Nevada Power, were more than $100 million apart on the issue of `stranded costs' to be paid to Nevada Power. Stranded costs are expenses that utilities recoup for capital investments they claim would be unprofitable under a deregulated scheme.

"There's a chance that they may be the first state to say, `We thought this was a good idea, but it isn't,'" observes Charles Acquard, who heads the National Association of State Utility Consumer Advocates.

Along with the matter of stranded costs, Guinn was also concerned that little progress had been made toward creating and funding an independent services administrator, basically a traffic cop overseeing access to Nevada transmission lines.

In an effort to achieve common ground, Guinn has held meetings with representatives of Nevada Power, the state consumer advocate, Nevada's Public Utility Commission and the gaming industry. The meetings have been amicable, but no progress has been made toward getting deregulation back on track. Nor has a deadline been set.

The prospect of that happening soon dimmed further in late March after Nevada Power filed a federal lawsuit to strike down Nevada's deregulation law.

The Nevada Public Utility Commission and several of its commissioners are named as defendants in the suit, which notes that Senate Bill 483 doesn't give Nevada Power a chance to recover stranded costs.

"We supported competition and customer choice in Nevada, but we want to make sure that it's done right," Nevada Power spokeswoman Faye Andersen says. "We can't go forward in a business where we continually lose money. We need to go back to the drawing board and fix the law."

Since Nevada's legislature meets every two years, the next opportunity for Silver State lawmakers to take a crack at deregulation would be in 2001.

While these subplots play out, two companies are waiting in the wings to compete against Nevada Power. One firm, Utility.com, claims it's the country's first Internet electric company. The other, Nevada Power Services, is an affiliate of Sierra Pacific Resources Inc., the parent company of Nevada Power.

Sixteen hundred miles to the east, powerful industrial and retail allies are clamoring for Alabama to enter the era of electric utility restructuring.

"I think it's going to be good for large industrial customers and good for Alabama," businessman Ed Boardwine told the Birmingham News . Boardwine is president and chief executive officer of SIMCALA Inc., a company whose Montgomery silicon metal production plant is one of Alabama Power Co.'s biggest customers.

Alabama Attorney General Bill Pryor is also a deregulation backer. "We favor deregulation and competition in electricity as we do in all aspects of the free market. We believe consumers have benefited greatly from the deregulation of other industries, such as trucking and airlines and telephones," Pryor said.

An engineer with Alabama's Public Service Commission, Rick Cleckler, has even put together a state deregulation plan modeled after those in Oregon, Montana and other states, according to the Mobile Register .

The Alabama PSC is beginning to hold a series of public hearings that will give deregulation naysayers and admirers an opportunity to voice their opinions on the issue.

One vocal opponent, the Alabama Farmers Federation, has already materialized.

"We are opposed to deregulation," federation executive director Doug Rigney told the Birmingham News . "We are in a low-cost state, probably lower than the average, and we believe deregulation probably would increase rates to residential customers and farmers."


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