NV Energy begins process to merge north, south

The local power utility blew a 1,122-page blizzard of paperwork at the state Public Utilities Commission on Friday as it launched an effort to merge northern and southern operations.

Forget about the timing for a minute: The long-planned filing is unrelated to Wednesday’s announcement of Warren Buffett’s $10 billion buyout of NV Energy. Rather, the case is designed to finish a process that began in 1999, when Nevada Power Co. of Las Vegas merged with Reno’s Sierra Pacific Power Co., and will end Dec. 31, when the One Nevada transmission line goes live.

The utilities and their 2,600 employees statewide joined under the same corporate parent 14 years ago and changed the holding company’s name to NV Energy in 2008. But north and south still have different grids, power sources and rate-case schedules.

ON Line, a $552 million, 235-mile transmission line under construction from Ely to Apex, will change that by linking Sierra Pacific’s and Nevada Power’s grids. That is important because Sierra Pacific often generates more juice than it needs, particularly from geothermal energy. It also brings in cheap hydroelectric power from the Pacific Northwest. But the state’s disjointed grids mean none of that energy is available in Southern Nevada. Meanwhile, the Las Vegas Valley’s high summer use forces NV Energy into unpredictable wholesale power markets for about 20 percent of its power supply. ON Line will ship some of Northern Nevada’s electric bounty south.

There’s a big catch, though. U.S. law doesn’t allow affiliated but separate utilities to share electricity without oversight from the Federal Energy Regulatory Commission, which would consider every power swap a wholesale trade subject to federal scrutiny. NV Energy said in its filing that it would have to open a separate services company to comply with federal rules. And FERC would have a say in cost and benefit allocations between intrastate grids.

Unifying Sierra Pacific and Nevada Power would “(eliminate) the need for costly and cumbersome safeguards and procedures that would be required in order to maintain the two-affiliated-company structure,” the filing said.

The new company would be called NV Energy Operating Co.

Merging the companies shouldn’t cost ratepayers money. In fact, savings could come from filing one company rate case, instead of two. But that could bring a short-term surprise to Northern Nevadans. State law requires NV Energy’s subsidiaries to file general rate cases every three years. Southern Nevada’s last case was in 2011, so the next is scheduled for 2014. Northern Nevada’s next case should be filed Monday, which means the case after that shouldn’t come until 2016. Because the merged companies would be on the same rate schedule, though, Northern Nevada would have another case two years ahead of time in 2014, alongside Southern Nevada.

But Nevada’s consumer advocate, Eric Witkoski, said the Northern Nevada rate case “has to be” a reduction because NV Energy hasn’t built big plants there recently. Plus, it’s no sure bet the Public Utilities Commission will approve the merger. So “whether (Sierra Pacific customers) are affected by another rate case next year is yet to be determined,” he said.

Friday’s filing did mention the Buffett buyout but only to say that NV Energy’s utility operations “are not impacted by the announced agreement.” Nor does the deal “impact the analysis or merits” of the proposed north-south merger.

The Public Utilities Commission will decide on the merger within 180 days.

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512. Follow @J_Robison1 on Twitter.