A Consumer Cooperative organized by Nevada's former Consumer Advocate and the Land and Water Fund will bid in October to buy out Nevada Power's transmission and distribution system. If successful, the power co-op will offer southern Nevada consumers membership as an alternative to shopping alone in the deregulated market, and plans to invest heavily in energy efficiency and renewable power.
Former Nevada Consumer Advocate John Wellinghoff and the Land and Water Fund have formed a coalition with an undisclosed for-profit generation company interested in purchasing Nevada Power's power plants, in an approximately $1.4 billion bid to take over the investor-owned utility. The Cooperative's share, at approximately $700 million, will be financed by the National Utilities Finance Corporation (NUFC), the 15 year old, $9 billion bank called the "cooperative of co-ops" based in New Jersey.
Wellinghoff is confident that the co-op will operate the distribution system with a $60-$80 million annual savings, enabling the co-op to both offer competitive prices and invest substantially in energy efficiency technologies and renewable energy resources. "The co-op can run this system less expensively as a co-op with financial flexibility and resources," including a non-profit income tax exemption. "With these savings we can finance energy efficiency investment for our customers, and market renewable energy as a mainstream option."
Eric Blank, of the Energy Project for Colorado's Land and Water Fund, a partner in the effort, said a first principle of the co-op would be to eliminate the utility incentive to increase electricity sales, long considered a barrier to energy efficiency investment by power companies. "The insanity of the current system is that utilities make a fortune in extreme weather, and get killed in mild weather, addicting them to increasing sales." Blank said the co-op will separate sales and revenues by an annual true-up to recover costs. "If we sold more power than planned last year, we will refund the difference. If we sell less, we will increase the rates to make up for the revenue loss," he explained.
Blank added the co-op will be governed on the one-consumer, one-vote system to elect a nine person board, which in turn will install the management. "The structure vests control in the community and offers cheap capital, a lower discount rate, and more flexibility as a non-profit to invest in renewable power and energy efficiency." Blank added that municipalities could use some of the same economic strategies to form municipal utilities. "We chose not to pursue the municipal option in Southern Nevada for political reasons," he said.
While the co-op wishes to own the transmission and distribution systems only, says Wellinghoff, "a serious offer must include the whole package." The co-op found a partner in an unnamed "multi-billion dollar company which is in the business of buying generation," but adds that the co-op has no other agreements with the generation company. "We will probably buy some power from them but financially we're totally independent."
"The purpose of this co-op is to deliver the lowest cost electricity to Nevada consumers at a minimum social cost," says Wellinghoff, who believes that consumer ownership of the transmission and distribution system will prove critical to that purpose. "With ownership, our communities will have a stable and reliable revenue base coming in from access charges, as well as access to meters, which provide information on usage patterns and power requirements that is essential to wise power purchasing decisions." He also believes that consumer control of meters eliminates the conflict of interest in giving power companies control of reselling to consumers. "State law requires an arm's length between power company affiliate selling and buying power, but this is an artificial measure that can be gotten around. As a co-op we would represent consumers only, so we can be counted on to provide objective information to our members and to do the right thing by them."
"The co-op is one of the most successful forms of business in America," adds Wellinghoff. " The California AAA is the state's most successful insurance company, because they focus not on revenue but low cost insurance and member services. Sunkist orange growers and other agricultural co-ops succeed because they are narrowly focused, and even credit unions are beginning to beat the for-profit banks. As the electric industry is deregulated, I think we are going to see the co-op emerge as an effective, progressive force in the market." END
Copyright 1997 by the American Local Power News