Utilities Use Rate Freeze As Selling Point Wwp Says Rates Could Climb By 8 Percent If Merger With Sierra Pacific Is Rejected By Regulators

Idaho customers of Washington Water Power Co. would likely be asked to pay rate increases of as much as 8 percent within the next few years if a proposed merger with Sierra Pacific Resources were rejected, company officials said Monday.

But in seeking approval of the deal from Idaho regulators, WWP has agreed to freeze rates until the year 2001.

And any earnings above a cap imposed by a separate agreement with Idaho Public Utilities Commission staff would be split with ratepayers.

The freeze would extend a 10-year period of rate stability for WWP customers in Idaho.

Technical and public hearings on the merger were all but ignored Monday in Coeur d’Alene, with testimony largely confined to that of company and commission staff witnesses.

In Washington, officials at the Utilities and Transportation Commission also said there has been minimal public focus on the deal, which will combine two of the smaller utilities in the West.

WWP Chairman Paul Redmond said the savings - estimated at $450 million over 10 years - made possible by creating a single, larger utility warranted the transaction.

The Spokane utility has been a successful operator in the wholesale power market, he said, but competition has multiplied.

And WWP risks losing customers if forced to raise rates to shore up its finances, he said.

WWP pays out a high share of income, almost 90 percent, in dividends.

“The key word is competitiveness,” Redmond said. “We’re going to be a more dynamic, aggressive company.”

Sierra Pacific Chairman Walter Higgins said his Reno-based company, the smallest utility in the West, would be vulnerable to unforeseen setbacks without the greater resources a larger company would have available.

“You like to have more control over your future,” he said.

The two utilities, which will be the operating divisions of a new company, Resources West Energy, will continue to rely on their own generating resources.

The segregation assures WWP’s inexpensive hydroelectric generating facilities will remain dedicated to its Washington and Idaho customers.

But Idaho commission Chairwoman Marsha Smith questioned how long the divisions will stay separate, and whether Sierra Pacific’s more expensive power might eventually be blended with WWP’s cheaper resources.

“There comes a time when the merged companies want to operate as one entity,” she said.

Smith also challenged the 12.5 percent return on equity WWP will be allowed for the next six years. Idaho Power Co. was granted 11 percent in a recent rate case.

The commission does not have to approve the staff-negotiated agreement.

Commission rate auditor Terri Carlock noted the allowed rate is less than WWP is entitled to now. And a rate proceeding might yield the company more, she said.

WWP Controller John Buergel said company and Sierra Pacific officials decided early in their merger discussions that the resources of the two utilities would remain dedicated to their separate service territories.

Regulators in states where combined generating systems would hike rates would never approve such a merger, he said.

, DataTimes