Nevada Power to appeal PUC rule limiting profits

Thursday, Sept. 23, 1999 | 10:43 a.m.

Nevada Power Co. plans to appeal an order issued by the Public Utilities Commission limiting the company's rate of return for the next three years.

In a media briefing Wednesday, Chief Executive Officer Michael Niggli said the company has reviewed the order issued last week and decided to challenge the PUC's determination that the company should be allowed to earn a rate of return of 9.66 percent.

State statutes permit utilities to a 12 percent rate of return, Niggli said, and the rate allowed in the order would rank Nevada Power in the bottom 25 percent among the nation's utilities.

The PUC noted last week that Nevada Power is earning $14.2 million in excess profits this year while its merger partner, Sierra Pacific Resources, is collecting $33.9 million more than it needs.

But commissioners also noted that with rates frozen for the next three years and expenses likely to rise during that time, profits are expected to shrink unless the company moves to operate more efficiently.

The Nevada Legislature capped Nevada Power's rates through March 2003 in anticipation of the beginning of deregulation next year. When customers choose an electricity provider beginning March 1, 2000, they can go with Nevada Power and keep the capped rate or they can shop for a less expensive alternative.

But for consumers, there's a catch: Market forces can affect the price of electricity and costs could rise once a consumer signs on with a new provider. But it's also possible that the price would stay below Nevada Power's frozen rate.

Another catch: Once consumers switch to a new provider, they can't go back to the Nevada Power frozen rate, although a Nevada Power affiliate is expected to be one of the companies competing for residential customers.

So far, only one company has been licensed to serve residential customers beginning March 1, Utility.com Inc., Albany, Calif.

Three other companies that plan to serve residential customers in some capacity have applications pending before the PUC. Electricity providers include Sierra Pacific's affiliate, known as Nevada Power Services, and New Energy Southwest LLC, Phoenix.

The third company, Avistar Inc., which plans to operate as Phaser Advanced Metering Services, Albuquerque, N.M., would offer metering, meter-reading and billing services for residences.

On another issue, Nevada Power officials say the company is ready for Y2K.

Randy Ranck, executive director of management information systems, said the company participated in industrywide testing in April and on Sept. 9 and that all systems were deemed ready.

Ranck said the company's communications department will be staffed Dec. 31 in anticipation of the calendar's change from 1999 to 2000. Some experts say computer systems will fail when the year switches from "99" to "00" because they will read the digit as 1900 and malfunction.

Nevada will be at an advantage when put to the ultimate Y2K test Dec. 31, Ranck said. Because the state is in the Pacific Time Zone, company officials will be able to observe what happens to other utilities east of the state.

Another advantage is the winter season. Ranck said Nevada Power's generation sources have a capacity of 2,500 megawatts. On Jan. 1, 1999, the city operated on 1,200 megawatts because the big power users -- air conditioners and cooling systems -- aren't in use in the winter months.