Editorial: Utility is needing humility

Friday, Jan. 21, 2000 | 9:11 a.m.

In July 1999 Nevada Power submitted a request with the state Public Utilities Commission to increase rates by $40 million, offsetting the higher than anticipated costs of the fuel it had purchased. Then in September the company asked that the increase be upped to $110 million, a 15 percent boost for customers.

Both the commission's staff and state Consumer Advocate Fred Schmidt asked Public Utilities Commission Chairman Don Soderberg to dismiss the $110 million application, but Soderberg rejected this on Nov. 16, allowing the utility to present its case. As the Sun's Cy Ryan reported Wednesday, Nevada Power sent a letter to the commission on Jan. 10, saying that even though the company believed state law allowed it to do so, Nevada Power wouldn't charge its customers the $40 million it had sought in its first request. (Under Nevada law, if an application for a deferred energy case isn't acted on within 150 days by the commission, then it automatically goes into effect.) So far, so good.

There was a kicker, though, to the letter sent by Cheryl Hachman, Nevada Power's associate general counsel. "If however, the commission grants the relief sought in staff motion for full commission review of the Nov. 16 order or otherwise dismisses the Sept. 30 (combined application), Nevada Power will place the July 15 proposed rates into effect." In other words, if the company doesn't get its way on its amended rate hike request, it will unilaterally impose the hike it had first sought.

The intent of the law, requiring a decision by the commission within 150 days, is sound: Utilities should get a fair and expeditious hearing. The problem with Nevada Power's case, though, is that the company came in and essentially amended its plan, which most observers would assume would reset the clock from the time it changed its proposal.

Soderberg termed the letter a threat and Schmidt described it as "arrogance." They're both right. The company now is backing off its initial demand. Laura Lipparelli, manager of regulatory pricing for Nevada Power's parent company, Sierra Pacific, told the Sun that this was simply part of "ongoing correspondence." The utility, Lipparelli said, doesn't "intend to implement anything at this time."

It is unclear whether Nevada Power, in fact, does have the legal authority to impose rates without the commission's consent in this instance. It shouldn't be too surprising, though, that Nevada Power would push hard to get rates as high as possible before deregulation begins: Under the law allowing other electric companies to compete with Nevada Power for customers, rates would be frozen for three years once deregulation begins.

The commission begins its hearings Monday on Nevada Power's $110 million request. As deregulation of the power industry in Nevada nears, each decision taken by state regulators takes on exceptional importance. The commission must give due consideration to Nevada Power's $110 million request, but regulators should ignore any hint of bullying.