Nevada Power set to plead case for rate hike

Friday, Jan. 21, 2000 | 11:16 a.m.

A critical hearing on electric rates begins Monday with advocates for customers saying Nevada Power doesn't need the $110 million increase it's requesting.

The Public Utilities Commission hearing in Las Vegas is expected to last at least two days and will include testimony from the PUC staff, the state's Bureau for Consumer Protection, the Southern Nevada Water Authority and representatives from the state's largest casino companies.

Nevada Power Co. and its parent company, Sierra Pacific Resources Inc., will try to convince PUC Chairman Don Soderberg that the company needs the increase to offset rising costs the company will see in the next three years.

Soderberg will preside over the hearing on the plan, which would raise rates for most customers by 15 percent.

Soderberg, who has denied a request to throw out the rate increase proposal, will likely draft an order after the hearing and present it to the full commission. A final decision on the rates is expected to be considered by commissioners next month.

The rate case is important because it's the last opportunity for Nevada Power to seek an increase in a regulated environment. On March 1, Nevada is scheduled to restructure the industry to allow competition, though that may be delayed. Twelve companies have filed for licenses to sell power in the state.

Last year the Nevada Legislature voted to freeze rates for three years, but allowed Nevada Power one last deferred energy case to pass through higher fuel costs to customers.

Initially, the company asked for a $40 million increase. But in September, the company amended its request to $110 million.

"It's not surprising that on its last case they come in and ask for a bushelful of money," said State Consumer Advocate Fred Schmidt. "The really interesting thing is that we (the case intervenors) all agree they don't need a rate hike."

The Southern Nevada Water Authority and a coalition of casino operators including Mirage Resorts Inc., Park Place Entertainment Corp. and Mandalay Resort Group have hired financial experts to testify on why Nevada Power doesn't need the rate increase.

Mirage owns Bellagio, the Mirage, the Golden Nugget, Treasure Island and is a partner in the Monte Carlo hotel-casino in Las Vegas. Park Place owns Paris Las Vegas, Bally's, the Las Vegas Hilton, the Flamingo Hilton and Caesars Palace. Mandalay Resort Group operates Mandalay Bay, Luxor, Excalibur, Circus Circus and is the other Monte Carlo partner.

In prefiled testimony, the intervenors were unanimously opposed to Nevada Power's rate increase. They said the company had earned more than a fair rate of return last year and that the increase being sought by the company goes beyond recovering deferred energy costs.

The intervenors say Nevada Power is attempting to recover "capacity charges" in addition to fuel costs. Capacity involves the expense of acquiring electricity from other suppliers.

The only areas in which the intervenors disagree is on how much they figure Nevada Power should be allowed to recover for fuel costs and how much of the rate increase is in capacity charges.

Schmidt says he is opposed to any rate increase for the utility because he feels capacity charges should be addressed in general rate cases and not in deferred energy cases. Because of the company's high rate of return, he believes the utility should not be entitled to profit at the expense of ratepayers.

Schmidt said he also believes Nevada Power is seeking a major rate increase because it doesn't believe competitors will make a significant dent in its customer base when the industry is deregulated, even after rates are frozen.

Nevada Power believes the rate increase is justified because of the risk it is taking by locking in rates for three years while fuel costs could rise.

Bill Branch, director of rates and regulatory affairs for Sierra Pacific Resources Inc., Nevada Power's parent company, said the rate increase is about setting energy rates at a fair level and recovering deferred energy balances that have accumulated.

"Of course, there may be some disagreement on what fair is," Branch said.

He said Nevada Power's statement on earnings says the company was not overearning as of Aug. 31, the date the company is using as the benchmark.

Branch also explained that whether to incorporate capacity costs in the rate case has been an issue that has been unresolved for two years.

"This was something we wanted to address in this last rate case," Branch said.

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