Power rate hikes ‘unconstitutional’

Friday, July 28, 2000 | 11:11 a.m.

CARSON CITY -- A negotiated settlement that will permit Nevada Power Co., to raise its rates every month "clearly violates" the 1999 state law that ordered an electric rate freeze for three years, a legislative attorney says.

Legislative Counsel Brenda Erdoes said a court would probably find the rate freeze law unconstitutional.

Critics of the settlement have complained the 1999 law that prohibited rate increases for three years is being ignored by the negotiators of the agreement.

Erdoes addressed her Thursday legal opinion to Senate Minority Leader Dina Titus, D-Las Vegas, who has criticized the "backroom deals" that forged a compromise to allow for rate hikes for Nevada Power and its sister utility Sierra Pacific Power Co. in Northern Nevada. The stipulation also sets a schedule for opening the electric market to competition.

Titus said legislators who voted for this law last year "were duped into believing there was protection for ratepayers."

With this legal opinion, Titus said she "can't help but see rate increases every 30 days" for the two major utilities.

The 1999 law said the state Public Utilities Commission shall not allow any increase in rates for Nevada Power or Sierra Pacific until March 1, 2003. Part of the negotiated settlement permits the two utilities to submit rate increase requests every 30 days based on the cost of fuel or purchased power.

Erdoes said, "The rider (in the settlement) clearly violates that prohibition," in the law.

But Erdoes, who is chief attorney for the Legislature, added a court would "likely find" the rate freeze law unconstitutional.

The state has a duty to provide a regulatory framework whereby the utility can receive just compensation, Erdoes said.

The law allowed Nevada Power to file for one last rate increase before last October. It initially sought $44 million and then amended the request to $110.7 million, or a 14 percent to 15 percent increase. The PUC turned down both applications. Nevada Power filed suit in District Court in Carson City to overturn the decision.

Negotiators for the utilities, the big casinos in Las Vegas, the staff of the PUC, the state consumer advocate and the Southern Nevada Water Authority worked out a deal in secret in which Nevada Power would be able to boost rates by 4.7 percent to homeowners and 5 percent to 6 percent to big customers to collect an additional $48 million.

And another part of the agreement allowed monthly increases. It could mean rates could rise by 9 percent to customers of Nevada Power by the end of the year.

Titus, only one of two senators who voted against the law, said she thought the "high priced lawyers" were aware that the law might be unconstitutional. But the lawmakers were never advised of the potential for the law being declared invalid, she said. She suggested these lawyers for the industry and other big users may have hoodwinked the legislators by putting forth a law they knew to be unconstitutional.

"This is the danger of backroom deals and the problem the Legislature faces in a 120-day crunch," she said. The committees tell the lobbyists to work out the agreement, Titus said.