PUC decision sets stage for court fight

Tuesday, March 28, 2000 | 10:36 a.m.

The Public Utilities Commission of Nevada has approved an order that decreases power rates for Nevada Power Co., setting the stage for a court battle between the company, its shareholders and state regulators.

In a 2-1 vote, commissioners approved its staff's recommendation, which allows the utility to collect about $9 million to $10 million less next year than it is now taking in from ratepayers. The PUC's order rejected a proposal by gaming interests to reduce the rate even more.

But Nevada Power, through parent company, Sierra Pacific Resources Inc., has already indicated that it would appeal if the staff plan were approved. The PUC presented a draft order last week indicating the direction it was headed.

"It is the company's opinion that the PUCN's final order will substantially reflect the draft order and lead to a write-off of approximately $20 million against first-quarter 2000 earnings and a reduction in expected future revenues," Nevada Power said in a statement after reviewing the draft.

After Monday's vote, the Utility Shareholders of Nevada announced that it also planned to appeal the decision.

"We're preparing our appeal of (Monday's) decision and will carry that appeal through the courts if necessary," said Joyce Newman, president of the association. "Thousands of individual shareholders have lost a great deal of their invested capital because of recent PUCN decisions and we feel strongly the courts will agree the commission acted contrary to the law."

Newman said the association also was concerned about the impact the decision could have on the company's ability to keep up with Southern Nevada growth. The decision, she said, does not reflect the intent of Nevada lawmakers when they approved deregulation of the industry.

"To deny recovery, and in fact, to reduce rates, means consumers have used energy for which they will never have to pay," Newman said. "And since this case is part of the overall series of cases to prepare the state for electric competition, it means that deregulation to benefit a few large customers will be done on the backs of thousands of primarily retired utility shareholders."

The stock market also reacted negatively to the decision. Sierra Pacific stock closed down 18.5 cents from Friday's close to $12.625. In early trading today, the stock was down another 25 cents to $12.375, close to its 52-week low of $12.31.

Nevada Power originally sought a $44.3 million rate increase, but then amended it to $110 million.

The PUC rejected the $110 million case in February and the company has begun appeal proceedings on that decision. The agency then deliberated the original request. As the hearing was coming to a close, Gov. Kenny Guinn engineered a pair of summit meetings between the utility company, the regulatory staff, gaming and mining company representatives, the Las Vegas Water District and the state consumer advocate's office.

Those meetings were designed to get the deregulation process, which was delayed from a March 1 startup by Guinn, back on track. Since the rate increase -- the final one to be considered before competition begins -- was tied to deregulation, issues involving the rate case were discussed. But no compromises were reached and the PUC went ahead with its order, which was opposed by temporary Commissioner Jo Ann Kelly.

According to a PUC analysis of the order, Nevada Power would be able to collect $17 million over the next year in deferred energy rates -- the pass-through of fuel costs and energy the company buys from suppliers.

Currently, Nevada Power is receiving $30.2 million from deferred energy rates for the year, so income will go down by about $13 million.