Friday, Aug. 3, 2001 | 4:50 a.m.
Editor's note: In August Where I Stand is written by guest columnists. Today's writer, Timothy Hay, is the state consumer advocate.
RECENT STUDIES show Nevada leading the nation in rate increases for electric services. These increases are due, in part, to the Western United States' departure from traditional utility regulation and experimenting with market-based pricing, in part to utility practices which do not produce least-cost results, and in part to ineffective federal regulation that allowed price manipulation in the Western energy markets.
These price increases are felt by all, especially those who are elderly or have health concerns and who rely on electricity to provide safe household temperatures during extreme summer months. The 2001 Nevada Legislature recognized these market conditions and responded with some strong measures.
Most importantly, the Legislature adopted the position advocated by our office to put a stop to the utilities' plan to sell their generating units to out-of-state merchants who could have then sold electricity back to Nevadans at inflated prices. We estimate this action alone will save Nevada's consumers over $900 million over the next five years.
Utility-owned generation remains our most reliable electric resource; it is subject to state regulation so that the cost to consumers is minimized. Unfortunately, Nevada Power's recently filed resource plan indicates its strategy is to continue to rely heavily on the volatile purchased-power market. Our office supports greater reliance on building our own generating units, which provide more reliability and rate stability. The Legislature also adopted provisions that prohibit the Public Utilities Commission of Nevada from making hasty decisions and increasing utility rates without considering evidence, as it did in February when it approved the largest electric rate hike in the state's history -- over $311 million.
Nevada Power now estimates it will request a further rate increase of $450 million to $700 million later this year as a result of returning to an accounting mechanism -- repealed in the 1999 Legislature -- but restored by lawmakers in the 2001 session at the request of Nevada Power and its lobbyists. The utility's actions of the past few months have damaged the credibility of the regulatory process that oversees a necessary part of each citizen's existence -- electricity. Shortly before the PUC's approval of the largest rate increase in Nevada's history, Nevada Power claimed it was near bankruptcy and that its suppliers might not honor energy contracts for this summer.
Just days before the Legislature approved the bailout that will result in the rate increases to be requested this fall -- and which, if approved, will result in even higher electric bills next summer -- the utility made similar claims and announced it would suspend its dividend payments to shareholders. Now, a few days after the final energy legislation supported by Nevada Power was signed by the governor allowing large consumers such as mines and casinos to shop for cheaper energy, the utility announced that dividend payments to shareholders will resume -- over $60 million per year.
In short, shareholders have benefited from regulatory and legislative action and Nevada's ratepayers will be paying high rates as a result. Our efforts to prevent partial deregulation by not allowing large customers rights that small customers lack were unsuccessful as well: Next summer large users will have the right to shop for cheaper electric supplies. During this time of record increases in energy rates, Nevada Power did not endorse caps on the prices that wholesale electric generators could charge (Nevada Power purchases about 50 percent of its summer energy from such suppliers). Our office took the opposite view, and supported both federal regulatory action as well as federal legislation to moderate prices.
Now that the federal regulators have reversed their position and have taken an active role to regulate wholesale prices, the Western energy market is experiencing lower prices and more stability. Whether Nevada ratepayers will see those benefits will depend on Nevada Power's willingness to take aggressive action to seek refunds from independent suppliers and to renegotiate its existing power supply arrangements. Customers of Nevada's electric utilities deserve more. It is time for the utilities to justify to Nevada citizens their request for record-setting rate increases. It is time to put aside utility claims of bankruptcy that occur at the same time as do large payments to utility shareholders. And it is time to put aside the utilities' cries of crises and their calls for hasty decision-making.
Instead we must restore public confidence in the regulatory process by requiring Nevada utilities to meet all requirements of law. We must ensure Nevada utilities examine all operating alternatives and select a least-cost plan that is based on careful economic and engineering analyses.
We must ensure Nevada utilities provide the information that is necessary to fully evaluate the merits of their proposals. We must ensure the regulatory process allows for adequate investigation, citizen input, and relies on appropriate evidence. It is only once these issues are addressed that we can be assured the citizens of Nevada pay no more for their electricity services than is just and reasonable.
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