PUC official says decision could be reversed

Tuesday, Feb. 27, 2001 | 11:19 a.m.

CARSON CITY -- The chairman of the state Public Utilities Commission says he doesn't know whether a $311 million electric rate increase approved by the commission to take effect Thursday for customers in Las Vegas and Northern Nevada is justified.

Chairman Don Soderberg said an emergency existed, and the commission allowed Sierra Pacific Resources Inc. to put the rates into effect pending a further review of the case. The approval last Friday by the commission "does not mean the rates are permanent or justified," he said. And there could be refunds to the consumers if there is no evidence to back up the application.

But state Consumer Advocate Timothy Hay told the Senate Commerce and Labor Committee Monday that the application to raise the rates was "legally defective," and he will go to court later this week to seek an injunction to stop Nevada Power Co. and Sierra Pacific Power Co. from charging the higher rates. He added, however, he was "not confident we will prevail" in court.

And his analysis, Hay said, didn't support the commission's finding that an emergency existed.

The Senate committee heard testimony for more than 90 minutes on the issue of the 17 percent overall electric rate hike and said it will delve further into the matter.

Chairman Sen. Randolph Townsend, R-Reno, suggested the committee may propose an independent audit of the company to learn its financial condition. The energy issue is becoming one of the biggest to confront the Legislature, which doesn't want to see a California scenario flow into Nevada with rolling blackouts.

Townsend said not one of the 63 legislators know if the $311 million rate increase was justified. And Soderberg said neither do the three public utilities commissioners.

Had the PUC not voted for the increase, Soderberg said there could be blackouts in Nevada in two months. These rate increases start at the lowest usage time of the year with spring coming on. And the PUC will make its final decision before the heavy use times begin this summer.

Soderberg suggested that the utility's position was so bad that it might have trouble buying power because of its poor financial condition.

Legislators confirmed during the hearing that there was no examination done of the company's profit level and all the information required in a rate increase application was not submitted to the commission. The rate of return issue will be explored when the commission holds its hearings, probably in April.

"Everybody knows we are in tough times. We don't want the lights to go out," Hay said, noting that the application filed by utility was not allowed by law. "The rates will be illegal," he said.

Under a so-called global settlement reached last summer, Nevada Power and Sierra Pacific were allowed to file monthly increases to recover part of what it was costing the utility in higher fuel costs. And Nevada law said there should not be any general rate increase until March 2003.

Hay said Sierra Pacific filed its 17 percent rate increase Jan. 29 as a fuel cost adjustment. That was only 14 days after it filed for its monthly increase to cover fuel costs. The law says these fuel and purchased power costs cannot be filed within 30 days of each other.

If this is not a purchased power cost adjustment, then it has to be a general rate increase, which is barred by law. And he said the PUC never made any formal finding that an emergency existed.

Soderberg said the PUC had 30 days to act after the application was presented. If it didn't take any action, the rate increase would go into effect. The PUC, he said could have suspended the rate increase for six months. But he said the staff, after an examination, felt there was a financial emergency facing the utility.

Kirby Lampley, an analyst for the PUC, said he looked at the income, the cash flow, the deteriorating credit rating, the ability of the two utilities to pay off debt and the potential high cost of natural gas in the future.

For instance, he said there was a $1.5 million monthly cash flow and if there had been any unexpected expenses, the company would have "been in a lot of trouble." Credit agencies held a "negative outlook" for Sierra Pacific Resources, the parent company for Nevada Power and Sierra Pacific Power.

Nevada Power, he said didn't have enough money to meet its current debt and Sierra Pacific just could pay its bills. The price of natural gas, which has risen dramatically recently, will probably at the same level in a year. And most generating plants use natural gas for its fuel.

Hay on Monday urged the PUC to reverse its decision and to make a ruling prior to March 1 when the new rates go into effect. Absent that, he intends to file suit.

The PUC said it will hold a pre-hearing conference on March 23rd to consider Hay's previous motion to dismiss the case because the law was not followed.

Under the rate design filed by Sierra Pacific Resources, there would not be any increase for a customer who used less than 300 kilowatts. But Townsend questioned how many users fell in that category. The committee was told the average customer in Southern Nevada uses 1,100 kilowatts and 550 kilowatts in Northern Nevada.

The committee will continue hearings on Wednesday.