$929 million power rate hike to be sought

Thursday, Nov. 15, 2001 | 11:02 a.m.

CARSON CITY -- Nevada Power Co. is expected by the end of the month to request a record $929 million rate increase in Clark County.

The boost is being sought to cover increased fuel costs, according to state Consumer Advocate Timothy Hay. The power company is entitled to recoup such costs under a law passed this year that nullified the state's plan to deregulate utilities. A formal request must be made, under the law, by Dec. 1.

The request would be in addition to a $42 million rate increase already proposed to cover the cost of a merger of Nevada Power and its parent company, Sierra Pacific Power Co., as well as other costs.

"By February there will be $1.2 billion in rate applications," Hay said. Hay is opposing the $42 million increase, a 6 percent hike, and plans to challenge the $929 million one as well.

The increased costs have been accumulating for more than 10 months, Nevada Power spokesman Paul Heagen said. "It's a rate increase we don't like to see but it's unavoidable."

The final amount has not been decided, but he agreed it was in the $900 million range.

Nevada Power has not yet released the details of its expected $929 million increase, so it's unclear how much it would raise individual power bills.

However, in the utility's application for a $42 million raise, the utility proposes to triple the monthly fee for service, to $20 for homeowners, Hay said. That request would hurt low-income users, he said. Some big users will see a decrease, he added.

Heagen said the utility has "made no secret" about the upcoming rate increase to recover higher power costs. Company officials had previously said it may be an increase of 25 percent.

Heagen said the law permits the utility to spread the cost over three years. He said the utility was sensitive to the plight of the consumer.

Consumer sessions are planned in Las Vegas in mid-January on the two rate increases. The hearing on the applications begins Feb. 4 and will continue through the month, Don Soderberg, chairman of the utilities commission, said.

Sierra Pacific Power Co., the sister company of Nevada Power, is expected to file an application by Dec. 1 to raise rates by $30 million to cover additional expenses and profit margins. Hay said the latest figures from Sierra are that, in an application to be filed by Feb. 1, it will seek an additional $177 million to offset increased fuel costs.

Heagen blamed the Federal Energy Regulatory Commission for the size of the increase. Nevada Power had been selling its excess electricity on the spot market. When the federal agency capped the prices that could be charged, the utility lost millions in revenue.

He suggested that the full $900 million potential rate increase would have been avoided if Nevada Power had been able to sell its electricity on the spot market at higher prices.

The Democratic leadership in the Assembly and Senate issued a statement Wednesday calling on the state Public Utilities Commission to deny the "outrageous rate increases" sought by Nevada Power "that asks consumers to pay for the company's bad business decisions."

Assembly Speaker Richard Perkins, D-Henderson, Assembly Majority Leader Barbara Buckley, D-Las Vegas, and Senate Minority Leader Dina Titus, D-Las Vegas, said the state commission should deny any effort by the utilities to recover the costs of a merger of Nevada Power and Sierra Pacific Power. They said the companies claimed it would save consumers money.

The three said they were concerned Nevada Power is restructuring its billing in a manner that will place an undue burden on small residential users.

Buckley said the state commission should look at the efforts of the two utilities to renegotiate power purchase contracts to obtain lower rates. The leadership made the statements to alert the public to the upcoming applications, she said.

Nevada Power is now taking different positions than the ones it held during the 2001 Legislature, Perkins said. For instance, he said, utility representatives told the Legislature that the rates have been "flattened" between big users and small consumers.

One was not subsidizing the other. Now, however, Perkins said the utility is putting a larger burden on small users.

The three said, "While we all recognize that the cost of electricity has increased, Nevada consumers should not be asked to subsidize poor management or purchasing decisions."

Paul Heagen, spokesman for Nevada Power Co., could not be reached for comment Wednesday and this morning.