PUC warns Nevada Power on hookups

Friday, April 19, 2002 | 11:04 a.m.

State regulators issued a stern warning to Nevada Power Co. on Thursday saying that its certificate to operate could be jeopardized if it fails to serve future customers.

Nevada Power officials have expressed uncertainty about the utility's ability to handle future customers as a result of sharp cutbacks in capital spending. The state Public Utilities Commission said Thursday that it wants to discuss that issue in detail at its May 2 meeting in Las Vegas.

PUC Chairman Don Soderberg cautioned Nevada Power to "not do anything that would bring into question the status of its certificate."

"I understand that Nevada Power's past actions have created monumental challenges, but it needs to be objective and focused on solutions," Soderberg said.

His comments were echoed by fellow Commissioner Adriana Escobar Chanos, who cautioned the utility "not to do anything in haste."

In response, Nevada Power spokeswoman Sonya Headen said the company has "an unwavering commitment to meet the needs of our customers as the certificate holder as long as we have the financial means to do so."

It is the latest chapter in an ongoing saga that has the utility crying poverty while its critics, including the PUC, charge that the company has only itself to blame for its shaky financial condition.

Nevada Power parent Sierra Pacific Resources announced on April 3 that it will have to slash $125 million in capital spending this year. The utilities placed blame on the PUC's March 29 decision to grant Nevada Power only $485 million of the $922 million it was seeking from ratepayers for energy used last year.

The company maintained that the PUC disallowance of $437 million put it in financial jeopardy. Nevada Power last week filed a lawsuit against the PUC in Carson City District Court in an attempt to get its full $922 million request, arguing that all its purchases were prudent.

The state Bureau of Consumer Protection, however, has asked the PUC for reconsideration and wants the entire $922 million request disallowed based on its belief that Nevada Power made poor business decisions dating back to 1999.

As part of its belt-tightening, Nevada Power has decided to cut $50 million from its ongoing expansion of power lines in the Las Vegas Valley. Headen said the utility does not yet know how the cuts to the so-called Centennial project will impact future hookups. The Centennial project was designed to handle projected growth through 2005.

While the company continues to serve new hookups, Headen said there is no certainty Nevada Power will be able to do so in the future. She said the company is not yet prepared to elaborate on a time frame when future hookups would be at risk.

"We have a strong commitment to meet the needs of our customers," Headen said. "But it is hard to predict what will happen in the future because of the PUC decision."

State Consumer Advocate Timothy Hay said, however, that any cutbacks in power line construction should not be made without approval from the PUC. Nevada Power is required by law to submit periodic resource plans for commission approval that update how the company intends to improve the facilities that transmit electricity to homes and businesses.

"The company has a legal obligation to hook up and serve new customers," Hay said. "Otherwise, it puts their monopoly over the service territory in jeopardy. This appears to be another threat by Nevada Power to hold the Southern Nevada economy hostage."

The PUC's concerns about Nevada Power's ability to serve future customers followed the commission's announcement on Wednesday that it would investigate the company's "yellow alert" issued Sunday. Such an alert represented concern by Nevada Power that it was at risk of not having enough electricity to meet demand during unseasonably high temperatures.

"We felt we made a decision that was a favor to our customers," Headen said. "The temperatures were incredibly hot and there was a lot of demand. The company's financial condition makes it difficult to buy spot power."

Although no blackouts occurred as a result of the alert, the PUC expressed its continuing concern about the reliability of electricity services in the state. The commission staff has been given until May 6 to issue a preliminary report on the alert. The PUC will conduct a May 20 workshop.

Headen said the company welcomed that investigation. The last Nevada Power blackout caused by a shortage of electricity occurred on July 2 and lasted 45 minutes.

"Last year, the commission wanted us to give the public warnings about what was going on with our supply," Headen said.

Hay sees a connection between the yellow alert and the company's uncertainty over future hookups as part of a strategy by Nevada Power to "create hysteria among homeowners and developers." He said the timing of the alert was "suspicious" since it followed closely on the heels of the company's lawsuit against the PUC.

"Their certificate is in jeopardy if they continue with this conduct," Hay said.

The PUC also announced Thursday that it would investigate Nevada Power's billing system to determine whether the company improperly charged customers higher rates based on the way meters were read. At public hearings earlier this year, including those held in connection with the $922 million rate case, some customers complained that employees took too long between meter readings.

The investigation will involve the three-tiered billing system that was in effect through last month.