Nevada Power plan under attack

Malcolm Hall

Friday, Feb. 8, 2002 | 11:05 a.m.

A witness for the state Bureau of Consumer Protection says Nevada Power Co.'s proposed monthly "customer charge" in its $22.9 million general rate increase request is nearly twice as high as any other electric utility in the West, and would contribute to big rate hikes for homeowners while big business customers will get a rate cut.

The existing $5 per month customer charge doesn't pay for electricity, but covers accounting and other administrative costs.

In testimony filed Thursday on behalf of the state consumer advocate, William Marcus, principal economist for JBS Energy in West Sacramento, Calif., said Nevada Power's proposal is "pretty unusual."

"We did a survey of customer charges across the West and what Nevada Power is proposing is just about twice as much as the highest one," he said. "This kind of rate shift has the potential to create some fairly large winners and losers."

As part of its ongoing $22.9 million general rate request case, Nevada Power has proposed increasing the customer charge from $5 per month to $19 for single-family residential users, a move the consumer advocate said favors large customers.

Marcus' survey shows the next highest customer charge by another Western utility is $10 for single-family residential customers of Portland General Electric. The average is $3.93.

He said a comparison of classes of customer -- residential multi-family, single-family homes and small commercial -- shows that each class would see an average overall increase of 6.71 percent under Nevada Power's proposed rate hike.

But the customer fee would go from $5 to $12 per month for apartment dwellers, a 240-percent increase; from $5 to $19 for single-family residents, a 380-percent increase; and from $5 to $21 for small businesses, a 420-percent increase.

Marcus also faulted Nevada Power's proposed "flat rate" design, which he said would tend to give large increases to the average customer in winter and smaller increases or even decreases in the summer.

Marcus said because Nevada Power's usage pattern is highly seasonal, that out of a representative sampling of customers who used consistent averages of electricity each month, those who used half the average would pay an extra $176 a year relative to their current rate if single family, and $99 more per year if multi-family.

At the same time, a customer who used 50 percent more than the average would pay $4 less per month, Marcus said, "and you get some really big decreases for the 5 to 10 percent who use double the average or more." He said the 3 percent of users who use the most electricity would see decreases of 5 percent.

Marcus recommends there be either no increase in customer charges or only a very modest increase for both residential and small commercial customers.

"We just don't believe it's necessary to go to such a high customer charge," said Deputy Attorney General Eric Witkoski. "We believe a lower charge is the way to go and gives customers more control over their bills when they use less energy."

But Nevada Power spokeswoman Faye Anderson said the company simply wants to combine two different items -- the $5 customer charge and distribution charges, or the cost of such things as wires, poles and substations.

"The $5 customer charge was supposed to cover the customer's meter reading and services such as accounting and billing," she said. "But $5 today doesn't adequately cover that, so we're proposing to incorporate that charge into the distribution charge and add more costs for poles, wires and substations."

Anderson said those distribution services have to be paid for regardless of how much electricity is used, much like a telephone dial tone.

"So it's moving more toward putting those fixed costs into one category, and then the costs of what electricity you actually use would go up and down," she said. "It doesn't mean more revenue to the company, just a different way of charging for your energy."

Sonya Headen, another Nevada Power spokeswoman, said the company only wants to more accurately reflect the true cost of providing electricity and prevent any customer from paying more or less than it really costs to serve them.

But Marcus said the rate design proposed is flawed because it doesn't recognize that a large portion of the company's distribution costs relate to the demand that customers put on the system.

For example, he said people living in large homes actually pay no more for distribution costs than apartment dwellers or single families, despite having typically higher electricity demands.

"All these factors that relate the cost to the customer's usage, or where cost is related to factors like lengths of lines and the kinds of services installed in a house are completely ignored by Nevada Power," Marcus said.

Public Utilities Commission staff Thursday recommended an increase in these basic service charges for residential single-family homes of not more than $4.50, and not more than $3 for multi-family dwellings.

"A higher basic service charge will enhance Nevada Power's revenue stability because a larger portion of the revenue would be collected through a fixed charge," staff said. It also acknowledged that such an increase would give customers less control over their total bills.

To relieve that, commission staff proposes a tiered rate to encourage conservation and give customers the chance to offset the increase in basic service charges. Staff also wants to lower increases in facilities and basic services charges for some larger users.

Meanwhile, Nevada Power Thursday agreed to decrease its overall rate request by $688,000 for three-year average expenses to cover settlements and reserves for injury and damage claims.