Consumer advocate’s criticism sparks heated response from Nevada Power

Wednesday, Feb. 13, 2002 | 11:28 a.m.

Nevada Power Co. accused the state's consumer advocate of spreading half-truths about its request for an electricity rate hike.

Timothy Hay countered that the utility knows it has a weak case.

The rhetoric between Sierra Pacific Resources chairman and chief executive officer Walt Higgins and Hay heated up Tuesday. That's when the utility executive called a press conference to further explain why subsidiary Nevada Power is requesting $922 million plus interest for energy used last year by Southern Nevadans.

The press conference, part of a local media blitz Higgins has orchestrated this month, came three weeks before the Public Utilities Commission of Nevada is scheduled to begin hearings on that rate request. Higgins directed criticism at "a handful of people," including representatives of business customers who will testify before the commission, but mentioned only Hay by name.

Higgins also praised Nevada Power employees -- about 20 of whom were in attendance -- in the face of public criticism over the proposed rate hikes.

"They're very proud of what they do, and you know what, they've kept the lights on," Higgins said. "These people have done a lot of unimaginable things in the face of tough decisions."

Turning to the employees, he said, "I apologize to you that you've put up with this."

Hay said afterward that he was particularly angered that one of his staff representatives was ordered to leave the press conference at Nevada Power's Ryan Center in North Las Vegas. He said his office has a right to attend all such events in its capacity as the consumers' representative in rate cases before the commission.

"I believe the company realizes there is a substantial chance they may not get the money they're asking for," Hay said. "They are mounting a public defense because their case is not very strong."

Higgins made his arguments with the help of colorful placards and flow charts. Higgins attacked Hay for spreading "half-truths" that Nevada Power purchased 77 percent more energy than it needed last year from other sources.

Higgins said the utility purchased 76.8 percent more power in 2001 than the previous year but sold any excess energy on the spot market and used the revenue to offset the cost of providing electricity to its ratepayers. Through a method known as "swapping," he said Nevada Power continually bought and sold wholesale power in 2001 in order to spend as little as possible to keep the lights on in Southern Nevada. As it was, he said Nevada Power shareholders ended up losing "hundreds of millions of dollars."

"The last people on earth who want a rate increase are the people at the power company," Higgins said.

But Hay said he was not convinced by Higgins' arguments and stuck to his own claim that the utility paid at least $500 million more than it should have last year for power from other generators.

"The company should wait until our case is filed with the commission because we will have a persuasive case to rebut Mr. Higgins' position," Hay said.

Higgins made some assertions that Hay said were inaccurate. Among them:

Higgins said that the increasingly higher wholesale prices Nevada Power paid last year were largely the result of California's failed attempt at deregulation. He also said a corresponding sharp increase in natural gas prices also made it more costly to operate Nevada Power's generating plants, compelling the company to buy power elsewhere.

The company initially wanted to recover the $922 million plus interest and an additional $22.9 for administrative costs over the next three years. If approved, those rate hikes could add as much as 25 percent to a customer's monthly bill.

But Nevada Power last week filed an amendment that it would agree to spread the rate hikes over six years, effectively lowering the rate increases to about 12.5 percent. That is conditional on Nevada Power's creditors, which include Wall Street financiers, deeming that such a plan would make the company credit worthy. But if the commission approved anything less than $922 million, company spokesman Paul Heagen said it is likely Nevada Power would demand that the rate hikes revert to the three-year period.