Planned power rate hike to be discussed

Friday, Jan. 11, 2002 | 9:59 a.m.

Meetings The Public Utilities Commission will hear public input concerning a proposed rate hike by Nevada Power Co. at three meetings

Nevada Power Co. customers will get their first opportunity Tuesday to tell state regulators what they think about the utility's controversial proposals for a rate increase.

Local residential, business and government consumers are being asked by Nevada Power to pay an additional $921 million for energy that has already been used. The utility has also asked separately for an additional $22.9 million to cover administrative costs, such as those associated with the delivery of electricity.

The utility is bracing for a tough fight, however. Resorts, hospitals and other heavy hitters plan to argue that Nevada Power bought too much energy from other generators and paid too much for that power over the past two years.

"We are looking at numbers from Nevada Power that are the equivalent of what the state collects in sales and gaming taxes," state Consumer Advocate Timothy Hay said. "The impact on Nevada's economy is an issue that needs to be addressed."

Nevada Power has said it pursued a strategy that enabled Nevadans to avoid the rolling blackouts that struck Californians last year, when that state's utilities were adversely impacted by deregulation.

"The onus is on us to prove that we have been prudent in our decisions," Nevada Power spokeswoman Andrea Smith said. "That's what this process is all about."

If approved by the Public Utilities Commission of Nevada, the rate increases would take effect as early as April 1 and be spread over the next three years. Residential consumers would see their bills climb roughly 25 percent a year during that period. A customer who is now charged $100 a month for electricity, or $1,200 annually, would have to pay about $300 more per year under that scenario.

The commission will take public input at three meetings, beginning with a 6 p.m. Tuesday session at Richard H. Bryan Elementary School, 8050 Cielo Vista Ave. Hearings also will be held on Tuesday, Jan. 22, at 9 a.m. at the Henderson Convention Center, 200 Water St., and at 6 p.m. at Winchester Community Center, 3130 McLeod Ave.

The commission will then conduct hearings in Las Vegas -- beginning in February -- that will involve testimony from the utility as well as from customers who plan to fight for reduced rates. Former commission chairman Scott Craigie, now a consultant for the Nevada Coalition of Commercial Energy Consumers, predicted that either Nevada Power or customers will appeal to state courts if they lose at the commission level.

"This may be the toughest set of cases ever brought before the Public Utilities Commission," Craigie said. "The commission is going to establish its reputation based on these cases. I believe they are capable of coming to the right decision."

Nevada was on the brink of allowing all of its consumers to purchase electricity on the open market when California suffered dire financial consequences through utility deregulation. With California forced to shift billions of tax dollars from other state services to pay for wholesale electricity on the spot market Nevada nixed the idea of deregulation.

Nevada Power, meanwhile, had entered into contracts with electricity wholesalers "to keep your lights and air conditioners on."

"Our company and our state's lawmakers did not want to suffer the rolling blackouts that plagued California," the utility stated in a flier. "We bought enough power to ensure that we could supply you with sufficient electricity during the summer peak demand period.

"But we had to pay extremely high prices due to the energy crisis. These costs were significantly more than you were being charged at the time. The difference between what you were paying and the actual cost is called 'deferred energy."'

A state law passed last year that froze rate increases during the energy crisis allowed Nevada Power to recoup its deferred costs at a later date. The utility calculated its deferred energy costs at $921 million, or $307 million a year over the next three years.

If approved, that request would set a state record for an energy rate increase. But critics say that amount would have been much lower had the utility purchased energy by taking fewer risks and executing contracts with wholesalers in a more timely manner.

Hay said the utility may have overspent by as much as $500 million, a cost he said should not be passed on to consumers. Craigie said his coalition, which represents UNLV, local hospitals and manufacturers, has hired energy purchasing experts who will testify that Nevada Power acted irresponsibly.

Nevada Power has said that it could not have locked in lower-priced energy contracts because it was not certain until last spring that the state was going to drop its deregulation plans. The utility also said it was adversely impacted by federal energy pricing policies that helped California survive its crisis but hurt Nevada and other Western states.