Nevada Power chief: Rate hike foes jeopardize summer energy

Tuesday, March 12, 2002 | 10:53 a.m.

Nevada Power Co. President Mark Ruelle blamed opponents of the company's ongoing $922 million rate case of making it difficult for the utility to buy energy from other generators.

Testifying Monday in Las Vegas before the Public Utilities Commission of Nevada, Ruelle said some negotiations have been postponed because potential vendors are concerned the company will be unable to fulfill contracts if the commission rules against Nevada Power.

Ruelle said there is a possibility Nevada Power will be unable to meet all peak electricity demands this summer. He suggested that life would be a lot easier for his company if the commission granted the utility's request to recoup $922 million plus interest from Southern Nevada ratepayers for energy used last year.

"It's starting to cascade," Ruelle said of potential vendors' concerns. "They're reticent to enter into contracts with us."

He complained that the amounts of money critics would like to see reduced from Nevada Power's rate request -- ranging from $90 million to close to $1 billion -- represent "absurd levels of disallowance" and have raised concerns among potential vendors.

The $90 million reduction request was recommended by the commission staff. Much larger reductions are being sought by MGM MIRAGE, state Bureau of Consumer Protection, Southern Nevada Water Authority and groups that represent other casinos, hospitals and miscellaneous businesses. Those groups have argued that Nevada Power wasted money on ill-timed energy purchases and poor planning dating back to 1999.

When asked how much the $922 million request could be reduced without forcing Nevada Power into bankruptcy, Ruelle declined to offer specifics. But he said that even the $90 million reduction recommended by commission staff would be problematic for the company.

"The staff is in a very dangerous range if we're talking about reliable service for the state of Nevada," Ruelle testified.

When it was suggested that the $922 million be used to build new power generation plants rather than be repaid to the company, Ruelle said, "We all wish we could take money from past debts and apply it to new solutions, but life doesn't work that way."

Ruelle depicted Nevada Power as the victim of unprecedented market conditions, which included record high wholesale energy prices attributed to the California power crisis that escalated in May 2000.

He said his company didn't secure long-term energy contracts that in hindsight would have saved Nevada Power a lot of money because of uncertainty raised by constantly changing state laws and regulations covering retail electricity deregulation. He said the changes made it difficult to predict how many customers the utility would lose to potential competitors on the open market.

"The shifting policy was a tremendous concern," Ruelle testified. "It's the most clumsy restructuring or intended restructuring that existed."

Ruelle said it was impossible to predict the number of customers his company would have lost under the various state deregulation laws and regulations that were adopted since 1997 but never implemented. But he said Nevada Power, which uses as much as 4,500 megawatts of electricity at a time, believed it could have lost at least 500 megawatts worth of large commercial and industrial customers by November 2000 with additional defections possible through September 2001.

Even after Gov. Kenny Guinn decided last fall to postpone deregulation indefinitely, Nevada Power was faced with the prospect that the Nevada Legislature in 2001 would change the state's policy toward retail electricity once again.

"Now you are getting an appreciation of how tough it was to meet customers' needs in that market," Ruelle said.

The commission has until April 1 to rule on Nevada Power's $922 million request. If the full request is approved, it would show up on ratepayers' bills over the next three years and result in an increase of as much as 25 percent.6"The staff is in a very dangerous range if we're talking about reliable service for the state of Nevada."