PUC chief expects challenge to rate hike ruling

Wednesday, March 13, 2002 | 11:12 a.m.

Chairman Donald Soderberg of the Public Utilities Commission of Nevada said he expects the commission's pending decision in the $922 million Nevada Power Co. case to be challenged in court, regardless of the outcome.

Soderberg offered that opinion Tuesday moments after the commission wrapped up seven days of testimony in Las Vegas involving the utility's request to recoup $922 million plus interest from Southern Nevada ratepayers for energy used from March through September.

"The company has a history since the merger (into Sierra Pacific Resources in 1999) of fully exercising all legal rights," he said. "We would assume that either way someone will file a petition for reconsideration and then go to district court in either Las Vegas or Carson City."

Soderberg said it is far less common for opponents of proposed rate hikes to challenge commission decisions in court. But he said that state Consumer Advocate Timothy Hay has already indicated that his office, which is seeking a $950 million reduction, will file a lawsuit if Nevada Power's request is granted.

The three-member commission, which also includes commissioners Adriana Escobar Chanos and Richard McIntire, is tentatively scheduled to issue its ruling March 29. With the help of policy staffers the commissioners will comb through thousands of pages of testimony before Soderberg authors a draft ruling that will be voted on by the commission.

"What we try to do is make sure that our process can be legally supported," Soderberg said. "We've been trying to make the hearings better and the orders better so that we meet the substantial evidence rule."

Although it's not uncommon for utility rate hearings to last more than a week, Soderberg said, "The level of contention in this case has been higher than in past rate cases." Before the hearings began, in fact, he had complained that the level of rhetoric between Nevada Power and its critics was getting out of hand.

"I'm pleased it hadn't seeped into the hearing room much," Soderberg said. "I noticed some of the rhetoric stopped since we made those comments."

One highlight in the final day of testimony was a suggestion that Nevada Power investigate whether it was the victim of "market manipulation" at the hands of El Paso Natural Gas Co. Nevada Power buys natural gas from that company to run some of its electricity generating plants.

The suggestion from attorney Fred Schmidt, who represents the Southern Nevada Water Authority, was based on ongoing allegations from California utilities, regulators and municipalities that El Paso Natural Gas manipulated natural gas supplies in that state to drive up prices.

When natural gas prices rise, as they did by reaching record levels in late 2000 and early 2001, it costs more to generate electricity, a factor that usually results in higher consumer bills.

Schmidt got two Nevada Power economic consultants from The Brattle Group in Cambridge, Mass., to concede that their company has also been serving as a consultant to Southern California Edison in that utility's litigation against El Paso Natural Gas.

Peter Fox-Penner, chairman of The Brattle Group, testified that his company plans to investigate whether Nevada Power was the victim of manipulation by El Paso Natural Gas. But that statement was made only after he and partner Richard Goldberg huddled briefly with Nevada Power executives to determine whether they were violating confidentiality.

"I hope you're able to get us some dollars in Nevada, too," Schmidt said.

Fox-Penner testified that skyrocketing natural gas prices in November 2000, which contributed to the high costs Nevada Power incurred to generate and buy power, represented one of the greatest events that drove the Western power crisis.

He and Goldberg also testified that they believed Nevada Power's energy purchasing decisions have been prudent.

But Chanos questioned the prudence of a decision by Nevada Power to sell 200 megawatts of spare power the weekend before July 2, when the company shut off electricity to 10,000 customers for 45 minutes.

Goldberg responded that Nevada Power based its decision in part on forecasts that predicted mild weather in the days ahead. But he also said the company was affected by unexpected mechanical problems at some of its generation plants.

"A lot of surprises happened over the weekend that weren't anticipated," Goldberg testified.