PUC chief calls for power rate cut

Tuesday, March 26, 2002 | 11:07 a.m.

The Public Utilities Commission of Nevada on Wednesday will consider a proposal by its chairman to decrease Nevada Power Co.'s "general" residential electricity rates by 3 percent or $42.2 million.

The proposal, outlined in a 141-page draft resolution by PUC Chairman Don Soderberg, is part of Nevada Power Co.'s general rate case filed by the utility in October.

The general rate case is not related to Nevada Power's $922 million "deferred energy" rate increase proposal to compensate the utility for power it purchased last year. The PUC's vote on the purchased power case is set for Friday.

Consumer Advocate Tim Hay said because the vote hasn't occurred, it is premature to be specific about the various issues Soderberg addressed in the general rate request. He said there could be further amendments to the draft before final adoption.

He did say, however, that he was happy with how the draft addresses Nevada Power's capital structure and its rate of return on equity.

The draft order would approve a 10.1 percent return on equity for the company. The company had sought a 12.25 percent return.

"There are a lot of miscellaneous issues we have some disagreement with," Hay said. "But the overall decrease in rates the order suggests we think is in an appropriate range."

Hay cautioned observers not to read anything into how the commission would treat the purchased power request based on its probable approval of the rate decrease in the general rate case. Hay said that under PUC procedures, the recommendation of the presiding officer in each case -- Soderberg in this one -- is typically followed by the other commissioners.

"The company had originally asked for $42.7 million and that was reduced to $22.9 million and the intervenors had suggested a decrease of up to $107 million, so I think the commission came down in the middle of that range," Hay said. "But I don't think you can draw any kind of analogy on what that means on the case that will be decided Friday."

Hay explained that the general rate case involves a large number of components regarding administrative expenses while the purchased power case involves analysis of how prudently the company managed its finances in the acquisition of power last year and how much should be passed on to consumers.

While the company has requested a $922 million rate increase for purchased power, intervenors have suggested a disallowance of between $400 million and $600 million of that. Hay thinks the commission will either agree with the company or the intervenors in the case and not split the difference as it is poised to do in the general rate case.

Representatives of Nevada Power said today they are studying the draft order and are reserving comment on it.

Nevada Power filed its general rate case Oct. 1, asking the PUC for permission to raise electricity rates by $42.7 million a year to cover administrative expenses. It was the first general rate increase requested since 1993.

In subsequent testimony in the case, Nevada Power scaled back its request by nearly $20 million a year in January, saying its costs have been diluted by a 1 percent growth in the number of customers it serves.

However, an analysis by intervenors in the case said the utility should lower its general rates by as much as $107 million instead of increasing them by $22.9 million, as requested by Nevada Power in its revised request.

Hay proposed an overall revenue reduction of $51 million in the general rate case.

Hay based some of his analysis on disallowing merger and power plant sales expenses that had been requested by Nevada Power.

Soderberg's draft order, posted on the PUC Internet site this morning, proposes a $42.2 million decrease in annual revenues, which would result in a 3 percent rate decrease for residential ratepayers.

The three-member PUC votes on the general rate request Wednesday morning with two affirmative votes necessary to approve the order.

Soderberg said he could not comment on the draft order until after it was considered by the full commission.

Soderberg's draft document contains a summary of findings addressing 76 different issues related to the rate request, with topics ranging from whether new rate classes should be established for large residences to how the value of computer equipment would be depreciated.

Among the issues that would have a direct impact on monthly electricity bills are monthly distribution charges.

Nevada Power proposed raising the standard charge from the current $5 a month for all residential classes and small commercial customers to $12 for apartment dwellers, $19 for single-family homes and $21 for commercial users. The PUC staff recommended increases to $8 a month for apartment dwellers and $9.50 a month for single-family homes and small commercial users. Soderberg's draft order endorses the staff position.

The increase in the standard charge would be offset by decreases in other areas to lower rates 3 percent.