PUC OKs general power rate cut

Malcolm Hall

Wednesday, March 27, 2002 | 11:56 a.m.

The Public Utilities Commission of Nevada approved a 3 percent decrease in general residential electricity rates this morning while consumers waited anxiously for a decision later this week on a huge rate increase request related to electricity used last year.

The three-member PUC, meeting in a teleconference in Las Vegas and Carson City, unanimously approved Chairman Don Soderberg's proposal to reduce Nevada Power Co.'s annual revenues by $43 million in a general rate case filed by the company in October.

Nevada Power filed a request in October to raise general rates by $42.7 million a year -- the first such general rate case since 1993 -- citing the costs of building infrastructure to keep up with Southern Nevada's rapid growth. The company trimmed that request by nearly $20 million in January after revising downward its costs to serve new customers last summer.

This morning, commissioners further reduced the cost to consumers by leaving unchanged the $5-per-month customer delivery charge residential customers pay.

Soderberg had proposed increasing the fee to $9.50 a month. By leaving the fee alone for residential users, commissioners will cut Nevada Power's annual revenue by an additional $250,000. The change did not alter the original estimated 3 percent decrease in rates for residential customers.

A typical customer uses 1,100-kilowatt hours per month at a cost of $99.17, so a 3 percent reduction would result in $2.98 off a typical monthly electricity bill, the commission said Tuesday. Today, Soderberg said savings for commercial customers had not been calculated, but are also around 3 percent.

The separate $922 million deferred-energy rate case will be considered by the panel Friday. The general rate decrease and the deferred-energy rate, if approved, take effect Monday.

The commission also said today it wants Nevada Power to explore making meters available that would calculate power usage during off-peak times so that customers can take advantage of good conservation practices.

"Technological improvements over the past few years have brought these meters down in price and there has been a move across the country where utilities are doing this," Soderberg said. "It's a good approach and I encourage the company to move forward on this. Time-of-use meters will allow consumers to take advantage of using electricity at off-peak times."

Paul Heagen, vice president of communications for Nevada Power, said the company would take steps to make such meters available.

"We want to put more of them out there, but we want to make sure the right customers get them," he said.

He explained that workers on late shifts may not be able to take advantage of off-peak savings as readily as workers on more normal shifts.

Soderberg explained the commission's positions on the general rate case in a 141-page draft order issued Tuesday morning.

Nevada Power on Tuesday expressed disappointment in the general rate case draft order, and pointed out that parts of it might change before it is finalized.

"Overall, the draft order is disappointing, but we are grateful that the commission accepted our recommendation to discontinue the tiered rate structure that was very confusing to our customers," the company said.

Nevada Power said during recent consumer sessions on its rate hike requests that customers had complained about the tiered rates, which put nearly every customer in the highest rate during the summer when the most electricity is used.

The commission agreed, citing concern that a tiered structure at a time of historically high energy rates "will exacerbate the current historically high energy prices that the consumers are already paying during the high usage summer months, thereby creating a financial hardship for these customers."

Steve Boss, president of the Nevada Energy Buyer's Network, which represents Station Casinos, Coast Resorts, the Sahara hotel-casino and Fashion Show Mall, said from a commercial customer standpoint his only disappointment with the draft order was that the commission did not do more to base rates on the cost to provide service.

"Since 1993, commercial customers have always subsidized residential customers," he said. "That subsidy is about $50 million. Large customers because of the economies of scale are more economical to serve than residential customers."

Critics say the $50 million estimate is high.

Boss said he believes the commission's rationale was that there is enough economic disruption on the horizon because of the Nevada Power's deferred rate case, "so they didn't want to make any movements toward more cost-based rates at this time. It basically shields the residential customer."

The draft order said all movement toward cost-based rates should be held in abeyance until Nevada Power's next general rate proceeding.

Boss also said it appeared the commission had sidestepped issues surrounding the 1999 merger of Nevada Power with Sierra Pacific Resources, for which the company had sought the return of a portion of expenses related to the deal.

Consumer Advocate Tim Hay said he was happy with how Soderberg's draft addressed Nevada Power's capital structure and its rate of return on equity.

The commission approved a 10.1 percent return on equity for the company. Nevada Power had sought 12.25 percent.

"The commission believes that 10 percent return on equity is appropriate for Nevada Power and will allow Nevada Power to earn a fair rate of return," Soderberg's draft order said. "However, in recognition of the additional risk that Nevada Power faces due to its financial situation, the commission will increase the return on equity to account for this risk."

Among the many individual items in Nevada Power's request, the draft order recommended it could not include $3.3 million related to additions at the company's 6,000-acre Harry Allen Generating Station, saying it is not proper for ratepayers to be burdened for investment expenses when the plant improvements will not be used until some time in the future.

Nearly $9 million of the company's request involving the amount of cash it needs on a day-to-day basis also was recommended for rejection because the commission found Nevada Power did not provide a comprehensive study demonstrating that much money is required. The company had argued there was not time to perform such an "expensive and time consuming" study, which was required by Assembly Bill 369 passed last year by the State Assembly.

The commission also was asked to deny $895,000 the company had sought for its supplemental executive retirement plan, with Soderberg siding with MGM MIRAGE that such plans include extra money to "sweeten the pot" for executives and as a result are not necessary costs of providing utility service.

Nevada Power had argued that the retirement plan is a common component of executive benefit packages offered in the utility and other industries, but Soderberg said that plan should be the responsibility of shareholders, not ratepayers.