1-month power rate hike OK’d by PUC

Thursday, May 23, 2002 | 11:19 a.m.

Nevada Power Co. customers will see a temporary increase in their electricity bills next month under a plan approved today by the state Public Utilities Commission.

The increase, roughly 11 percent for residential customers, was proposed in a draft order by PUC Chairman Donald Soderberg Wednesday to generate additional cash flow to help the struggling company get through the summer. However, the plan is structured so that customers will actually save money in the long run.

The one-cent per kilowatt hour rate increase is for June only and will raise an additional $16 million for the utility. The intent is for Nevada Power to use the money to buy wholesale energy from other suppliers to help meet peak demand.

The temporary rate increase was related to reconsideration by the PUC of its decision on March 29 to grant Nevada Power only $485 million of the $922 million it is seeking from ratepayers for energy used last year. The PUC agreed with critics at the time that Nevada Power did not do a good enough job purchasing energy from wholesalers and did not have proper risk management in place.

But the PUC conceded that the decision raised concerns about its impact on Southern Nevada.

"What we've come up with is an opportunity to give Nevada Power a one-time shot in the arm of cash flow by giving them this rider," Soderberg said.

The utility, for its part, has stated that the decision placed the company in financial jeopardy and may force it to file for bankruptcy.

"Therefore, the commission is making an adjustment on reconsideration to lessen the impact," the draft order stated. "On reconsideration, the commission has determined that mitigation of the high cash flow requirements of NPC (Nevada Power Co.) for the summer months should have also been considered."

The PUC indicated that customers will save $2.5 million in interest charges that were to be collected with the $485 million over the next three years.

Under the plan, customers will still pay the $485 million plus interest. But they will pay $16 million of that amount in June that otherwise would have been spread out over the next three years. That is why the PUC referred to the temporary rate increase as a "one-time prepayment."

Ratepayers, in effect, will be spending that much less from July through March 2005 than they would have otherwise. That has the effect of reducing the interest on the remaining principal by $2.5 million over that period.

"This is like paying a little extra on a car payment," Soderberg said. "The benefits come down the road. This little extra shot in the arm will give us a little extra cushion. This should get us through the summer."

Customers who live in single-family homes now pay 8.873 cents per kilowatt hour and apartment dwellers pay 8.786 cents per kilowatt hour. Each of those rates will increase by one cent in June and then return to existing rates in July. Typical customers who use 1,200 kilowatts a month will see a $12 increase in their bills in June.

Nevada Power spokeswoman Andrea Smith said the company did not have immediate comment on the plan. But state Consumer Advocate Timothy Hay said Wednesday that he found the proposal "awkward" given the fact that Nevada Power did not ask for that increase.

"Obviously, we're reviewing it," Hay said.

Nevada Power, in fact, chose not to ask the PUC for reconsideration of the March 29 ruling. Instead, the utility sued the PUC in Carson City District Court in an effort to collect the entire $922 million.

The PUC, however, rejected motions for reconsideration by Hay's Bureau of Consumer Protection and the Nevada Coalition of Commercial Energy Consumers. Hay's office had recommended that the entire $922 million request be rejected based on arguments that the utility was guilty of making poor business decisions dating back to 1999.

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