Energy group offers plan to Nevada Power

Friday, May 24, 2002 | 10:51 a.m.

An organization that represents casinos and other large commercial clients has approached Nevada Power Co. with a proposal it believes will help the cash-strapped utility get through the summer.

Steve Boss, president of the Nevada Energy Buyers Network, said Thursday that he is seeking Nevada Power's blessing to have his clients buy retail electricity from other suppliers on an emergency basis through September. Those clients include Coast Resorts, Station Casinos, Sahara hotel and the Fashion Show mall.

Boss said the proposal, which he said would have to be approved by the Public Utilities Commission, would have the effect of reducing the amount of energy Nevada Power would have to buy this summer to keep the lights on for all remaining customers. He said he would like the proposal to extend to other large customers who would like to participate.

"There's not a legal precedent for it," Boss said. "The commission would have to act in the best interests of the customers of the state. The PUC is aware our proposal is out there. But the easiest and perhaps only way it would work is if we had Nevada Power's cooperation."

Although Boss said he has pitched the proposal to Nevada Power officials, they have not yet responded. His clients are among those who have filed petitions with the commission to buy retail electricity on the open market on a permanent basis. The commission will consider those requests on June 18 in Las Vegas, though Nevada Power has requested a delay in that hearing because it believes several legal issues remain unanswered.

But Boss said his emergency proposal is independent of those petitions.

"We as large customers would like to help Nevada Power and be part of the solution so that there will be reliable energy for the summer," Boss said.

Nevada Power spokeswoman Andrea Smith said "obviously, we're open to anything but the number of questions the proposal raises outweighs any value right now. But we are continuing to look at the proposal."

The utility has said it was placed in financial jeopardy when the PUC ruled on March 29 to grant Nevada Power only $485 million of the $922 million it is seeking from ratepayers for energy last year. One fallout from the ruling was that it lowered Nevada Power's credit rating from investment grade to "junk" status, making it more difficult for the utility to buy energy from other suppliers to meet peak demand.

The PUC on Thursday acknowledged Nevada Power's cash flow problems entering the summer by approving a one cent per kilowatt hour increase in customer's bills for June only. The plan, which will increase residential bills by roughly 11 percent that month, is expected to raise an additional $16 million to help Nevada Power with its cash flow.

PUC Chairman Donald Soderberg, who proposed the temporary increase, said he believes Nevada Power will be able to make it through the summer.

"As we've seen over the last two months the reaction or overreaction to our order has caused the financial community to take a sterner view than they should," Soderberg said at the hearing.

He said it won't cost ratepayers any more than the $485 million that will be repaid to Nevada Power over the next three years. The $16 million represents a "prepayment" of money that otherwise would have been collected by the company between now and March 2005. Soderberg, in fact, said the plan will save ratepayers in the long run because it will reduce interest payments on the $485 million by $2.5 million through 2005.

Smith said the additional money "will help a little." The North American Electric Reliability Council of Princeton, N.J., which promotes and monitors the nation's electricity grids on behalf of utilities, reported earlier this month that Nevada Power was still short about 25 percent of the power it needs to get through the summer.

Nonetheless, Smith said Nevada Power was appreciative of the temporary rate increase.

"We certainly appreciate the action taken by the commission in recognition of our serious cash flow situation," Smith said. "We also agree with the chairman's assessment that several other things have to happen to solve our cash flow situation.

"That obviously includes successful negotiations with our suppliers but we are working hard everyday to ensure safe, reliable service for our customers."

It was the first time since the March 29 ruling that Nevada Power has seen eye to eye with the PUC. The significance wasn't lost on Wall Street, where the stock price of Nevada Power parent Sierra Pacific Resources closed Thursday at $7.08 a share, up 11 percent from the previous day and at the highest trading level since April 30. In midday trading today, the stock jumped another 7 percent to $7.59 a share.

But state Consumer Advocate Timothy Hay said he was upset by the temporary increase because it was not sought by Nevada Power. He also said the proposal should have been brought up in a public consumer session before it came to a vote.

"It appears to be awkward procedurally and a bad precedent for the commission to set," Hay said. "It's unprecedented particularly since the utility did not ask for it. When the June bills come sometime in July some people will be angry."

Ratepayers who attended the PUC hearing also were angered by the temporary increase. Jeanne Schneider of North Las Vegas complained that consumers were being "nickled and dimed" by Nevada Power. She said the utility has no sense of responsibility.

"One of the things that has gone downhill in this community is a sense of responsibility," Schneider said. "Lets not have a bunch of people left dead because they can't pay the power bills you keep raising."

Restaurant owner John Baietti of Las Vegas said he longed for the days when rates were about five cents per kilowatt hour. Those rates for residential customers are now close to nine cents per kilowatt hour and will be close to a dime with the June increase. The increase will amount to $12 for someone who uses 1,200 kilowatt hours that month.

"One hundred percent of the people I've talked to oppose this," Baietti said. "To ask elderly folks to fork over another $12 is disgusting behavior. We are going to take these rates back to a nickel, my friend."

Hay said he was also disappointed that the PUC rejected a motion of reconsideration from his Bureau of Consumer Protection to have the entire $922 million request disallowed. The commission also rejected a request from the Nevada Coalition of Commercial Energy Consumers to reduce the $485 million Nevada Power was granted by an additional $12.7 million.

The PUC, however, decided to give back to the utility $2.7 million in administrative costs covered in general rates. The commission on March 27 reduced Nevada Power's general rates by $42.9 million, or 3 percent. Thursday's decision amends the reduction to $40.2 million and will add roughly eight cents per month to the bill of a ratepayer who uses 1,200 kilowatts a month.

But Soderberg said after the hearing that he would not support another temporary rate increase to help get Nevada Power through the summer.

"This hits people when their pocketbooks are tight," he conceded. "That's why we picked June. It would have been harder on people later in the summer. The company should not expect us to do this more than once."