Hay: Nevada Power claims are ‘pure fantasy’

Monday, Oct. 14, 2002 | 11:14 a.m.

CARSON CITY -- Nevada Power's lawsuit that claims it is entitled to its full $922 million request for higher rates to customers of Clark County "is nothing more than pure fantasy," state Consumer Advocate Tim Hay said.

In a brief filed Friday in District Court, Hay says the state Public Utilities Commission was correct in cutting $437 million from the power company's application and should have rejected the full request.

Hay's brief was filed a day after one by the PUC that said it was justified in reducing the request by the Las Vegas utility. Nevada Power sued in Carson City asking District Judge Bill Maddox to allow the full recovery for money spent in 2001 in buying power.

Hay sued asking the full $922 million be disallowed. The $485 million approved by the PUC has already gone into effect.

Oral arguments are set for February before Maddox.

"Nevada Power Co. is not entitled to burden its customers with rates and charges the utilities itself could have avoided had it acted in a prudent manner when it purchased fuel and purchased power," Hay said.

Nevada Power says the PUC bowed to political pressure when it rejected its request to reimburse increased fuel costs that kept the lights on during a power crisis in 2000 and 2001.

Hay calls the argument by Nevada Power "spurious and outrageous allegations which have no basis whatsoever in the record on appeal." He said there is no evidence to support the claim the PUC succumbed to political pressures.

"In fact, the commission has made several significant disallowances in prior rate cases, and it is not uncommon for a utility to receive millions of dollars less than what it asks for," Hay said.

One major issue is the decision by the PUC to disallow $180 million, because Nevada Power in 1999 failed to act on an opportunity to buy low-cost fuel from Merrill Lynch. The PUC said Nevada Power knew fuel costs would rise and it failed to lock up a price of $32 to $39 per megawatt hour for a long-term supply.

As the energy crisis set in during 2000, the price of fuel rose from $120 to more than $400 a megawatt hour.

Hay said it is clear that Nevada Power "missed a golden opportunity" when it didn't strike a deal with Merrill Lynch.

Nevada Power said Merrill Lynch kept changing the price and the Las Vegas utility was unsure whether Merrill Lynch could deliver such a large amount of power. The PUC also cut $116.2 million from the utility's request on the grounds that Nevada Power purchased excess electricity at outrageous prices.