Friday, Oct. 18, 2002 | 10:03 a.m.
CARSON CITY -- While favoring a public takeover of Nevada Power Co., state Consumer Advocate Tim Hay said today his office must retain authority over a government-owed electric company to protect customers from skyrocketing rates in the future.
Hay issued a statement today to counter arguments by opponents of a buyout of Nevada Power who maintain that politicians running a municipal utility could raise rates without any oversight to finance their pet projects and hidden costs.
Hay said the $3.2 billion offer by the Southern Nevada Water Authority to buy the private Las Vegas utility will benefit both the shareholders and the ratepayers. The company says Nevada Power is not for sale.
Hay said the offer "significantly exceeds the book value of its assets" and will mean more money for the shareholders. And the rates for customers should be reduced.
But in a press release, Hay said a critical question is whether the rates "will remain just and reasonable over time." That's why his office should continue to have oversight on a potential municipal utility, he said.
At present, the Consumer Affairs Bureau scrutinizes only private companies, not government agencies such as the Las Vegas Valley Water District. His office, he said, must "maintain the ability to monitor the municipal utility's actions, to suggest corrective actions when necessary and to bring to light management and operational failures in the event, however unlikely, they occur."
A coalition of businesses and others opposed to the sale said a "government-run electric utility means the politicians would control electric rates with no checks and balances."
Citizens Against 14 said politicians "can set rates to raise money for pet projects or as a hidden tax to cover budget deficits without regard to the real cost of providing electric power."
The advisory question on the Clark County election ballot asks whether the state law should be changed to permit a public takeover of Nevada Power.
Sen. Joe Neal, D-North Las Vegas, the Democratic candidate for governor, has already requested a bill to remove any obstacles to the proposed purchase. Neal said today he has also asked the state Public Utilities Commission to open an investigationj into whether the offer made by the Water Authority is in the public interest. He said the PUC should consider revoking the permit of Nevada Power or take other action if it finds the offer is in the public interest.
This would pave the way for a public takeover, said Neal.
Carole Vilardo, president of the Nevada Taxpayers Association, and Ken Mahal, president of the Nevada Seniors Coalition, have sent letters urging groups to join in opposition Question 14 on the ballot. Vilardo and Mahal said, "This takeover could wind up as nothing more than a bait and switch. The government is telling us they'll give us lower power rates, but they're borrowing well over $3 billion to do it.
"And they would have to buy power from the same out-of-state sources as before. How can they guarantee lower rates over time after borrowing billions of dollars?" Vilardo and Mahal ask.
Hay said the acquisition cost by the Water Authority will be accomplished by issuing bonds that carry a low interest rate. He posed this question: "Would you prefer to pay for a utility generating plant by borrowing money from shareholders and paying them interest at the rate of 10 percent, or would you prefer to take out a loan on your own behalf, a municipal loan, and pay a much lower interest rate?"
"These refinancing cost savings are shared between shareholders, in the form of a transfer price greater than book value, and ratepayers, in the form of reduced rates and allow both to benefit from the proposed transaction," said the consumer advocate.
Hay said, "Reliable and affordable electric supplies are essential to the Las Vegas economy and having the option of creating a municipal utility may be the key to a long-term solution to Nevada Power's problems."
Vilardo and Mahal say however the deal "doesn't make economic sense. Some politicians want to spend well over $3 billion to take over our electric system and turn it over to bureaucrats to operate -- a staggering amount that's nearly double what the state spends annually from its general fund."
They said "Government bureaucrats with no experience running an electric utility would be in charge of making sure the lights go on, and stay on. Reliable electric service is too important to put in the hands of inexperienced government with its bureaucracy and red tape." But Hay countered that the water authority "seems to have sufficient management experience" to run the utility and it has also "committed to retaining Nevada Power experts with knowledge in power procurement and production."
They said tax dollars should go to more important things such as education, new roads, public safety, health care and ensuring clean drinking water. Hay said it was incorrect that the money used to finance a purchase would be tax dollars that could be spend on these important issues. This is a bond issue that would be paid off from rates paid by the customer. It would not take away money from these state programs. The opponents maintain that once the utility goes public, then the local property taxes collected will disappear.
But Hay said the water authority "has pledged to continue to transfer these funds to local governments through equivalent payments in lieu of taxes." In addition, he said the new municipal company would not pay federal income taxes.
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