Consumer advocate warns of electric-rate hike

Monday, Sept. 30, 2002 | 10:52 a.m.

Nevada's consumer advocate is warning that Nevada Power Co.'s escalating cost deficits will spell higher electricity rates for Las Vegas consumers.

Timothy Hay, who works out of the attorney general's office, said deferred energy costs -- the difference between what the utility pays for energy and what it can charge customers -- were more than $741 million for Nevada Power in July, the latest month available, up from $509 million a month earlier.

Sierra Pacific Resources, Nevada Power's parent company, has deferred costs from its Northern Nevada operation that bring the total to nearly $1 billion, he said.

Hay, an ally of the Southern Nevada Water Authority in the public agency's effort to buy out Nevada Power, warned that deferred balances appear to be "escalating rapidly north and south."

"We're looking potentially at another billion-dollar deferred case," he said.

Sierra Pacific and Nevada Power executives said the deferred costs now piling up are from several sources -- some of them already accounted for -- and will not necessarily mean higher energy costs.

"Of that $741 million, $387 million of that is already approved," from the deferred rate case last spring, Nevada Power Vice President Jack Leone said Friday.

Another $241 million is for charges that bankrupt energy giant Enron and other companies say Nevada Power owes them. The Nevada energy companies are fighting those charges and they may never appear on anyone's bill, Leone said.

But $125 million in new deferred costs has accrued since the last rate case, Leone said.

But Leone and Sierra Pacific Chairman Walt Higgins argued that the company may not seek any increase or even a reduction when it goes before the Public Utilities Commission again in November.

"As I've previously said, we do not know what our deferred rate case filing in November will contain," Higgins said. "However, with the current outlook of market prices for fuel and purchased power, it is possible -- and we are hopeful -- that we may be able to offer customers a decrease in rates."

But analysts working for the water authority have said all along that eventually the power company will have to raise rates, sell off assets or further damage the already junk-bond status of its credit. The water authority has promised that it would be able to trim electricity costs by 20 percent if it takes over the company.

Ray Spitzley, a Morgan Stanley managing director, is one of a small army of consultants working on the water authority's bid to buy the assets of Nevada Power. He doubts that the power company can forestall rate increases without further damaging its financial position.

"It is part of our contention all along that Nevada Power can't have it both ways," he said. "They can't improve their credit rating and lower rates.

"They are going to have to put through some or all of those deferred rates to the ratepayers," Spitzley said. "We just don't see how Nevada Power can avoid rate increases if they're not willing to sell the company."

Sierra Pacific attorneys sought rate increases last spring for more than $900 million in deferred energy costs last year. The Nevada Public Utilities Commission granted the company about half that amount, leading to higher energy costs for most consumers of a few dollars a month.

But the rate increase was far short of the 21 percent that the company had originally asked for. The company has gone to court to recover the rest.

The rate increase enraged customers and politicians, providing fuel for the water authority's takeover bid, which it has valued at $3.2 billion.