Las Vegas Sun

March 28, 2024

Where I Stand — Don Soderberg: Avoiding energy crises

Editor's note: In August the Where I Stand column is written by guest writers. Today's columnist, Don Soderberg, is chairman of the Public Utilities Commission of Nevada.

DO YOU REALIZE that the typical residential customer of Nevada Power Co. is only paying 20 cents more per month in general rates in 2003 compared to 1993? Before you ask me if I passed basic mathematics, please let me explain.

There are two major rate components in your electricity bill. General rates reimburse the utility for all costs it incurs in providing service to you except for fuel and purchased power costs. General rates include power plants, power lines, employee salaries and allowable profit. The typical residential customer, using 1,250 kilowatt hours per month, today is paying Nevada Power $42.05 per month in general rates compared to $41.85 in 1993.

The other rate component in your electricity bill is for fuel and purchased power costs. This is a pass-through of costs that the utility incurs in purchasing fuel to run its power plants and purchasing electricity on the wholesale market. The typical residential customer today is reimbursing Nevada Power $65.83 per month in fuel and purchased power costs compared to $35.71 in 1993. Clearly, wholesale fuel and purchased costs are the biggest problem to lowering your power bill.

What caused the $30.12 monthly increase in fuel and purchased power costs that occurred from 1993 to 2003? Most of the increase -- $28.45 -- occurred after July 2000 and was due to the Western energy crisis of 2000-01. Unlike retail utility rates that are cost-based and fully regulated by the state, wholesale fuel and purchased power costs are market-based prices that are federally monitored.

Average wholesale electricity prices for Nevada Power increased from 4.3 cents per kilowatt-hour in 1999, to 7.0 cents in 2000, and peaked at 15.7 cents in 2001. Average fuel prices for Nevada Power's power plants have been less volatile, increasing from 1.7 cents per kilowatt-hour in 1999, to 2.7 cents in 2000, and peaking at 4.5 cents in 2001.

This volatile wholesale energy market means that the Public Utilities Commission needs to be pro-active in its review of wholesale fuel and purchased power costs. This pro-active review must include immediate actions, intermediate steps and longer-term planning.

The immediate actions include: long-term contracts to lower and stabilize the costs the utility incurs purchasing electricity, energy conservation programs to lessen the need for the utility to purchase expensive electricity at peak times and a prior annual review of a utility's procurement plan to ensure the plan is one that promotes low and stable rates. Earlier this year the Public Utilities Commission approved long-term contracts and energy conservation programs for Nevada Power. Currently the Commission is considering new regulations to implement a prior annual review of a utility's procurement plan.

The intermediate steps move the utility to adding more generation so it need not purchase as much electricity in the volatile wholesale market. The Western utilities that were least harmed by the Western energy crisis were those that had enough power plants to meet the needs of their customers without having to rely on purchases in the wholesale market. The Commission is currently reviewing Nevada Power's 2003 Resource Plan and its proposals to add new generation.

The longer-term planning is to increase fuel diversity. One of the causes of the Western energy crisis was the over reliance on gas-fired generation. Over the past three years, natural gas prices have been very volatile, and many analysts state that the era of low natural gas prices is over. This state must continue to progress in the development of renewable energy sources and to plan for additional coal-fired generation.

I have given you my views on what needs to be done to lower and stabilize energy costs. However, the job of a utility regulator is not a one-way street. I want to hear what you have to say on this subject and have scheduled a consumer session on Nevada Power's 2003 resource plan for Sept. 11 at 4 p.m. at the Las Vegas Senior Center. This will be an opportunity for you to learn more about resource planning and to let us know where you stand.

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