Nevada Power’s policies challenged

Kevin Rademacher

Monday, March 10, 2003 | 11:08 a.m.

More critics have sounded off on Nevada Power Co.'s new rate case, claiming the company botched past purchases and that it is bungling calculation of future electric costs.

Nevada Power is requesting an $81 million rate decrease as part of an overall plan to recover $195 million spent on fuel and power to serve customers between October 2001 and September 2002. Lower ongoing costs for fuel and purchased power will result in a rate decrease in at least the first year, according to Nevada Power.

In testimony filed with the state Public Utilities Commission on Friday, interveners in the case said millions of dollars should be disallowed because of imprudent purchasing practices.

PUC staff testimony claimed errors by Nevada Power contributed to $80 million in bad purchases. Those alleged errors ranged from flawed hedging strategies to billing system errors.

The Nevada Energy Buyers Network, which represents several large Nevada Power customers, found Nevada Power errors totaled $147.4 million, according to testimony prepared by witness David Gildersleeve.

"In particular, I am concerned about (Nevada Power's) decision to lock the company into purchases of expensive power in late 2000 and early 2001 for delivery in 2002," Gildersleeve's pre-filed testimony said.

He also said the purchases may have further damaged the company's weak financial situation.

"Making these commitments also would use up significant amounts of credit being extended by counter-parties, possibly making additional transactions more costly due to credit risk premiums being imposed," Gildersleeve testified.

Dennis Peseau, who prepared testimony for the Southern Nevada Water Authority, said the company's request for cost recovery is overstated by $90.8 million.

He said the same transactions questioned in Nevada Power's nearly $1 billion rate case for the seven months ending September 2001 are still affecting the current case. The PUC last year disallowed $434 million in that case.

While the interveners claimed that the current case is flawed because of imprudent purchases, they found that the company's projections for ongoing purchases are too low.

In the testimony of PUC staff and the Water Authority, requests to raise the so-called "base-tariff energy rate" to cover those costs would offset the amount they are seeking to disallow.

"The (base-tariff energy rate) set in this case should be adjusted upward in a manner that approximately offsets the $90.8 million disallowance," Peseau said.

The PUC staff is requesting an $80 million upward adjustment in rates to offset the $80 million disallowance.

The Nevada Energy Buyers Network requested a base-tariff rate adjustment of $48.8 million, far from offsetting its requested $147.4 million disallowance.

Neill Dimmick, directory of regulatory operations with the PUC, said without an accurate base-tariff rate the company will be back next year looking to recover millions in fuel and purchased power costs.

State consumer advocate Tim Hay on Thursday said he would seek additional rate cuts of $292 million. He said the company missed cost saving long-term contracts, botched natural gas purchases and violated its own Risk Management Committee's policies.

Nevada Power must file rebuttal testimony by March 24. Hearings begin before the PUC on March 31. A final decision on the rate case must be issued by May 13.