Hay disputes criticism in audit

Friday, Oct. 3, 2003 | 11:28 a.m.

CARSON CITY -- Nevada Consumer Advocate Tim Hay says a recommendation in a confidential audit that he hire fewer private consultants would result in higher rates for utility customers.

Hay initially declined to comment on the audit but said today that "adequate ratepayer defense required using highly specialized expert witnesses on a case-by-case basis." He said the state cannot afford to hire individuals with this specialized knowledge on a permanent basis.

The examination of Hay's office by the state Division of Internal Audit said the consumer advocate spent $539,000 in consulting contracts last fiscal year and that ranks in the top 10 among the states in spending for private consultants. It said consultants charge $75 to $210 an hour and the consumer advocate could hire staff at a total cost of $42 to $55 per hour.

Auditors suggested that staff be hired to save money rather than going outside to the private consultants.

Hay said his office saved electric ratepayers $140 million last fiscal year by fighting proposed rate increases by Nevada Power Co. and its sister Sierra Pacific Power Co.

"The heart of consumer advocacy in Nevada is the authority and the money to bring in outside experts whose areas of specialty fit the merits of the case at hand," he said. Hay added that the "likely effect of such a change (decreasing spending for private consultants) would be to reduce the effectiveness with which ratepayer interests are protected.

"Thus, any cost savings ... would be more than offset by increases in utility rates resulting from reduced agency effectiveness.

"The BCP (Bureau of Consumer Protection) fears significant overall harm could accrue to the state and its citizens if they audit recommendation were implemented," he said.

The draft confidential audit was due to be released Wednesday at a meeting of the Executive Audit Committee headed by Gov. Kenny Guinn. It was delayed to give Hay a chance to form an official response, which is expected next week. Despite the delay, the Las Vegas Sun obtained a copy of the audit.

Hay said the consumer advocate's office was built on the premise that it would hire minimal staff but hire outside consultants on a case-by-case basis. He said that the private consultants are called in when needed and do not have to be on retainer full time.

The consumer advocate's office is supported by an assessment on electric bills of customers.

Hay also noted that every contract for a private consultant is approved by the state Board of Examiners, whose membership includes Attorney General Brian Sandoval.

Sandoval oversees the consumer advocate's office. He and Hay have not seen eye to eye on several issues. Sandoval, in response to the audit, said the recommendation for reducing the use of outside private consultants would be completed next year.

The audit also recommended stripping Hay of the unit that goes after deceptive practices violations.

Hay said that his deceptive practices staff has recovered $4.5 million for consumers, with more than 90 percent coming from Household Finance.