Utility fighting for second rate hike in new hearings

Kevin Rademacher

Wednesday, Feb. 18, 2004 | 11:20 a.m.

Just five days after hearings concluded in a $133.5 million general rate increase request, executives for Nevada Power Co. were back before state regulators defending a second $173 million rate increase request.

In its deferred energy rate case, Nevada Power is seeking $93 million in unrecovered expenses for higher fuel and purchased power incurred over the past year. The company also is seeking an $80 million annual increase to the so-called "base tarrif energy rate" for higher costs it expects to pay for fuel and power in the future.

In the opening hours of testimony, participants in the case questioned company executives over the structure of the case. Nevada Power has proposed phasing in the rate request over three years, beginning with a 6.29 percent increase for residential customers this year. The balance of the request would be recovered in subsequent years and offset as the recovery for past rate cases expire.

Critics questioned the delayed recovery proposed in the case since the utility has been struggling to regain its financial health.

The company also has requested an $80 million upward adjustment in the base tariff rate. If that rate had been calculated using standard regulatory calculations, the adjustment would have been about $171 million a year.

Again, critics questioned the lower amount.

Michael Yackira, chief financial officer for Sierra Pacific Resources, Nevada Power's parent company, said the plan meets the utility's needs.

"The proposal will do two things," he said. "It will properly protect customers and preserve the financial health of the company."

Eric Witkoski, senior deputy attorney general for the state Bureau of Consumer Protection, questioned the calculation of the base tariff rate.

"How confident are you that you don't need $171 million at this time," he said.

Yackira responded that the company's forecast is accurate, adding that projecting future power rates is "not meant to be an exact science."

The case is scheduled to be continued through Feb. 24. The commission must reach a decision on the case by May 12.

In the recently concluded general rate case, the utility requested from regulators additional revenue for the cost of building and maintaining power plants and transmission lines as well as construction costs associated with meeting customer growth. The company also requested a higher return for shareholders. That case must be decided by March 29.

If both cases are approved, the average customer's monthly bill would rise from $103.81 to $114.18 on April 1. Based on the phase-in strategy for the rate increases proposed by the utility, rates would rise again in April 2005 to $116.51.