Nevada Power may not get increase it’s asking for

Kevin Rademacher

Friday, Jan. 23, 2004 | 11:19 a.m.

Based on testimony filed during the past two weeks, Nevada Power Co. could be in for a difficult chore in selling its $133.5 million rate increase request to regulators.

The final pieces of revenue-related testimony were filed on Thursday by intervenors in the utility's general rate case, and they are pushing for a much smaller increase or even a rate cut.

The staff of the state Public Utilities Commission submitted a request for a $17.1 million rate increase, more than $116 million less than the utility requested. The filing by the state Bureau of Consumer Protection, led by Consumer Advocate Tim Hay, called for a $1.5 million rate cut.

The MGM MIRAGE, one of the utility's largest customers, is requesting a $3 million rate decrease.

A general rate case allows the utility to request 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 is allowed to request a return for shareholders.

If approved by regulators, Nevada Power's general rate case request would increase the average residential bill by 9.8 percent over the next two years. The company has proposed collecting $50 million this year, beginning April 1, and the balance in 2005.

Hay said the biggest area of concern in the utility's request is a proposed 12.4 percent rate of return. That would increase the current rate of return from 10.1 percent.

"Considering where interest rates are currently it is well above anything I have seen for a utility in the last year," he said.

Hay also continued his criticism of the high interest rates the utility is paying since its credit rating was cut to junk status in 2002, following the PUC's move to bar the utility from recovering $437 million in fuel and power purchases deemed imprudent.

"Both the capital structure and interest payments are a large component of why the rate request is so large," he said.

High interest expenses were cited when the BCP recommended cutting the utility's rate of return request from 12.4 percent to between 9.25 percent and 10.5 percent.

MGM MIRAGE apparently agreed. The casino operator recommended cutting the rate of return to 8.1 percent. That move accounted for $68.9 million of its recommended disallowance.

In a separate case, Nevada Power is seeking an additional $173 million increase of so-call deferred rates to cover higher costs of past and future fuel and power purchases.

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.

The PUC is scheduled to begin hearings on the rate case Feb. 3.