Nevada Power rate hike ruling may be challenged

Kevin Rademacher

Tuesday, March 30, 2004 | 11:12 a.m.

The latest state Public Utilities Commission ruling on Nevada Power Co. rates may be challenged by both the utility and the state consumer advocate.

Utility executives and advocate Tim Hay have both indicated that they might request reconsideration of rulings on two rate cases decided last week.

Walter Higgins, chief executive of Nevada Power's parent company, Sierra Pacific Resources, on Monday said the utility might contest some of the roughly $90 million disallowed in a $133.5 million general rate case.

That case sought to recover expenses for administrative costs as well as the cost of building and maintaining the company's transmission and generation system.

The company had also sought a higher rate of return for investors, and decisions on that request are of specific concern to Higgins.

"We might need some clarification," he told the Las Vegas Sun editorial board, emphasizing that a final decision on an appeal has not been made by the company.

Nevada Power had asked the PUC to increase its return on equity from the current rate of 10.1 percent to 12.4 percent. In deliberations, the commission accepted a rate of 10.25 percent recommended by Commissioner Adriana Escobar Chanos, who presided over the hearings in the case.

In those deliberations, PUC Chairman Don Soderberg had attempted to raise the level of return to 10.71 percent, but he was overruled by Escobar Chanos and fellow Commissioner Carl Linvill.

Higgins pointed out that the 10.25 percent mark was on the low end of a range of rates proposed by parties participating in the case.

"It's that kind of issue that troubles us," he said. "When (the commissioners) have a choice, they take the one that's the least favorable to the company."

He said the difference in the return on equity levels amounts to a nominal $6.5 million a year for the company, but would have a profound affect on Wall Street's perception of the company's relationship with regulators.

Analysts have repeatedly expressed concern over the appearance of a "hostile regulatory environment" in Nevada.

"Wall Street is still dubious," Higgins said.

Separately, the commission granted the utility $189 million of a $193 million request for recovery of past and future expenses for fuel and purchased power.

Hay has indicated that he could ask for a rehearing on the commissions failure to disallow the recovery of as much as $30 million for what he calls improper natural gas purchases.

"We haven't quite made up our minds on that," he said Monday.