Nevada Power tells PUC rate hike needed

Kevin Rademacher

Wednesday, Aug. 31, 2005 | 11:12 a.m.

In the wake of rising natural gas prices, Nevada Power Co. could need as much as $147 million in rate increases to cover the rising costs.

At a hearing before the state Public Utilities Commission on Tuesday, parties to the rate case asked questions about mitigation efforts undertaken by the electric company and the procedural nuances behind testimony filed by PUC staff.

There was little debate, however, over the validity of the company's request for more revenue.

In its June rate case filing, Nevada Power said it needed $62 million in additional revenue to cover the cost of natural gas, which is used to fuel power plants. In testimony filed earlier this month, PUC Financial Analyst David Chairez said that price increases since the original filing meant that the $62 million request was $84.8 million short. That would push the total rate case to nearly $147 million.

In rebuttal testimony, Nevada Power indicated that -- after mitigation efforts such as hedging activity and the acquisition of more efficient power plants -- the company needed about $133 million in rate increases.

If either one of the higher rate increases is approved, the average residential customer could face monthly bill increases of nearly $10, or about 8 percent.

At Tuesday's hearing, Chairez was questioned about the legality of PUC staff making updates to a utility's request. Ernest Figueroa, a deputy attorney general for the state Bureau of Consumer Protection, asked Chairez if regulations allowed for such a move. Chairez responded that he did not know of any specific prohibitions against such a move.

Alaina Burtenshaw, staff counsel for the PUC, also pointed out that the commission is charged with setting "just and reasonable rates." She asked Chairez if he thought setting rates so low that they accrue "tens of millions of dollars" in carrying charges and interest would be just and reasonable. He responded that it would not.

Figueroa also asked if the commission could waive carrying charges for the company. Chairez said the commission could, but a Nevada Power attorney quickly asked if it would be "just and reasonable" to disallow the utility's recovery of legitimate costs. Again, he responded that it would not.

Figueroa also pointed out that customers have only been made aware of a possible $62 million rate increase. He indicated that their first knowledge of a rate increase of more than double that amount would be when they receive their bills.

Burtenshaw responded that the notice to customers indicates that the commission can set rates higher or lower than the noticed amount.

PUC Chairman Don Soderberg -- who presided over the hearing -- also asked Chairez if the low initial request from the company was caused by errors made but the utility or strictly by changes in the natural gas market conditions since the first filing.

"Things changed," Chairez said.