Friday, May 13, 2005 | 11:17 a.m.
A utilities hearing set to begin Monday will examine the effect on customer service of the 1999 merger between Nevada Power Co. of Las Vegas and Sierra Pacific Power Co. of Reno.
The hearing is the product of a 2004 general rate case. In issuing its final order in the case, the Public Utilities Commission of Nevada directed the utilities to create a mechanism for measuring customer service levels. Those levels would have to ensure the PUC's original directive in approving the merger that customers would not be harmed by combining the companies.
In initial testimony filed with the PUC, the utilities and the state Bureau of Consumer Protection appear to have significant differences over the design of that mechanism.
Testifying on behalf of the Bureau of Consumer Protection, economist Gayatri Schilberg criticized the utilities' plan because it requires that changes in service quality "must be proved to be related to the merger before financial consequences (penalties or rewards) can be imposed."
"Such a requirement means that resources will be tied up in litigating merger-relatedness rather than monitoring service quality," she said in her testimony.
Schilberg also argued that the utilities' proposal to combine various indicators into indices will mask shortcomings in some areas with improvements in other areas.
"Such a mechanism does not hold customers harmless and permits wide variations in performance," she said.
The BCP plan recommends penalty zones for missing customer service levels ranging from $350,000 a year to a maximum annual penalty of $7 million.
In rebuttal testimony, the utilities said Schilberg's recommendations are unrealistic.
"The BCP witness, Ms. Schilberg, has presented an alternative that is ad hoc and unworkable," the testimony said.
Specifically, the objection to composite measures -- indices -- for reliability, customer service and safety "is not based on any analysis or fact."
The company also said limiting any financial incentives to "penalties only would discourage future efficiency enhancing transactions."
The company also contested assertions that everything that has happened since 1999 is merger-related.
"Her presumption that all post-merger changes in service quality are merger-related is unsupported by evidence and inconsistent with the commission's hold-harmless standard," the utilities testimony said.
Sierra Pacific Resources -- parent company of Nevada Power and Sierra Pacific Power -- saw its customer satisfaction rating inch higher in a recent J.D. Power and Associates survey.
The Nevada company's Customer Satisfaction Index score of 97 was two points higher than its 2004 score. It was, however, short of the West Region average score of 100 and below the industry average 103.
Of the 12 companies making up the survey's West Region, Sierra Pacific Resources bested only one, Xcel Energy West, which serves customers in Colorado and New Mexico.
Back in 1999, a similar J.D. Power survey credited Nevada Power with one of the highest residential satisfaction rates in the country. In that study, the Las Vegas company grabbed a score of 108, well above the industry average of 100, the highest score in the West and fifth-best in the country.
Sierra Pacific Power scored a 102 in the study.
By 2002, amid fallout from the Western energy crisis and the associated dramatic rate increases, the parent company was worst in the West for customer satisfaction. The company began its climb out of the cellar the following year.
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