Customers sound off on proposed electric rate hikes

Kevin Rademacher

Wednesday, Sept. 7, 2005 | 11:11 a.m.

Regardless of higher natural gas prices, Nevada Power Co. customers on Tuesday said they were not happy about the prospect of higher electric bills.

"We can't afford it," customer Richard Pautz said at a Public Utilities Commission consumer session. "We can't afford to pay for every new building project coming into this town."

In a 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. Subsequent testimony filed by PUC staff 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 increase to nearly $147 million.

In updated 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 a monthly bill increase of nearly $10, or about 8 percent.

The PUC held formal hearings on the case last week and will include transcripts of that proceeding as well as Tuesday's consumer session in deliberations.

Natural gas is used by the electric utility to fuel power plants. The cost of the fuel -- as well as power purchased on the open market, most of which is generated at natural gas-fired plants -- is recovered through a base-tariff energy rate. If that rate is set too low, the unrecovered balance piles up in a deferred energy account and accumulates carrying costs, such as interest.

PUC staff based its higher calculations on a jump in the natural gas futures market. Prices for a thousand cubic feet of natural gas jumped from $6.57 on May 2, just after Nevada Power made its original filing, to $7.55 on Aug. 1.

That's little consolation to customers.

Richard Lozo said Tuesday that the company should be better positioned to project rising costs.

"Someplace along the line, they are going to make a little money," he said. "They've got to put some of that profit aside (to cover these costs)."

John Baietti, a frequent critic of the power company, voiced similar concerns. He ripped the Bureau of Consumer Protection and PUC staff for failing to mount more aggressive challenges to rate cases.

"I want to know why they are not projecting two years in advance instead of just two months," he said. "Why is this happening?"

In last week's hearings, the Bureau of Consumer Protection questioned the fact that PUC staff proposed higher rates than the company originally requested. The BCP also challenged the notification that consumers received, which only outlined the original $62 million request.

Lozo pointed out the discretion that regulators have to adjust the rate recovery.

"If I read this correctly, you can either reduce it or increase it," he said. "I hope you don't increase it."