PUC approves electric rate hike

Kevin Rademacher

Thursday, Sept. 22, 2005 | 11:09 a.m.

Despite concerns that higher rate increases could come later, state regulators on Wednesday approved the smallest of two possible increase proposals for customers of Nevada Power Co.

The unanimous vote of the Public Utilities Commission will allow the Las Vegas electric company to raise the rates of the average residential customer using 1,250 kilowatt hours of electricity by $4.63 a month, or 3.7 percent.

With the new rates, which are scheduled to go into effect Oct. 1, the average monthly bill will be $127.40.

It's a move based on a June filing the company made seeking $62 million in additional revenue to cover higher natural gas costs. It also comes despite subsequent testimony by PUC staff that indicates that soaring natural gas prices since the June filing made the original proposal obsolete.

David Chairez, a financial analyst for the PUC, said in testimony the $62 million figure would be short by $84.8 million, and that failure to collect the amount now would mean customers will have to make up that amount later plus at least $13.8 million in interest. A rate increase that included the additional $84.8 million would have raised monthly rates for the average customer by nearly $10.

On Wednesday, however, PUC Chairman Donald Soderberg said that the commission would not have adequate opportunity to pick apart the subsequent testimony.

"We have an obligation when a filing is made before us -- no matter what the methodology -- to investigate it thoroughly," he said. "At some point we have to cut it off."

He did emphasize that, while the commission favors the original application in this case, it still reserves the right in future cases to set rates higher or lower than a utility recommends.

"I clearly believe that we have the power to adopt a rate different from the filing," he said.

PUC Commissioner Jo Ann Kelly agreed with the proposal that was approved, but she pointed out that the rapid rise of natural gas prices will continue to cause issues for consumers should prices remain at current record levels. Natural gas is the primary fuel used to run electric power plants in the Western United States.

"It does not appear that these numbers are in a cycle where they are going to cycle downward anytime soon," she said.

Kelly said an informal look at current natural gas prices could indicate rate increases of as much as 20 percent next year if they persist.

Soderberg did emphasize that -- while there was debate over which numbers to use -- no parties involved in the case disputed the prudency of Nevada Power's request.

"That's significant," he said. "We can compliment the utility on that."

In recent years, parties to Nevada Power rates cases -- including major customers, PUC staff and the Bureau of Consumer Protection -- have challenged the prudency of millions of dollars the utility has spent on power and fuel.

Also on Wednesday, the PUC approved Nevada Power's plan to acquire a 75 percent stake in the Silverhawk Power Plant, located about 20 miles north of Las Vegas in the Apex Industrial Park.

The staff of the state Public Utilities Commission, Nevada Power Co. of Las Vegas and the state Bureau of Consumer Protection have reached a stipulated agreement on the electric utility's proposed $210 million purchase of a Southern Nevada power plant.

In June, Nevada Power said it would buy for $210 million the ownership interest in the plant from GenWest LLC, a subsidiary of Phoenix-based Pinnacle West Capital Corp. Silverhawk is a 570-megawatt, natural gas-fired plant. The remaining 25 percent of the plant is owned by the Southern Nevada Water Authority.

The PUC also approved the utility's plan to issue long-term debt to finance the project. One unfinished matter in that deal, however, is the accounting treatment that the company will use for retirement and decommissioning costs for the three units at the Clark Generating Station. Those aging and more inefficient units will be replaced within the system by Silverhawk.

Soderberg said customers will benefit from the replacement of the units both in efficiency and by closing old plants in the heart of the Las Vegas Valley.

"Silverhawk performs very well," he said. "It is the class of the industry. While it still burns natural gas, I liken it to replacing a 40-year-old pickup truck with a brand-new pickup truck."

The commission also on Wednesday approved an order that gives Nevada Power and its sister utility -- Sierra Pacific Power Co. of Reno -- until December to complete a compliance plan spelling out how the companies will meet state-mandated renewable energy usage.

The utilities have missed goals for renewable energy usage in both 2003 and 2004. On the order of Commissioner Carl Linvill, the company submitted a compliance plan in August but it was deemed insufficient by the commission.

In laying out the new guidelines for the creation of a compliance plan, Linvill said his previous direction should have been sufficient.

"I continue to be disappointed with that," he said, adding that Wednesday's order contains "more detailed instruction."