Commission urged to reject proposed NV Energy rate hike

Increase would send residential utility bills up 16.7 percent

Leila Navidi

Richard Bianco of Las Vegas speaks out against the rate increases during the Public Utilities Commission’s consumer session addressing the proposed NV Energy rate increase at the Las Vegas Convention Center Monday, April 6, 2009.

By Alexandra Berzon (contact)

Monday, April 6, 2009 | 6:24 p.m.

NV Energy rate increase

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Hearing scheduled on proposed NV Energy rate hike (2-26-09)
NV Energy slips to a fourth quarter loss (2-11-09)

NV Energy

Her four young children seated behind her, Lorinda Johnson pleaded with the Public Utilities Commission Monday afternoon to reject NV Energy's proposed 17 percent rate increase for residential users.

"I’m wondering how am I supposed to make my power bill, in the middle of July, in the middle of December,” said Johnson, who described herself as a recently laid off construction worker struggling to provide for her family.

Johnson directed her comments at the two NV Energy executives seated on a podium during a PUC consumer session in a Convention Center meeting room. The informal hearing was designed to allow customers to air concerns regarding NV Energy's rate increase request. Formal hearings are set to begin later this month.

The anger ran thick, and Johnson's outrage was echoed many times over.

“You guys don’t care. The CEOs are making tons of money and going on nice lavish vacations. Why do we have to keep suffering for what you guys keep doing?” Johnson said.

Out of a room full of about 100 people, dozens came forward to beg the PUC to consider the hardship of consumers in the midst of the economic downturn.

Couldn't they put the rate increase off another year, when the economy will hopefully be better, they asked again and again. NV Energy has the tricky task of asking for its largest-ever rate increase even as the ranks of the unemployed and foreclosed upon swell, even as distrust of corporate executives and publicly traded companies soars.

"I've lived in Las Vegas over 50 years and I've seen my power rates go up and up and up," said Frances Spendlove, an elderly house wife. "I think it's time for the customer to take back the power company. Throw the bums out."

That prompted clapping and a few cheers.

The utility has asked for a rate increase of $320 million, which would mean residential rates would increase an average of 16.7 percent, while corporate rates would increase 11.3 percent. The increase is for capital improvements and an 11 percent return for the company’s investors.

The utility is required to submit a general rate increase to the PUC every three years to reflect the company’s capital costs and profit demands. That’s separate from the quarterly requests the company makes based on fuel and other costs, which are passed entirely along to the customer with no room for profit.

The company says the rate increase is so high because it has invested heavily in power plants to cut down on what it says is volatile pricing that comes with purchasing power instead of owning the power source.

Those costs include $89 million for the acquisition of the Bighorn Power Plant near Primm, about $62 million for the construction of the Clark Peaking units, and some retrofitting costs. In addition, the request includes $34 million to cover a portion of the cost of building the Harry Allen power plant, set to be completed in 2011.

Approval of that plant has been appealed by the Attorney General's Bureau of Consumer Protection.

Consumer Advocate Eric Witkowski said in an interview Monday that he is concerned the utility may have become overly aggressive in building and acquiring power plants, costing consumers too much. He expects that an examination of that strategy will come up at the formal hearings.

In the last four years, NV Energy’s power supply went from 39 percent percent produced by the utility to 77 percent percent, executives told consumers Monday.

NV Energy executives said they are aware the timing is bad, but they said the improvements will eventually be good for consumers and they have no choice but to ask for the increase now.

"We are essentially having a mortgage payment on an investment we believe and the commission believes leads to savings," said Roberto Dennis, in charge of energy supply for NV Energy.

Understanding the poor timing, the utility requested that the increase go into effect in September instead of July so that it is not felt during the height of electricity use. The cost of that delay, including interest, will be added to rates in three years, the utility said.

In addition, the utility is asking for a 15 percent savings for its low-income customers, which it says should offset most of the increase for its most needy users.

And, executives said, consumers can expect the increase to be tempered eventually by the plummeted cost of natural gas. All of that savings gets entirely passed onto consumers after some time has passed.

Still, that was limited comfort to the people at the consumer session Monday -- many of whom described themselves as fixed-income seniors.

Several said they have already had to do without such basic electrical needs as heat in the winter and air conditioning in the summer as their savings have been hit hard in the stock market.

They railed against the high salaries of NV Energy executives, which top out at a little over $3 million for CEO Michael Yackira, according to a PUC filing.

During an informational session with journalists last week, Yackira said the company expects it will not get the full increase it has asked for. At the formal hearings, a number of large ratepayers including the city of Henderson, the Southern Nevada Water Authority, Wal-Mart and Boyd Gaming will present their viewpoints, along with consumer advocates representing small ratepayers.

“You ask for x, they say y, and the commission comes up with a number somewhere in between,” Yackira said.

The Commission is down one member on this case due to a conflict of interest. That means the two remaining members will be in the unusual situation of having to agree on the outcome.

Discussion: 9 comments so far…

By sanddunes

4/6/09 at 7:17 p.m.

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The cost of natural gas is claim is bunk.

The April NYMEX futures contract expired last Friday at $3.631 per MMBtu, reaching the lowest closing price for a near-month contract since September 2002.

Apparent lack of expectation for any market tightness pushed futures contracts lower further out in the future as well.

How did NV Energy propose to pay for the acquisition, construction and retrofitting of power plants when they took these projects on?
By NLVResident

4/6/09 at 10:35 p.m.

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The utility companies are guaranteed a certain return on investment. The problem is all the perks they provide to their management staff -- starting at the director level and up. Free personal vehicles with maintenance, insurance, fuel, and registrations fees paid by the company -- or the ratepayer. Upper management personnel traveling first class and staying at first class hotels for business meetings. These guys can afford to purchase their own vehicles. Why should someone making over $100K (at the director level) be given a vehicle? Why should the ratepayer be responsible for the insurance, maintenance, fuel, and registration costs for those vehicles? And why should employees be able to use frequent flyer programs for personal vacations? If the ratepayers paid for their business trips, then free airline tickets or hotel rooms should be used for business purposes ONLY. It's time the PUCN start cracking down on these things.
By captainamerica

4/7/09 at 7:33 a.m.

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It is time for citizens to put up a referendum on the ballot. Any time a public official betrays the public trust or is found guilty of corruption, 20 years hard labor, mandatory sentence. If Neveda energy cannot write a business plan with long range projections that is there problem not the customers. If the PUC screws the people again they deserve a public flogging at the very least.
By Sunlizard

4/7/09 at 8:08 a.m.

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If you think this will raise your bill, check back in two years when rate payers will be covering the cost of all the renewable projects that will not provide energy 24/7. Renewable projects will run at three times the cost of conventional energy.

Stimulus money would have been wisly spent on grants to help people fit their homes with photovoltaics. We could sell our exess power back to the power companies. That does not make a few people rich though. Not like big power plants.

Expect your bill to rise another 50 percent with the onslaught of environmentally unfriendly renewable projects. That's a promise.
By The_Onion

4/7/09 at 10:56 a.m.

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Sunlizard-

You have no idea what you are talking about.

I'm happy to educate you. And before you get all hysterical, note this: I believe there are more jobs and benefits to distributive generation, but we will need large-scale renewables in the future.

Large-scale renewable projects will allow NV Energy to retire old, polluting coal plants (Reid Gardner)- soon to be very costly in a carbon tax regime. With NV Energy's investment in natural gas over the past three years and the slow down in growth in southern NV, we are not going to see very many large scale renewable projects built in the next three years.

There are more stimulus dollars for weatherization and energy efficiency than we know how to spend in Nevada, over 70 million.

If you do want to see further investment and support for rooftop solar and efficiency, you should look to support AB 352 at the NV Legislature. This bill changes state law to ALLOW but NOT MANDATE local governments to enter into public/private partnerships for financing home energy improvements.

The voters in Boulder, CO just approved a $40 million bond to create a fund that offers low-interest loans for homeowners and small businesses.

Check it out here:

http://www.elephantjournal.com/2009/03/f...
By The_Onion

4/7/09 at 12:07 p.m.

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Actually I was wrong about the Assembly Bill I mentioned earlier. I just received an email alert from Nevada Conservation and the bill is AB 456.

here is the link:
http://www.leg.state.nv.us/75th2009/Repo...

My bad.
By LV4LIFE

4/7/09 at 1:36 p.m.

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"We are essentially having a mortgage payment on an investment we believe and the commission believes leads to savings," said Roberto Dennis, in charge of energy supply for NV Energy".

And if what we "believe" will happen does not come about then too bad for the consumer. And we will ask for another rate hike and another and another. Thats what happens when you are the only game in town. Suckers!
By lvmermaid

4/23/09 at 7:51 a.m.

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I am appalled that Nevada Energy is proposing this absurd increase when we just had an increase in April 2009 especially in this economy! Additionally, Nevada Energy has the nerve to offer a remote reading device which would cut down on manpower - a savings - but you (the consumer) have to pay $50. Everything they offer has a price tag! With people losing their jobs and/or having hours cut back, Nevada Energy's contribution is to raise the rates. And because Nevada Energy is the only game in town, we are not able to even try to get a better deal! When is someone going to be on the side of the consumer? What about the person who has medical issues and has to have a stable temperature in the home - not the 58-58 degrees in winter and 78-80 degrees in summer as is recommended by Nevada Energy? When is someone going to say enough is enough?
By gmag39

4/23/09 at 8:47 a.m.

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Let's see here.
110 degree heat is coming.
We are in a severe recession.
People are losing their homes, cars, jobs, savings. Many more are headed that way.
What can the benevolent NV Energy do to pitch in, to help the community in which it serves during these times of dire need?
I GOT IT!
Another HUUUGE rate increase! THAT will show them exactly just how much NV Energy cares.
And we will allow them to do this to us???