electricity:

New plant would strain consumers, suit says

By Cy Ryan (contact), Phoebe Sweet (contact)

Friday, Jan. 2, 2009 | 2 a.m.

Carson City — The state Consumer Protection Bureau says NV Energy customers will pay too much for electricity if the utility is allowed to build a gas-fired power plant 25 miles northeast of Las Vegas.

So the bureau filed a lawsuit Tuesday in District Court in Carson City to try to force the state Public Utilities Commission to reopen the case, in which it granted the utility permission to build the 500-megawatt Harry Allen plant.

The bureau says the utility should instead have purchased a gas-fired power plant at Apex. Broadway Gen Funding LLC, a subsidiary of LS Power, offered to sell Apex for $545 million.

The bureau says customers would save more than $200 million if NV Energy were to buy the Apex plant rather than building Harry Allen, which is estimated to cost $780 million. The suit says the Apex plant northeast of Las Vegas is “the superior choice.”

The utilities commission “refused to balance the interest of the customers with those of the shareholders,” Senior Deputy Attorney General William Stanley says in the suit.

The weight of evidence will show that the Harry Allen plant “is $200 million more expensive than what would be a viable alternative, and the extra cost would be borne by the ratepayers to their detriment,” Stanley said.

The suit also says NV Energy, formerly Nevada Power, spent money developing Harry Allen even before it got approval from the state.

In late November, the commission denied a request from the bureau to reconsider its decision on Harry Allen.

NV Energy has asked the commission to approve a rate increase that pays for $285 million of the Harry Allen plant. The power company seeks an 18 percent increase in residential utility rates.

But that rate increase doesn’t cover the remaining $495 million cost of Harry Allen. For that, the company plans to ask for an additional rate increase.

The possibility of buying the Apex facility surfaced during commission hearings on Harry Allen, but NV Energy executives said it wasn’t really an offer, only a request for further negotiations.

“The company’s position was that there was never really an offer on the table,” said Tim Hay, former consumer advocate and member of the commission. “But to me it seems like the magnitude of the dollar amount is enough that I am proud of the consumer advocate’s office for trying to do this ... It’s certainly something I would have done as consumer advocate.”

Broadway’s parent company, LS Power, has also proposed a rival coal plant to one NV Energy has proposed near Ely.

NV Energy has also said it had an incentive to go ahead with the Harry Allen plant because the permit for the plant was set to expire if construction did not begin. Michael Yackira, NV Energy president, has said the Harry Allen plant is likely the last that could be permitted in the Las Vegas Valley because of poor air quality here.

Harry Allen is expected to be operating by summer 2011.

The commission also gave Nevada Power approval to buy the 562-megawatt gas-fired Bighorn Power Plant from Reliant Energy. The utility plans to pay for that plant with the recent rate increase it requested.

Bighorn is about 35 miles south of Las Vegas and has been operating since 2004. That purchase is complete.

Chelsie Campbell, spokeswoman for NV Energy, said the utility had no comment on the lawsuit because litigation is pending. Sean Sever, spokesman for the Public Utilities Commission, said the commission was just served with the lawsuit Wednesday and was reviewing the case.