NV Energy seeks 24 percent general rate increase

By David McGrath Schwartz

Thursday, June 9, 2011 | 2 a.m.

CARSON CITY — NV Energy wants general rates on its Southern Nevada residential customers to rise 24 percent in January, according to the state’s Consumer Protection Bureau.

If the Nevada Public Utilities Commission approves the increase, power bills will be unchanged when it takes effect. That’s because the price of natural gas and power purchases have been lower than expected, and customers have overpaid the utility by $185 million. Additionally, the company wants to defer for three years $64 million it believes it is owed from ratepayers.

In a news release this week, the company said it wants to keep rates flat until the state’s economy improves.

But consumer advocates don’t see the utility’s request for $246 million in additional revenue as any favor to customers.

“This is a very greedy request,” said Eric Witkoski, a consumer advocate who runs the bureau. “It’s huge. They’re seeking higher profits and trying to tell customers not to worry. We believe the Public Utilities Commission of Nevada will see through it.”

A NV Energy spokeswoman said the 24 percent increase represents only a portion of the charges the company is requesting. She said the overall rate increase for customers would be 11.52 percent, but the increase in their bill will be whittled down to nothing after the rebate from lower power costs is included.

“That’s looking at one component of the rate, while the company presents it as an overall impact to a customer’s bill,” Andrea Smith, a NV Energy spokeswoman, said.

Witkoski noted that NV Energy is seeking to raise its “return on equity” from 10.5 percent, set in 2008 during its last general rate case, to 11.25 percent. The commission approved a return on equity for the Northern Nevada sister utility of 10 percent this year.

Michael Yackira, NV Energy CEO, said that increase is justified. “We’ve invested billions of dollars to ensure Nevadans have reliable service and reasonable prices,” he said. But Yackira indicated the request is an initial offer that’s likely to change: “That’s the part of case that’s always argued. It never turns out to be what anyone’s … position is.”

He noted the actual return on the company’s investments has been 7 percent.

The commission, which is appointed by the governor, will determine the size of the rate increase and return on investment following public hearings.

Nevada has the highest energy prices of any Western state, other than California, according to the U.S. Energy Information Agency. Arizona, New Mexico and Colorado have energy rates of about 10 cents per kilowatt hour.

If the rate increase were approved, the overall residential kilowatt hour price would remain at its current rate of 12 cents.

Yackira said investments the utility has made have put it and its customers on solid footing for the future. However, the system has been hurt by decisions made 25 years ago to purchase power from third parties and not produce its own.

Customer complaints increase during summer months, when power bills spike because of the heat.

“The most difficult things for customers is when it gets to be 110 degrees plus,” Yackira said. He noted the company offered payment plans to level bills for Southern Nevada customers year round.

The rate case filed Monday includes costs associated with the Harry Allen power plant, outside Las Vegas, which was approved in 2008 and went online this year. That plant, which was opposed by consumer advocates, cost more than $638 million.

The $64 million, which the company wants deferred because of the recession, would collect interest at 8 percent, compounded monthly.

That means customers would face much higher costs once the company tries to recoup those costs.

“At the end, it’s like a huge balloon payment,” said Dan Jacobsen of the Consumer Protection Bureau. The $64 million would end up costing $130 million by the time it’s done.

Witkoski said NV Energy will submit a number of other applications. They include the cost of new “smart meters” the company has installed in customers’ homes and a $500 million north-south transmission line that the company is building on the east side of the state.

Additionally, a bill passed shortly before the end of the Nevada Legislature on Tuesday would allow the company to build up to a $1 billion transmission line to export renewable energy to other states, according to the Consumer Protection Bureau.

“We will see a huge increase now, and a huge increase three years from now,” Jacobsen said.

Yackira said the legislation would protect ratepayers, or possibly cause rates to go down.

He called the $1 billion figure a “red herring.”

“We don’t know what the demand is” for transmission exporting. “It could be $100 million. It could be zero,” he said.

According to an investor fact sheet on NV Energy’s website, the company’s other proposed increases in revenue include:

• $99 million for the Harry Allen plant.

• $85 million for cost of capital.

• $40 million for Increased depreciation and amortization schedules.

• $10 million for energy efficiency programs.

Southern Nevada energy rates will rise 3.4 percent tied to a separate rate case decided by the Public Utilities Commission in May. NV Energy made that application to recover the cost of energy efficiency programs, and sales that the company lost because of those programs.