Wednesday, Nov. 23, 2011 | 2 a.m.
- NV Energy seeks 24 percent general rate increase (6-9-2011)
- NV Energy-backed measure gets approval in final minutes (6-7-2011)
- Bill would let NV Energy seek another rate increase for energy efficiency (5-6-2011)
- NV Energy customers may get zapped for conserving (5-4-2011)
- NV Energy reports $2.3 million in 1Q net profits (4-29-2011)
There were as many police officers as protesters when I left a recent demonstration at NV Energy. But if people in Southern Nevada knew more about the electric utility rate hike, I think there would have been thousands there.
The Public Utilities Commission will decide soon on the company’s general rate case, which it submitted in June.
The company seems to have muted the outrage because even though it asked for a general rate increase of 24 percent on single-family homes beginning next year, our bills wouldn’t go up very much, at least for now. The monthly bill for the average single-family residence would increase from $140 to $147, but you should feel little relief from that small increase — it’s a mirage.
Rates increased 3.4 percent in July to pay for energy efficiency. (We use less energy but the company gets compensated as a way to encourage conservation efforts.)
And despite the rate increase request, the utility would keep bills down out of sheer luck: Natural gas prices are down, so its cost of electricity generation is down.
But there’s something going on here. NV Energy estimates the cost of natural gas, and we pay ahead of time. If gas prices are lower than expected, the company owes us money. And that’s the case here. They owe us money — about $88 million.
The company had wanted to give us our credit at the same time it raised our rates, which would have masked the increase in rates. But the regulators, the Public Utilities Commission, wouldn’t allow it, and forced the company to start paying us back last month.
What does this seem like to you? To me, it’s like my coffee company owes me money because I bought beans in advance and the price of beans is down, and just as it starts to pay me back for overpaying on beans, it raises the price of cups, water and the barrister labor.
All told, NV Energy is proposing to charge Nevada customers an extra $249 million. Why shouldn’t we think of this as a tax?
I guess we’re supposed to feel better because the company is proposing to defer $79 million we would owe until a later date. Except, we would have to pay interest, though the company hasn’t said what the rate would be. Imagine if your grocer said, “No, only pay me some of the money now. Pay the rest later. With interest.” Is he doing you a favor?
The company is also proposing to make a higher rate of profit, which calls to mind John McEnroe — “You’ve got to be kidding me!” Because the company is a monopoly, it is heavily regulated by the Public Utilities Commission, which sets rates and the company’s return on equity. NV Energy has asked that its return on equity increase from 10.5 percent to 11.25 percent. So at a time when Nevada households and businesses are all treading water in volatile economic seas, the electric monopoly wants more profit. This is the gall of the teenager asking for the car keys and then coming back for whiskey money.
Tony Sanchez, the company’s head of government affairs, said in an interview in June that the company’s return on equity is one of the lowest in the country, which explains its stagnant stock price. To which I say, so what? (Anyway, the stock was $10.32 on Jan. 2, 2009. It’s about $14.50 now — a 40 percent increase.)
In the same interview, Sanchez said the company made significant investments in electrical generation last decade that has paid off handsomely for consumers because the plants are more efficient, they use cheap natural gas, and they’ve given us a measure of independence because we don’t have to go out on the open market looking for electricity. He said that given the foresight of those investments, the company and its investors should be rewarded.
But due to historically low interest rates, the weak economy and economic instability, investors are begging to park their money in Treasuries and other safe investments — such as regulated utility monopolies — in exchange for lower rates of return. Lower risk, lower return. It’s an ironclad law, and there’s no reason for the PUC to give NV Energy any increase in its return on equity.
The only reason any of this is even being discussed is the sheer clout of NV Energy. One would think that the utility monopoly, to which we all send big checks every summer, would be a favorite target of populist politicians of both parties. One would think. But NV Energy has given more than $900,000 to political candidates the past three election cycles, nearly all of it to incumbents, according to the Institute on State Money and Politics. Sanchez said the giving isn’t partisan. And that’s the whole point. The company has access to both parties.
The Nevada political world was set aflutter when Gov. Brian Sandoval this year vetoed a renewable energy bill the company wanted. (Details of the bill’s passage probably sank it — it passed in the final hours of the legislative session in an act of sausage making that would have made Upton Sinclair’s stomach turn.)
But the reason people were surprised by the veto was because of the company’s considerable influence. NV Energy’s key lobbyists, Pete Ernaut of R&R Partners and Greg Ferraro, who runs his own firm, persuaded Sandoval to run for governor. (They also represent the Nevada Resort Association.) Sandoval was once an attorney advocating for higher power rates on behalf of utility shareholders, a group widely seen as a proxy for company management.
Sanchez sits on the board of Nevada Partners, a nonprofit group, with state Senate Majority Leader (and congressional candidate) Steven Horsford. I could go on.
There’s nothing nefarious about any of this. In fact, given our need for safe and stable electrical generation and desire to expand renewable energy generation, I want our elected officials to have a good working relationship with the power company.
But let’s get something straight. It’s a utility monopoly. It’s not like they’re competing with Steve Wynn or Sheldon Adelson. In fact, they’re not competing with anyone. This is a no-brainer: The Public Utilities Commission should cut ratepayers some slack.