NV Energy-Buffett deal likely to raise rates, state officials warn

By Cy Ryan

Thursday, Oct. 24, 2013 | 5:10 p.m.

The state Bureau of Consumer Protection says the plan to sell NV Energy to billionaire Warren Buffett is not in the public interest and could generate higher rates for consumers.

The bureau filed its concerns Thursday with the state Public Utilities Commission, which must approve the proposed $5.6 billion transaction.

And the staff of the PUC said there could be “potential harm to ratepayers” if the current financial acquisition is approved.

Consumer Advocate Eric Witkoski said NV Energy customers are already “paying very high electricity rates, which are producing extremely high profits for NV Energy.”

Part of the transaction provides that a $2 billion bonus would be paid to current shareholders by the new owners, Witkoski said. The $2 billion “provides a benefit to NV Energy officers and stockholders but not to customers” who would have to pay part of this $2 billion.

Yasuji Otsuka of the regulatory staff of the PUC said, “Ratepayers will end up paying more post-transaction than they would have absent the acquisition.” He said there may only be “minimal cost savings” if the sale goes through in its current form.

In the initial application, officers of NV Energy estimated there could be cost reductions of $30 million a year or 1 percent of the retail revenues.

Buffett’s MidAmerican Energy Co. has proposed to pay $23.75 per share of stock to acquire NV Energy. The company wants state and federal approvals by early January.

Dan Jacobsen, technical staff manager of the consumer bureau, said the PUC should order a $30 million rate reduction for consumers if the acquisition is approved.

In his prepared testimony, Jacobsen also suggested the PUC should consider weighing $15 million in reductions before granting any increase in rates in future cases.

Jacobsen says plans by NV Energy to build new generating plants to replace the coal-fired Reid Gardner facility should be delayed so they would not start operating until 2020.

Ratepayers in Southern Nevada will be hit with the cost of retirement and remediation measures in shutting down Reid Gardner, Jacobsen said, so they should not be hit at the same time with paying for new energy-producing plants.

NV Energy should continue its low-cost purchases of power from other sources, he recommended.

A chart was filed with the testimony of Jacobsen that shows Nevada electric customers are paying the highest rates in eight western and mountain states. For the 2013 fiscal year, Nevadans are paying 11.70 cents per kilowatt hour. The next highest is Colorado at 11.55 cents per kilowatt hour and the lowest is in Wyoming at 9.88 cents.

In a filing with the PUC earlier this month, MidAmerican said it would rely on NV Energy to comply with the law to close Reid Gardner. It said NV Energy would continue to control and manage the utility business.

In earlier filings, the Sierra Club and Nevadans for Clean Affordable Reliable Energy asked the PUC to ensure that MidAmerican would pursue such projects as solar and wind-driven facilities.