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April 16, 2014

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NV Energy customers might be in for $14 million refund

A draft order has been prepared for the state Public Utilities Commission directing NV Energy to refund $14.5 million to its customers because the utility earned more than its authorized profit.

The suggested order written by Commissioner David Noble will be presented to the other two commissioners for approval at its meeting Wednesday.

NV Energy customers in Las Vegas would get a refund of $10 million; those in Reno would receive $4.5 million.

The staff of the PUC and the Bureau of Consumer Protection recommended the refunds because of over-earnings.

Noble writes that the utility's Southern Nevada operations were authorized to earn a rate of return of 8.17 percent for 2012 but actually realized a return of 8.71 percent. The Reno operations were authorized rate of return was 8.06 percent but captured an 8.50 percent return.

The utility is authorized to recover money on its loss of sales because of efficiencies and conservation of its customers. The utility is reimbursed in higher rates for its lost revenue.

Noble said the law “is clear on its face that the lost revenues compensation shall not contribute to the electric utility earning more than its authorized rate of return.”

NV Energy opposed the proposed refund and suggested that if it is approved, it be spread over future years.

Noble wrote, “The commission rejects NV Energy’s argument that the lost revenues amount should simply be deferred until the electric utilities earn less than their respective rate of return.”

The order says, “The longer an electric utility continues to earn more than its authorized rate of return (i.e., one, three, five, 10 years) the more absurd the result.”

A source close to the PUC said the refund would be about $7 per Southern Nevada resident.

The proposed order says the company shows it earned less than its rate of return for more than a decade. Lost revenue due to reduced use of electricity affects the bottom line of the firm.

The utility is able to recover its lost earnings by charging higher rates. But in this case NV Energy collected more than it lost and exceeded its approved profit level.

The 43-page order says the commission will adopt regulations in the future to handle these situations.

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