Las Vegas Sun

September 2, 2015

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Why a power rate hike was inevitable

Residential bills are set to rise 10-15 percent

Nevadans’ base residential electricity rates will go up on the first of the year, likely by double digits. That would be about a $15-per-month hit on today’s average utility bill of about $140 a month.

It’s a bitter pill to swallow for residents in a state with the nation’s highest unemployment and where most people owe more on their homes than they’re worth in today’s market.

Still, the decision by the three Public Utilities Commission members, who are appointed by the governor, is seen as relatively consumer friendly.

The primary driver for the rate increase, estimated to be from 10 to 15 percent for single-family homes, came in 2008. That’s when state regulators approved construction of the $700 million, natural gas-fired Harry Allen Generating Station 25 miles north of Las Vegas. It was built to increase the utility’s ability to generate electricity instead of having to purchase power on the open market.

“In a lot of ways, this (rate increase) was a fait accompli,” said Eric Witkoski, the state’s consumer advocate, who heads the state’s Bureau of Consumer Protection.

The PUC approved the draft report on the general rate case last week. The exact size of the rate increase for single-family homes is expected to be announced by NV Energy, possibly as early as today.

PUC Commissioner Rebecca Wagner estimated last week that increase would be 10 to 11 percent for single-family homes. The Bureau of Consumer Protection thinks it will be closer to 15 percent.

NV Energy had asked for a rate increase of 24 percent.

Wagner, during a public hearing on the rate case last week, said the commission tried to disallow costs submitted by NV Energy as much as possible. Previously, commissioners had said that they were sensitive to the fact that Nevada’s energy rates are the second highest in the West, trailing only California.

The Bureau of Consumer Protection had opposed the plant’s construction, arguing that the utility didn’t need such a large unit, capable of generating 484 megawatts — enough to supply about 375,000 homes.

“The biggest frustration is the investment the company made in the Harry Allen plant in Las Vegas,” said Dan Jacobsen, technical staff manager at the Bureau of Consumer Protection. The plant “was more capacity than the company needed. The company should have been watching what was happening to the local economy.”

Rob Stillwell, spokesman for NV Energy, said it was still calculating the effect of the rate case. The increase would be offset on power bills by a decrease that went into effect on Oct. 1 because of lower fuel prices, he said.

Part of the savings is also due to the added efficiency of new power plants such as Harry Allen.

Stillwell said the company has no immediate concerns about the decision.

The Bureau of Consumer Protection said there are some wins for consumers.

Most glaringly, the commission reduced the company’s return on stock from 10.5 percent to 10 percent. The company had asked for an increased return to 11.25 percent, and the Bureau of Consumer Protection had asked for 9.8 percent implied level of profit.

“We think this is a step in the right direction,” Witkoski said.

PUC members also said the company could not pass on raises it gave employees or the cost of a new computer system to ratepayers.

Las Vegas Sun Bureau Chief Cy Ryan contributed to this story.

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