$110 million Nevada Power rate hike won't be reconsidered

The Public Utilities Commission of Nevada rejected Nevada Power Co.'s bid to reconsider a $110 million rate increase, setting the stage for a possible court appeal.

Commissioners voted 2-1 last week for an order denying Nevada Power's motion to set aside the Feb. 4 order dismissing the rate filing. The commissioners voted the same way, with Don Soderberg and Judy Sheldrew favoring it and Jo Ann Kelly dissenting.

Kelly was appointed specifically to handle the deferred energy case because Commissioner Richard McIntire was on the regulatory agency's staff and helped draft the rules governing the case.

Nevada Power's request to set aside the previous order was the company's last procedural move before taking the matter to court. Company representatives have said they would appeal the decision, which the company hoped would have allowed it to pass through fuel and purchased power costs from suppliers to customers.

A spokesman for Nevada Power's parent company indicated those plans haven't changed, but the company also is attempting to resolve matters in closed-door meetings with Gov. Kenny Guinn.

"This is not what we requested, but in anticipation of the decision, we have developed legal options," said Doug Ponn, vice president of governmental and regulatory affairs for Sierra Pacific Resources Inc., Nevada Power's Reno-based parent company.

"We are encouraged by the governor's settlement process and hopefully it will address these issues," Ponn said.

Guinn met last week in a four-hour closed session with representatives of Sierra Pacific, the PUC staff, the consumer advocate's office, the Las Vegas Valley Water District and the gaming and mining industries to discuss the delay in the start-up of deregulation of the electrical industry.

Another closed meeting was planned this week in Las Vegas.

In the commission's order denying the Nevada Power request, commissioners reiterated their reasons for dismissing the rate increase in the first place.

The request was introduced as an amendment to an earlier rate increase proposal for $44.3 million. The commission ruled it was not proper for Nevada Power to use higher fuel costs recorded in the summer of 1999 to justify the higher rate increase. Nevada Power also projected future expenses to be recovered during a rate cap mandated by the state Legislature.

The rate increase is important to Nevada Power because it is the last one to be considered before competition begins.

Just before Thursday's vote was taken, commissioners agreed to remove a paragraph from the order deflecting blame for Sierra Pacific's poor stock performance. Analysts have been hammering the commission for the rate decision, which they say contributed to Sierra Pacific stock plunging to its lowest level of the year.

As expense pass-throughs, deferred energy rate increases are not supposed to affect the company's bottom line, but investors perceive the rejection as potentially lost revenue.

Soderberg and Sheldrew discussed whether adding the paragraph was appropriate and Soderberg backed off on it, saying "it wasn't a hill to die for."

The deleted paragraph: "(Nevada Power's) argument that the commission is responsible for its financial woes is not well taken. This commission is, indeed, concerned with NPC's health as it relates to NPC's shareholders. Notwithstanding, the fall in stock prices must not be viewed in a vacuum. Nationally, utility stocks have declined as deregulation and divestiture and other changes are affecting the industry. Further, NPC's recent merger into the Sierra Pacific Holding Co. and NPC's parent company acquiring another large, out-of-state utility have obviously contributed to NPC's financial condition, none of which have to do with the commission's decision to dismiss the September filing."

Meanwhile, hearings have ended on Nevada Power's original rate increase request of $44.3 million.

Commissioners are scheduled to deliberate the request March 20 and vote on it March 22.

If approved, the $44.3 million request would raise rates 7.7 percent for residential customers and 2.7 percent for others -- 4.9 percent overall.

Opponents to the rate increase include the PUC staff, which has recommended a $12 million rate increase, the consumer advocate's office, which suggests a $3.2 million increase and casino companies, which say Nevada Power should reduce rates by $11.5 million.

The casino companies believe the utility is incorrect in its interpretation of legislation on deferred energy cost recovery and that the company has overrecovered those expenses.

Among the purchased power agreements that are a part of the $44.3 million rate request is one for low-cost electricity from Hoover Dam.

Nevada Power, the PUC, the consumer advocate, the Southern Nevada Water Authority, the Utility Shareholders Association and the Colorado River Commission reached an agreement earlier this week on how residential customers can benefit from 135 million watts allocated from Hoover Dam.

The six parties devised a formula to calculate the benefit of the power to residential users. Under the agreement, the average residential customer would save about $10 a year.

The Colorado River Commission had to modify a 30-year agreement passing through the benefits of the cheap power to local consumers because of the arrival of the competition in the marketplace. The Colorado River Commission wants to keep benefits to all residential consumers, even if they choose alternative electricity sellers.

The six parties agreed to review the issue again when a competitor enters the market.

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