Monday, Sept. 22, 2003 | 11:09 a.m.
Nevada Power Co. customers could see rates increase 82.5 percent if the utility is allowed to move ahead with the construction of two power plants, Nevada Consumer Advocate Tim Hay said on Friday.
Building the plants, which would cost more than $450 million, and spending $500,000 on a study of coal fired generation would push rates up from 8 cents a kilowatt hour in 2005 to 14.6 cents a kilowatt hour in 2022, testimony filed by Hay with the state Public Utilities Commission said.
The jump in rates, Hay said, is driven by Nevada Power's junk-level credit rating.
"The company's plan excludes significant costs and relies upon unrealistic assumptions," Hay said.
Nevada Power proposed the construction of the plants in a resource plan filed with the PUC in June. The commission is scheduled to hold hearings on the plan Oct. 14, and will ultimately vote to approve the plan or order changes.
In a recent consumer session, Nevada Power executives argued that the resource plan is necessary to mitigate a growing reliance on purchasing electricity for consumer on the wholesale market. The company currently only generates about 40 percent of the power it uses, said Michael Yackira, executive vice president for strategy and policy with Sierra Pacific Resources, parent company of Nevada Power.
The new plants would allow the utility to maintain the current ratios, given the rapid growth of the Las Vegas market, he said.
PUC staff recommended the approval of the construction of both proposed plants, a 70 megawatt power plant and a 520 megawatt power plant.
The projects "should lessen the impact on native-load customers from the volatility of the purchased-power markets, should improve reliability and provide other benefits associated with generation inside (Nevada Power's) control area," PUC engineer John Candelaria, wrote in his testimony.
PUC economist Ron Knecht said the approval of the resource plan was unlikely to have any adverse effect on the company's fragile finances.
"The key insight of this analysis, however, is that the particular resource plan choices available in this (filing) are not likely to have significant impacts on the (Nevada Power) financial condition," he said. "NPC appears to be able to finance its preferred resource plan about as well, or with the same degree of difficulty or challenge, as any other reasonable response to its future resource needs.
"Thus, in terms of this case, staff recommends that commission choices and policies to be adopted be based on basic considerations such as economic efficiency, because (Nevada Power's) financial condition and challenges are fully reflected in the cost and other inputs used in the rest of staff's analyses."
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