When the power company builds, we pay

By Phoebe Sweet

Wednesday, Dec. 10, 2008 | 2 a.m.

A nearly 18 percent increase in residential electric rates proposed by NV Energy sparked public outrage last week.

Consumers are upset about the average Southern Nevada electric bill going from about $150 to about $175, saying a down economy is a poor time to charge customers more. But where were those ratepayers in 2006 and 2008, when regulators held public hearings over whether to approve the utility’s plans to purchase one power plant and build two others?

NV Energy executives say the cost of those plants, approved later in 2006 and 2008, is the reason the rate increase is needed.

Nevada Public Utilities Commission hearings rarely involve anyone not employed by the utility, environmental groups or the commission itself. The same was probably true for the hearings in which the commission approved the purchase of the Bighorn Power Plant near Primm and construction of gas generators near U.S. 95 and Sunset Road and at the Apex industrial complex north of the city. Neither the commission nor the utility could immediately say whether any ratepayers sat in the audience those days.

That’s nearly $1.5 billion in investments with only a consumer advocate, a few environmentalists, a reporter or two and three utility regulators asking why.

In fact, buying and building power plants is a strategy — one the commission and the utility are counting on to make electric delivery reliable and rates stable in the long run.

Before the Western energy crisis in 2001, Nevada’s utility had the opposite strategy. Then, it was cheaper for utilities to buy energy from independent power producers than to build their own plants — buy more, own less. That strategy nearly bankrupted the company.

But it changed just after the turn of the century, when energy prices skyrocketed. Rolling blackouts in California were probably encouragement enough, even if soaring prices weren’t.

When NV Energy started building and buying in 2006 (the regulated utility industry moves slowly), it owned enough power plants to provide 25 percent of peak summer demand in the valley. Today the utility, formerly Nevada Power, can provide about 70 percent of the valley’s growing demand. Over those two years, the utility has netted 2,380 additional megawatts of generation capacity, enough to serve nearly 1.7 million average homes.

The company’s executives brag that 2009 summer bills, just before the proposed rate increase would take effect, will actually be lower than 2007 summer bills.

That’s little comfort for Las Vegans struggling to pay their bills all year.

The company wants the rate increase to kick in after the hottest part of summer is over, and executives say there will be virtually no rate increase for low-income residents thanks to a new program to offset the higher charge.

They insist the investments will pay off in the long run with lower rates for customers. (It will pay off for the company as well, with an 11 percent profit.)

Because every dollar spent purchasing electricity from independent power plants is passed on to the consumer, over time power from generators the utility owns is cheaper.

They say the three plants that account for this rate increase have saved customers $100 million a year — a difference that comes from cutting out a step in the supply chain.

But for consumers who think this increase — the largest since the Western energy crisis — is the last for a long time, consider this: NV Energy plans to spend at least another $5 billion on a coal plant in rural Nevada. If an 18 percent increase for $1.5 billion in spending sounds bad, just wait until that bill comes along.