Commission urged to reject proposed NV Energy rate hike

By Alexandra Berzon

Monday, April 6, 2009 | 6:24 p.m.

Her four young children seated behind her, Lorinda Johnson pleaded with the Public Utilities Commission Monday afternoon to reject NV Energy's proposed 17 percent rate increase for residential users.

"I’m wondering how am I supposed to make my power bill, in the middle of July, in the middle of December,” said Johnson, who described herself as a recently laid off construction worker struggling to provide for her family.

Johnson directed her comments at the two NV Energy executives seated on a podium during a PUC consumer session in a Convention Center meeting room. The informal hearing was designed to allow customers to air concerns regarding NV Energy's rate increase request. Formal hearings are set to begin later this month.

The anger ran thick, and Johnson's outrage was echoed many times over.

“You guys don’t care. The CEOs are making tons of money and going on nice lavish vacations. Why do we have to keep suffering for what you guys keep doing?” Johnson said.

Out of a room full of about 100 people, dozens came forward to beg the PUC to consider the hardship of consumers in the midst of the economic downturn.

Couldn't they put the rate increase off another year, when the economy will hopefully be better, they asked again and again. NV Energy has the tricky task of asking for its largest-ever rate increase even as the ranks of the unemployed and foreclosed upon swell, even as distrust of corporate executives and publicly traded companies soars.

"I've lived in Las Vegas over 50 years and I've seen my power rates go up and up and up," said Frances Spendlove, an elderly house wife. "I think it's time for the customer to take back the power company. Throw the bums out."

That prompted clapping and a few cheers.

The utility has asked for a rate increase of $320 million, which would mean residential rates would increase an average of 16.7 percent, while corporate rates would increase 11.3 percent. The increase is for capital improvements and an 11 percent return for the company’s investors.

The utility is required to submit a general rate increase to the PUC every three years to reflect the company’s capital costs and profit demands. That’s separate from the quarterly requests the company makes based on fuel and other costs, which are passed entirely along to the customer with no room for profit.

The company says the rate increase is so high because it has invested heavily in power plants to cut down on what it says is volatile pricing that comes with purchasing power instead of owning the power source.

Those costs include $89 million for the acquisition of the Bighorn Power Plant near Primm, about $62 million for the construction of the Clark Peaking units, and some retrofitting costs. In addition, the request includes $34 million to cover a portion of the cost of building the Harry Allen power plant, set to be completed in 2011.

Approval of that plant has been appealed by the Attorney General's Bureau of Consumer Protection.

Consumer Advocate Eric Witkowski said in an interview Monday that he is concerned the utility may have become overly aggressive in building and acquiring power plants, costing consumers too much. He expects that an examination of that strategy will come up at the formal hearings.

In the last four years, NV Energy’s power supply went from 39 percent percent produced by the utility to 77 percent percent, executives told consumers Monday.

NV Energy executives said they are aware the timing is bad, but they said the improvements will eventually be good for consumers and they have no choice but to ask for the increase now.

"We are essentially having a mortgage payment on an investment we believe and the commission believes leads to savings," said Roberto Dennis, in charge of energy supply for NV Energy.

Understanding the poor timing, the utility requested that the increase go into effect in September instead of July so that it is not felt during the height of electricity use. The cost of that delay, including interest, will be added to rates in three years, the utility said.

In addition, the utility is asking for a 15 percent savings for its low-income customers, which it says should offset most of the increase for its most needy users.

And, executives said, consumers can expect the increase to be tempered eventually by the plummeted cost of natural gas. All of that savings gets entirely passed onto consumers after some time has passed.

Still, that was limited comfort to the people at the consumer session Monday -- many of whom described themselves as fixed-income seniors.

Several said they have already had to do without such basic electrical needs as heat in the winter and air conditioning in the summer as their savings have been hit hard in the stock market.

They railed against the high salaries of NV Energy executives, which top out at a little over $3 million for CEO Michael Yackira, according to a PUC filing.

During an informational session with journalists last week, Yackira said the company expects it will not get the full increase it has asked for. At the formal hearings, a number of large ratepayers including the city of Henderson, the Southern Nevada Water Authority, Wal-Mart and Boyd Gaming will present their viewpoints, along with consumer advocates representing small ratepayers.

“You ask for x, they say y, and the commission comes up with a number somewhere in between,” Yackira said.

The Commission is down one member on this case due to a conflict of interest. That means the two remaining members will be in the unusual situation of having to agree on the outcome.