Nevada Power plan challenged
Feb 02 - Las Vegas Review - Journal
The Southern Nevada Water Authority, however, suggests the commission make no
disallowances in Nevada Power's recovery of past fuel and wholesale power
expenses. Instead, the water authority's key witness argues for adjustments that
would stabilize rates.
Parties on Friday filed testimony that addresses Nevada Power's request to
boost rates by 9.8 percent over three years so the utility can recover the cost
for fuel used in its generation plants and the wholesale power it buys.
The utility suggested phasing in that energy rate increase over three years
so that rates increase only 6 percent in the first year.
Nevada Power also is asking state regulators to approve a general rate
increase of 9.8 percent for nonfuel costs, including administrative expenses,
operations and profits. Nevada Power suggested that general rates be increased
3.5 percent in the first year and be raised later.
In testimony filed Friday, the PUC staff argued that the commission should
allow Nevada Power to recover between $51 million and $67 million of the $93
million the utility is seeking for past fuel and wholesale power expenses.
However, the PUC staff is recommending setting rates for future energy
expenses higher, because it believes Nevada Power's energy cost projections are
too low. This part of the rate is called the Base Tariff Energy Rate and is
designed to reflect expected fuel and power expenses over the next year.
If the commission sets this forward-looking rate higher than the actual cost
of fuel and wholesale power in the future, the utility can reduce rates later to
offset any excess money.
However, if the commission underestimates the cost of fuel and power, Nevada
Power may recover the difference through higher rates in the future.
The Bureau of Consumer Protection, which is run by consumer advocate Tim Hay,
did not address the Base Tariff Energy Rate in its testimony. It recommended
that the $93 million Nevada Power seeks for past expenses be reduced by $39
million.
James Philip Williamson, manager of the consumer advocate's technical staff,
recommended the commission disallow $21 million of the utility's wholesale power
expenses.
The commission determined in a previous rate case that some of the power was
purchased without little analysis, Williamson explained. The commission order
determined the purchases were made on the "spur of the moment" in 2001
during the Western energy crisis.
Williamson also called for disallowing $11 million of natural gas expenses,
based on arguments that Nevada Power failed "to prudently follow its own
strategy to lock in gas prices at a time that they were depressed."
The bureau also proposed another disallowance based on a disagreement with
Nevada Power about the appropriate way to treat income tax considerations.
The Southern Nevada Water Authority is proposing that energy rates increase
by 2.4 percent this year in an effort to stabilize rates.
"The regulatory principles of rate continuity and stability are better
served by avoiding the abrupt rate increase sought in the pending general and
deferred energy cases, only to follow this with potentially large (reductions)
in April 2005 and 2006," wrote Dennis Peseau, an expert retained by the
water authority.
The water authority's expert doesn't argue for any permanent disallowances of
the funds spent by Nevada Power for fuel and purchased power.