Measure Proposed on Utilities' Future Costs

State regulators on Wednesday voted to propose a law change that would allow utilities to recover future costs in general rate cases, which are designed to compensate utilities for administrative expenses, operation, maintenance, new plants, equipment and profits.

A bill adopted in 2005 directed the Public Utilities Commission to review the possibility of including future costs in rate cases, rather than the current practice of setting general rates based on past costs.

Under current law, the commission sets customer rates for electric, natural gas and telephone service based on expenses in a past 12-month period.

"Historical conditions are sufficiently predictive of likely future circumstances to serve as a reliable method for predicting future costs," the commission stated in a document being sent to the Legislature. Past costs also can be verified relatively easily, the commission explained.

However, the commission noted that it would be helpful for utilities experiencing rapid growth, such as those serving Las Vegas, to recover expenses in advance, rather than waiting.

The bill would allow the commission to decide whether to consider use some future costs in a rate case. The proposed law would allow utilities to seek rate increases that compensate utilities for "reasonably known and measurable" data that will affect its costs. For example, a utility might be permitted to recover the cost of a pay increase under a new contract for union workers although the union contract was not in effect during the past year.

Commission Chairman Don Soderberg and Commissioner Jo Ann Kelly voted to file the bill request with the Legislature. Commissioner Carl Linvill abstained because he had concerns that he commission may later resolve through changes in the bill. He did not disclose what worried him about the bill.

In other action, the commission approved a 3.4 percent residential rate increase for Westpac Utilities, Sierra Pacific Power Co.'s natural gas distribution utility. Sierra Pacific Power's residential electric rates are expected to be unchanged or slightly lower as a result of the commission order. Sierra and Westpac serve customers in Northern Nevada.

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