When power bills go up, it’s a tax on everyone. For hard-hit Nevadans with no financial wiggle room, power bill increases are especially brutal.
The Public Utilities Commission starts hearings Nov. 18 on the purchase of electricity monopoly NV Energy by Warren Buffett’s MidAmerican Energy Holdings, and the panel will be asked to pass along $1 billion in new costs to ratepayers. Not because of increased fuel costs. Not because of added generation capacity. No, ratepayers will be asked to cover a chunk of Mr. Buffett’s generous purchase price.
In May, MidAmerican offered $23.75 per share for NV Energy, $5.6 billion total for 235 million shares. Shareholders have $3.6 billion in equity, a difference of $2 billion. MidAmerican wants ratepayers to cover half that difference as an “acquisition premium” or “good will” bonus for shareholders.
Last week, in regulatory filings related to the sale, the state attorney general’s Bureau of Consumer Protection proposed a rate reduction worth about $30 million, saying the utility already is earning excessive returns, thanks largely to residential rates that are the highest in the nine mountain states. And, as reported by the Review-Journal’s Ed Vogel last week, PUC regulatory staffer Yasuji Otsuka said his first recommendation would be to protect ratepayers from the acquisition costs. Other individuals, companies and entities have filed similar suggestions.
NV Energy asserts the acquisition will lead to some cost savings as a result of the public company going private, and that the premium will not require rate increases beyond those already planned. Fine. If existing rates can cover the $1 billion, then the PUC should reject the premium request and reduce rates even further than the attorney general suggests.
As it is, ratepayers are on the hook for NV Energy’s dramatic fuel switch to natural gas and renewables, requiring the closure of coal-fired plants. Depending on how much natural gas prices rise, this plan alone will bring dramatic rate increases in the years ahead. The Consumer Protection Bureau wants to delay coal-plant closures until at least 2020 because of the cost.
MidAmerican has until Friday to respond to the complaints registered with the PUC. It could do Nevadans a favor — and show some genuine good will — by dropping its premium request altogether. Nevada can’t afford it.