As recently as a week ago, the purchase of NV Energy by Warren Buffett’s MidAmerican Energy Holdings was looking like a very bad deal for the utility’s customers. On Friday, ratepayers received word that the acquisition was taking shape under far more favorable terms.
In May, Mr. Buffett’s company generously agreed to pay $23.75 per share for NV Energy, $5.6 billion total, even though shareholder equity was valued well below that, at $3.6 billion. A $2 billion premium is quite a chunk of change, even for Mr. Buffett. So, channeling movie villain Dr. Evil, MidAmerican and NV Energy proposed having ratepayers cover one billion dollars — half the premium — over many years.
Talk about a PR problem. One of the world’s richest men snaps up the largest electricity provider in the state hit hardest by the Great Recession, then asks a customer base that has suffered great economic harm to go Dutch on the costs? The plan was challenged by the state attorney general’s Bureau of Consumer Protection and the staff of the Public Utilities Commission. Far from seeing a justification for the $1 billion charge, the Bureau of Consumer Protection recommended a $30 million rate reduction for NV Energy customers, claiming the utility had earned excessive returns. Other groups protested the sale’s proposed terms in regulatory filings.
With PUC hearings on the sale scheduled to start Nov. 18, MidAmerican, NV Energy, the PUC’s regulatory staff and the Bureau of Consumer Protection agreed Friday to a stipulated settlement that not only takes the acquisition premium and transaction and transition costs off the table, but provides NV Energy retail customers with a total of $20 million in one-time bill credits within 30 days of the sale closing. Three-fourths of those credits will go to Southern Nevada — an average of $13 per single-family residence — and one-fourth will go to Northern Nevada, NV Energy CEO Michael Yackira said.
In addition, senior management personnel would receive no salary increases for at least two years, and a temporary program that allows customers to pay more to opt out of digital “smart meter” reporting would be made permanent, among other terms.
PR problem solved. The settlement, like the sale itself, is subject to PUC approval. But the sign-off from public entities charged with oversight should smooth the road.
NV Energy customers already face higher costs in the future as a result of the utility phasing out coal-powered generation. This deal gives ratepayers a needed break. The PUC’s job just got a lot easier.