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New NV Energy power plant would raise customers’ rates, study shows

CARSON CITY – Southern Nevada utility customers will pay more for electricity if NV Energy is allowed to build its own new 706 megawatt natural gas power plant rather than continue to purchase energy from existing plants, an analysis released Tuesday shows.

The study by two economists from the Beacon Hill Institute says the cost to ratepayers would be $115 million in 2020 alone and total more than $600 million over six years. The institute is a free-market think tank based at Suffolk University in Boston, Mass.

The study by David Tuerck and Paul Bachman for the Nevada Policy Research Institute says the plant would cause the average consumer to pay an additional $31 a year. It would cost the average industrial rate payer just under $10,000 a year.

The Beacon Hill analysis says that the higher prices for electricity that would result from building the plant will be a negative on Nevada’s economy, resulting in 1,614 jobs lost and $18 million in reduced investment

The new plant is referenced in the utility company’s three-year energy supply plan now under consideration by the Nevada Public Utilities Commission but is not up for formal approval at this time. The next hearing on the plan is Oct. 26.

The cost of the plant is estimated at nearly $1 billion, and would be built in part to replace existing contracts for natural-gas produced electricity that may be allowed to expire.

The additional costs to ratepayers would occur compared to the alternative of purchasing natural gas power from existing power plants, the study says.

The study links the plant to Senate Bill 123 passed by the 2013 Nevada Legislature that directed Nevada Power to eliminate its coal-fired electricity generation. That is scheduled to be completed by 2019.

Victor Joecks, executive vice president of the conservative think tank NPRI, said the study suggests the public should be very concerned about the mandate put on NV Energy by the Nevada Legislature.

“It could end up costing ratepayers hundreds of millions of dollars,” he said.

The PUC can help reduce the cost of the SB123 mandates by rejecting the proposed new plant, Joecks said. The report shows that mandates from the legislation without the new plant total $91 million, compared to $206 million with the project, he said.

NV Energy spokeswoman Jennifer Schuricht, in a brief response to the concerns expressed about the proposed plant, said in an emailed statement: “Our current integrated resource plan does not seek approval of a new gas-fired generating station. Instead, it seeks approval of only the minimal expenditures that will preserve options to meet the needs of our customers. It has nothing to do with Senate Bill 123.”

The Beacon Hill report says: “NV Energy’s plan to build a new natural gas plant has generated enormous controversy. Consumer advocates and ratepayers throughout Nevada are questioning why NV Energy needs to build a new gas power plant when it is ending a current arrangement with Star West Generation that provides natural gas power from its Arizona plants.”

That agreement with Star West is set to end in 2017.

Bachman said in a telephone interview that the utility may want to build the plant for profit-driven reasons. The utility gets a 10.5-percent return on such investments, he said.

“It’s a way to boost the bottom line,” he said. “It could also be a way to take its assets in-house. But if they want to do that they could have bought Star West.”

The new plant is not a done deal, but Bachman said now is the time for the PUC to put a halt to the proposal if it is not in the public interest.

Contact Sean Whaley at swhaley@reviewjournal.com or 775-687-3900. Find him on Twitter: @seanw801

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