Report: NV Energy’s rate request faces denial

A Friday document from the Public Utilities Commission of Nevada shows that local power company NV Energy isn't likely to get what it asked for in its general rate request.

The commission's 242-page draft order, a preliminary finding that must go before the full panel Wednesday for a vote, calls for lowering the return on equity the company requested in its June proposal. The order also would deny NV Energy's request to push part of its revenue recovery into its 2014 rate case, a move the company said would ease rate effects on consumers today.

Citing higher borrowing costs, NV Energy requested a maximum possible return on equity of 11.25 percent, up from a current potential of 10.5 percent. In practice, the company earns returns of about
7 percent.

In her draft order, presiding Commissioner Rebecca Wagner rejected NV Energy's assertion that the company's cost of equity is rising and advised a return of
10 percent.

The weak economy has reduced expected returns and the opportunity cost of investing in utilities, Wagner wrote. Regulatory agencies in other states have authorized median utility returns of 10 percent through the third quarter, she said. That rate would be reasonable for NV Energy and would appropriately balance the interests of the company's ratepayers and shareholders, the order said.

NV Energy also asked to defer $80 million of its $249 million rate request until 2014 to reduce power bill increases.

But the commission's draft order said the deferral is not in the interest of ratepayers or shareholders because rate delays come with carrying charges compounded monthly. Plus, with new rates set to take effect Jan. 1, rather than in hot summer months, there will be little or no rate shock.

NV Energy doesn't comment on preliminary orders. But if the commission accepted the company's initial proposal as filed, the average monthly bill would rise from $140 now to $147 on Jan. 1.

State consumer advocate Eric Witkoski late Friday declined to comment, saying the Bureau of Consumer Protection is reviewing the order.

State law requires NV Energy to file every three years for changes in general rates, which represent about half of a power bill and cover operating costs such as maintenance, labor, depreciation of assets, taxes, interest on debt and return on equity. The remainder of a bill covers the cost of purchased power at peak periods and fuel to run power plants. Fuel costs are passed directly to customers, with no profit or loss taken by NV Energy.

To see the draft order, visit puc.nv.gov, click on "Docket Info" and choose "Electric Dockets." The rate case is Docket No. 11-06006.