NV Energy drops plan to pass sale costs on to customers

NV Energy customers won’t be asked to foot the bill for $1 billion of MidAmerican Energy Holdings’s cost to buy NV Energy, and customers will also be refunded $20 million in the form of a bill credit, according to a settlement agreement filed by NV Energy with the state Public Utilities Commission.

The proposed settlement between the utility, the Bureau of Consumer Protection and the PUC staff, is a response to an Oct. 28 regulatory filing by the the state Bureau of Consumer Protection and other parties that called for a $30 million NV Energy rate reduction. The filing also called for the utility to cancel its plans to have customers pay half of a $2 billion acquisition premium.

The settlement agreement is pending approval from the PUC.

In May, investor Warren Buffett’s MidAmerican agreed to buy NV Energy for $5.6 billion. Shareholders have $3.6 billion in equity, leaving a difference of $2 billion.

The difference, if passed on in full, would have cost customers $5 million each year over 40 years, said consumer advocate Eric Witkoski.

PUC staff member Yasuji Otsuka also questioned the acquisition premium, noting a “lack of public benefits.”

“It was the single item that was facing most opposition by the parties,” Tony Sanchez, senior vice president of government and community strategy at NV Energy, said of the utility’s decision not to recover costs of the sale from customers.

Of the $20 million refund, 75 percent will go to Nevada Power Co. customers in Southern Nevada; 23 percent to Sierra Pacific Power Co. electricity customers in Northern Nevada; and 2 percent to Sierra Pacific gas customers in Northern Nevada. Refunds will be issued within 30 days of the close of the sale, amounting to $13 per customer.

The sale is expected to close Dec. 20, pending PUC approval.

As part of the agreement, MidAmerican and NV Energy committed to investigate the cause of NV Energy’s low customer service satisfaction ratings and identify a way to improve ratings.

“The customer service of NV Energy has gone down,” said Dan Jacobsen, technical staff manager for the Bureau of Consumer Protection. “It’s not been very good. Frankly, it’s been at the bottom of the barrel.”

Jacobsen said MidAmerican has agreed to improve customer service going forward.

Additionally, the settlement agreement states that NV Energy will not seek to recover lost revenues in 2014 for 2013. In 2015, it will seek no more than 50 percent of lost revenues.

The utility will not request a change in revenue requirement or a return on equity of more than 10 percent in any rate case in 2014.

NV Energy will also seek to make opting out of smart metering a permanent option for customers. Smart meters collect data about a customer’s electricity usage, raising privacy concerns for some.

“A lot of customers were concerned that the opt-out program was just temporary,” Jacobsen said. “One of the agreements was that this would would become permanent.”

For 24 months following the close of the utility’s sale, senior management will not receive raises from rates collected. Corporate headquarters for NV Energy will remain in Nevada, and “sufficient senior management personnel will be located in Nevada to make decisions on behalf of NV Energy pertaining to Nevada retail customer service issues.”

If junior or mid-level managers are relocated outside Nevada, timing and economic justification must be given for the workforce reduction.

The 34 commitments on behalf of NV Energy and MidAmerican Holdings will be tracked and subject to reporting for a minimum of five years.

PUC hearings regarding the acquisition begin Nov. 18.

Contact reporter Kristy Totten at ktotten@reviewjournal.com or 702-477-3809.