NV Energy proposes 17.5 percent increase in residential rates

In its biggest electric rate case since the aftermath of the energy crisis in 2001, NV Energy today proposed a 17.5 percent increase in local residential rates, starting Sept. 1.

NV Energy, the utility formerly known as Nevada Power Co., is asking state regulators to boost the typical residential customer’s average monthly bill by more than $26. A customer using 1,250 kilowatt hours of electricity would pay $175.84, compared to the $149.59 he now pays per month.

The overall rate increase would be 14.9 percent, but the company wants to boost residential rates by an additional 2.6 percentage points to reduce the subsidy that non-residential customers are giving residential customers.

That is no more than the Public Utilities Commission directed the utility to boost residential rates in recent cases to reduce the residential subsidy, said Michael Yackira, chief executive of NV Energy Inc.

On the other hand, state consumer advocate Eric Witkoski suggested residential rates should be increased no more than other customers’ rates, given the economic hard times.

“We’re approaching 10 percent unemployment,” Witkoski said. “In 2009, the economists are suggesting that things are going to get worse before they get better.”

NV Energy is proposing that the utilities commission offer low-income customers a 15 percent discount on the new rates.

In addition, the utility proposes to delay the rate increase from July 1 to Sept. 1 so consumers can avoid a big increase during summer months when power bills are highest.

“We realize that any increase is difficult at any time and it’s especially true today,” Yackira said. NV Energy would defer collecting the $91 million that otherwise would be paid during those two months. The utility offers to delay recovering the $91 million until the next rate case in three years while earning 8.9 percent in interest compounded monthly.

“They are not doing it out of kindness,” Witkoski said, calling 8.9 percent “pretty expensive” compared to the low interest rates savers now earn on CDs and bank accounts.

Witkoski also questioned whether the utilities commission could defer collection of $91 million in costs until the next rate case, given the state law requiring new rates to become effective July 1.

The bureau chief said he hopes to “whittle down” the size of the $323 million rate increase but acknowledged that a large part of the rate case stems from power plants that NV Energy bought or built with commission approval.

NV Energy’s southern division will be seeking to earn a profit on $1.2 billion spent on three power plants: the 600-megawatt Bighorn power plant that it bought at Primm and renamed the Walter Higgins Generating Station, a 600-megawatt plant built at Clark Station in Las Vegas and a 500-megawatt unit at the Harry Allen Generating Station north of Las Vegas.

The company and utility regulators decided that NV Energy should generate more of the power it sells to retail customers, because wholesale power rates skyrocketed during the energy crisis of 2000 and 2001 when generating capacity was too low compared to demand in the region.

The North American Electric Reliability Corporation predicts that generating capacity reserves again will fall below demand, potentially boosting wholesale power prices by 2012, said Roberto Denis, senior vice president.

“Our rates would have been even higher if we had not built and acquired these electrical generating facilities,” Denis said.

Executives defended the decision to build the $683 million, natural gas-fired Harry Allen plant although it could have purchased an existing and similar plant from LS Power for $235 million less.

The utility factored $285 million of investment in the Harry Allen plant into the rate case and will add the remainder of the Harry Allen plant costs in its next rate case.

Electricity from the LS Power plant can be purchased already, executives said, but the Harry Allen project will increase the generating capacity in the area. Yackira said he wasn’t sure that the price quoted for the LS Power plant was “really an offer.”

In addition, NV Energy wanted to build an additional power plant before a permit expires, Denis said. The Harry Allen plant may be the last generating facility the company is allowed to build in Clark County because of poor air quality here, Denis said.

Contact reporter John G. Edwards at jedwards@reviewjournal.com or 702-383-0420.