Nevada Breaking News
Nevada Power Files for Deferred Rate Recovery 11/18
Federal Regulators Uphold Ruling 11/12
Judge Grants Stay to Nevada Utilities 10/17
Nevada Power Company Files General Rate Case 10/2
PUC Rejects Major Customers' Bid to Leave Nevada Power 9/19
Nevada Rates Soar Over 13-Year Period 9/11
Utility Proposes Monthly Fuel Purchase Cost Adjustments 8/14
Consumer Advocate to Appeal Nevada Power's Rate Increase 8/8
Nevada Power Files for Deferred Rate
Recovery
(November 18) On Nov. 14, Nevada Power Company made required filings
with the Public Utilities Commission of Nevada seeking to recover costs for fuel and
purchased power as well as conservation and energy efficiency programs.
In order to mitigate the financial impact on customers, the company is seeking to spread
collection of its new deferred energy balance over three years, with less to be collected
in the first year.
If approved, the deferred energy and conservation cost recovery filings will result in an
increase of 6.29 percent, or $6.55 per month, effective April 1, 2004, for the typical
residential customer using 1200 kWh per month.
These filings seek to:
- Recover over three years fuel and purchased power costs incurred
from October 1, 2002 through September 30, 2003 ($14 million of $93 million in the first
year, a less than 1 percent increase in total rates);
- Set a new going-forward rate for projected fuel and purchased
power costs through a change to the Base Tariff Energy Rate (about a 4.9 percent increase
in total rates);
- Recover costs associated with conservation and energy efficiency
programs ($11 million, also a less than 1 percent increase in total rates
"Although deferred energy filings seek a dollar-for-dollar
pass-through of costs, we understand that any increase in rates is difficult for our
customers and we're doing everything possible to help mitigate that while maintaining the
financial viability of the company by producing necessary cash flow," said Pat
Shalmy, president of Nevada Power Company.
"Natural gas prices and energy prices are still high and
continue to be extremely volatile – especially natural gas," Shalmy added.
"We are trying to take some of the volatility out of our rates so our customers know
what to expect."
Source: PRNewswire
Federal Regulators Uphold Ruling
(November 12) On Nov. 10, the Federal Energy Regulatory
Commission (FERC) let stand its June decision refusing to let Nevada Power Co., Sierra
Pacific Power Co. and other utilities renegotiate some of their high-priced power supply
contracts.
The issue stems from power supply contracts that Nevada Power of
Las Vegas and Sierra Pacific Power of Reno entered with nine wholesale power suppliers
during the Western power crisis of 2000 and 2001. Those companies included Enron
Corp., Morgan Stanley, Reliant Energy Services, Calpine Energy Services and Mirant Corp.
At the time the contracts were signed, wholesale electricity
prices were skyrocketing. But wholesale power prices later dropped, leaving Nevada
utilities locked into the high-priced contracts. Nevada Power and Sierra asked FERC to
overturn the contracts based on claims the wholesale market was dysfunctional when they
were signed. In June, FERC refused to change the power supply contracts.
Nevada Power and Sierra Pacific Power responded to the June
decision by asking FERC to rehear their cases against nine wholesale power suppliers.
On Nov. 10, FERC refused to rehear the complaints, and the Nevada utilities said
they will appeal the FERC decision.
The order was "in the public interest because it balances
the effective rate regulation with respect for the sanctity of contracts (under a Supreme
Court decision)," FERC said in a statement. "At the time of contract execution,
other alternatives were available to (the Nevada companies and other utilities); however,
they chose to enter into the contracts in question, accepting market risks."
The utilities "benefited from resales of the energy
purchased under these contracts during the relevant period; however, after the drop in
prices in mid-2001, (the utilities) became dissatisfied with their bargains and sought
contract modification," FERC explained. "The fact that a contract becomes
uneconomic over time does not render it contrary to the public interest," the federal
agency added.
Walt Higgins, chairman and chief executive of Nevada Power parent
Sierra Pacific Resources, said in a statement: "While we are certainly respectful of
the FERC commissioner's upholding of their prior decision by the same 2-1 majority, we now
will move forward with our previously announced plan to appeal the ruling in federal
circuit court."
State consumer advocate Tim Hay said: "We're disappointed
that FERC did not acknowledge the merits of the petition for reconsideration but we're
certainly not shocked by that order." Hay recalled that his office sent letters in
June and August 2001 to the utilities' executives urging them to attempt to renegotiate
the contracts that later resulted in the FERC complaints. The company's executives did not
respond, Hay said.
Nevada Power and Sierra Pacific Power have filed a new complaint
against Enron, urging FERC to void part of the Enron contracts that resulted in a $336
million judgment against the Nevada utilities. The new complaint remains pending at FERC,
but the order Monday may indicate that the commission majority isn't inclined to overturn
the contract.
Source: Review Journal
Judge Grants Stay to Nevada Utilities
(October 17) A New York judge will grant two Nevada
utilities' request for a stay of a $336 million judgment, dispelling concerns that
enforcement of the judgment would force them to seek bankruptcy protection.
The utilities filed a complaint last week, urging the Federal
Energy Regulatory Commission to intervene by Oct. 16 in an action taken by a judge
overseeing Enron's bankruptcy case. The Nevada companies said at the time execution of the
judgment could put them into bankruptcy.
On Oct 15, Enron rejected the utilities' arguments in a 43- page
answer to a complaint that Nevada Power Co. and Sierra Pacific Power Co. filed with FERC.
"We, being Enron, don't want to put them into bankruptcy, and the court doesn't want
to put them into bankruptcy," said Charles Moore, Enron's attorney and former general
counsel to the Federal Energy Regulatory Commission.
Moore said Enron agreed to delay execution of the judgment for 60
days, regardless of what happens, "so FERC wouldn't think that there was a rush to
judgment." Enron also is willing to accept collateral from the Nevada utilities while
the Nevada companies appeal the decision.
The dispute stems from March 2002, when the Public Utilities
Commission disallowed $437 million of a $922 million energy rate increase sought by Nevada
Power. That decision led to a bond rating downgrade for the utilities, which are
subsidiaries of Sierra Pacific Resources.
Enron was in bankruptcy at the time, but it was supplying power
to the Nevada companies. The struggling Houston energy giant demanded the utilities
provide collateral guaranteeing payment for future energy purchases. When the Nevada
utilities failed to provide collateral satisfactory to Enron, Enron stopped delivering
power to them.
Then, Enron sued the utilities, seeking compensation for the more
than $300 million difference between the prices the Nevada companies were expected to pay
under their contracts with Enron and the lower price of power on the market at the time.
In September, the bankruptcy judge entered a final judgment for
Enron against Nevada Power and Sierra Pacific Power.
On Oct. 6, Nevada Power and Sierra asked FERC to issue an order
immediately to prevent denial of a stay in the judgment's execution. The utilities
suggested immediate execution of the judgment could push them into bankruptcy.
Gonzalez will consider whether to grant a stay, but the real
issue will be the type of collateral, not whether a stay will be granted, Moore said.
Source: Knight Ridder Tribune Business News
Nevada Power Company Files General Rate
Case
(October 2) On Oct. 1, Nevada Power Company, a wholly owned
utility subsidiary of Sierra Pacific Resources, filed a General Rate Case (GRC) with the
Public Utilities Commission of Nevada (PUCN) calling for a 3.4 percent rate increase to
customers beginning April 1, 2004.
In order to lessen the financial impact on ratepayers, the filing
defers the collection of a significant portion of an overall proposed revenue increase
until January 1, 2005. The deferral means that the balance of the total proposed increase
-- which otherwise would have been 9.6 percent on April 1, 2004 -- will be offset,
resulting in little additional impact on ratepayers since collection of an existing
deferred energy balance will expire on January 1, 2005.
If the proposal is approved by the PUCN, the typical residential
customer using 1200 kWh per month could expect to pay about $3.61 more per month beginning
in April 2004.
"We understand that any increase is difficult and we're
taking steps to reduce the effect of the increase on our customers while at the same time
protecting them from unnecessary price fluctuation," said Pat Shalmy, president of
Nevada Power. "Our recommendation to delay full implementation of the rate increase
until January 2005 will neutralize the effect of the overall increase since it coincides
with the elimination of a deferred energy balance."
According to the utility, the rate increase is necessary because
Nevada Power has spent $433 million over the past two years to meet the growth in Southern
Nevada and to improve service to customers. In addition to requesting an adequate return
for its shareholders on this investment, the company is seeking to recover increased
costs, such as health care, that have affected businesses throughout the United States.
The company also plans to spend approximately $800 million for new electric facilities
during the next few years to improve the reliability of its service territory.
"Our primary goal is to continue to provide safe, reliable
service to our customers," Shalmy added. "While continued investment and higher
costs are causing upward pressure on rates, we believe the overall approach we're
recommending will help stabilize the energy situation in Nevada through long-term planning
while maintaining the financial viability of our company by earning a fair return."
Under Nevada Revised Statutes, general rate cases are filed every
two years. The company's last filing in 2001 resulted in a $42 million rate reduction.
Nevada Power will make a deferred energy filing on November 14, 2003 for fuel and
purchased power costs. The most recent deferred energy filing resulted in a six- percent
decrease in rates.
Source: Nevada Power Company
PUC Rejects Major Customers' Bid to Leave Nevada Power
(September 18) On September 17, state regulators gave four of
Nevada Power Co.'s largest customers some bad news: they can't leave the regulated
monopoly and start buying electricity from a competitor of the utility.
In a draft order, Commissioner Richard McIntire said the four
customers failed to satisfy the requirements specified by a Public Utilities Commission
order in March that allowed them to depart the regulated system. He persuaded the
commission to dismiss applications from MGM Mirage, Monte Carlo, Station Casinos and the
Fashion Show mall.
The proposed order states that the applicants must comply with
all the terms and conditions the PUC specified within 100 days after the order.
"However, none of the applicants fulfilled all of the compliance items required by
the compliance order and the parties' (agreements)," McIntire's' draft order states.
"Neither the (law) nor the regulation contains any provision permitting the parties
or the commission to waive this 100-day deadline."
McIntire expressed concern that the exiting customers were unable
to secure multiyear contracts for backup power although they did enter contracts from
energy companies that want to be their primary power source. The applicants previously
have struggled because of a lack of creditworthy independent sources of power inside the
Las Vegas valley, on which they could rely if transmission-line capacity limited power
imports.
"The commission is concerned that, if (Nevada Power) had to
suddenly provide the applicants with power during peak periods, the remaining customers
would be put at risk for any costs put on (Nevada Power's) system by the resulting adverse
effects on the systems reliability," the proposed order observes.
The commission has considered 26 applications to leave the
regulated utilities since the law was enacted in 2001, but not one entity has left Nevada
Power or Sierra Pacific Power Co., the utility serving Reno.
Source: Las Vegas Review-Journal
Nevada Rates Soar Over 13-Year Period
(September 11) Nevada power rates for residential customers
increased 60 percent over the past 13 years, more than those in any other state.
At Nevada Power, the average rate per kilowatt-hour for
residential customers in single-family homes jumped 74 percent over the past 13 years,
according to the Public Utilities Commission. They were 8.23 cents in May this year, up
from 4.74 cents in April 1990.
The average monthly bill for Nevada Power's single-family,
residential customers rose to $107.88 from $62.75 over that time period, according to the
PUC. That is the amount customers pay for 1,250 kilowatt hours of electricity, the average
monthly power consumption in the Las Vegas area, according to the PUC.
Power rates in Nevada increased faster than in any other state,
but California and New York continue to have higher rates, said David Chairez, a spokesman
for the PUC.
While Nevadans saw the biggest increase in electricity rates,
they currently trail only Californians in the West in the rates per kilowatt-hour they
pay.
The statewide average residential rate for electricity was 9.72
cents a kilowatt-hour in April this year, up from 6.06 in April 1990, according to
Chairez' calculations. The survey showed that California residential customers were paying
12.33 cents a kilowatt-hour for electricity in April.
Tim Hay, state consumer advocate, said Nevada Power rates will go
higher yet if Nevada Power succeeds in its appeal to the state Supreme Court of the PUC's
2002 decision to disallow almost half of the $922 million rate increase the utility
sought. Also, rates could go up if Nevada Power loses its planned appeal of a summary
judgment Enron Corp. of $200 million against Nevada Power, Hay said. Sierra Pacific Power,
which serves Northern Nevada, is liable for another $87 million in the Enron case.
Source: Las Vegas Review Journal
Utility Proposes Monthly Fuel Purchase Cost Adjustments
(August 14) On August 11, Southwest Gas Corp. executives said
they may need to increase residential rates by only 6 percent, rather than 9.4 percent,
based on lower natural gas prices in recent months and if the utility is allowed to change
how often it can seek rate adjustments. Andrew Bettwy, assistant general counsel, made the
disclosure to about 25 consumers attending a Public Utilities Commission meeting on the
company's rate increase request.
The gas distribution company in early June said it could hold its
rate increase to 9.4 percent if the PUC allowed it to seek monthly adjustments to cover
changes in the cost of fuel it sells. The utility now applies once a year for fuel
purchase cost adjustments. If the commission decides to stick with annual changes, the
utility will need a rate increase for residents of 12.6 percent annually, Southwest Gas
officials said.
The 12.6 percent rate increase is based on the price Southwest
paid for gas during the 12 months ending March 31. But converting to monthly adjustments
would result in use of a so-called moving average of the last 12 months. However, in April
and May, gas prices declined generally for the company, and Bettwy estimated that the
company may be able to get by with a 6 percent rate increase for residential customer, not
the originally sought 9.4 percent increase, if Southwest is allowed to switch to monthly
purchased gas adjustments. The company also has agreed to make other adjustments that
would lower planned rate increase and also may consider gas costs for June and July,
executives said.
Southwest officials said they had not calculated how much lower
rates would be if the PUC decides to continue with annual purchase gas adjustments, rather
than monthly ones. They argued that monthly adjustments would enable the utility to avoid
rate spikes up when it builds up unrecovered expenses for the fuel over a year.
The PUC could decide on the rate increase request in October. The
new rates would become effective in December.
Source: Las Vegas Review-Journal
Consumer Advocate to Appeal Nevada Power's Rate Increase
(August 8) State Consumer Advocate Tim Hay is preparing to file
an appeal in state District Court of regulators' May 13 approval of a $148 million rate
increase for Nevada Power Co.
When the Public Utilities Commission approved the rate increase,
it let the utility recover the $148 million in anticipated power and fuel costs over three
years. The PUC offset the increase in the initial year through an adjustment for
anticipated lower power and fuel costs this year, reducing rates temporarily by 6.3
percent.
In the May rate case, Nevada Power had sought to recover $195
million for past wholesale power and fuel it purchased for its own generation plants. The
PUC trimmed $47 million of that amount.
In his lawsuit, Hay, chief of the attorney general's Bureau of
Consumer Protection, argues that the PUC violated state law and should have disallowed
another $106 million, thus cutting the rate increase to $42 million. The lawsuit argues
that the PUC didn't follow the law and failed to limit Nevada Power's recovery to fuel and
power purchases that were prudent.
In the May rate case, the PUC reversed a decision reached last
year. In that decision, regulators trimmed $180 million from Nevada Power's request,
saying the utility missed an opportunity to buy electricity at favorable wholesale prices
from Merrill Lynch or other suppliers.
The Merrill Lynch contract, had it been signed, would have
continued into the period covered in this year's Nevada Power rate case, the lawsuit
states.
Hay also cites Soderberg's statements that a big cut in the rate
increase could cause Nevada Power to file for bankruptcy. The law doesn't allow the
commission to consider the financial impact on the company in setting rates for power and
fuel purchases, only whether purchases were prudent, Hay said.
Source: Las Vegas Review-Journal
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