ELECTRICITY COSTS: Utilities seek record increases Average residential customer's bill would rise $12 per month

By JOHN G. EDWARDS REVIEW-JOURNAL

The state's investor-owned utilities Monday asked regulators to approve a record $310 million, 17 percent rate increase to offset soaring wholesale power costs.

The companies described the rate increase -- which would raise a typical Las Vegas residential customer's bill by more than $12 a month -- as necessary for their financial health. But a key legislator called the request "outrageous."

Nevada Power Co., which serves the Las Vegas area, asked the Public Utilities Commission to raise rates by $208 million -- easily exceeding the record $110 million rate increase application that state regulators rejected last year. Sierra Pacific Power Co, an affiliated company in Reno, wants regulators to boost its rates by $102 million annually.

"Utilities like us have to be able to pay for these wholesale (power prices), and we have to be able to stay solvent," said Walt Higgins, chief executive officer of Sierra Pacific Resources, the utilities' parent.

"It serves no one's interest to have the state's largest utilities teetering on the edge of bankruptcy," Higgins said.

Some of California's largest electric utilities are concerned that they may be forced into bankruptcy, and Higgins said Nevada's utilities could be in a similar financial situation in 12 months or less.

Others aren't totally convinced about that.

"Is the California situation a convenient way to gouge Nevadans?" asked Sen. Randolph Townsend, R-Reno.

Townsend called the rate increase "outrageous" and promised an extensive review by the Senate Commerce Committee that he chairs.

Tim Hay, state consumer advocate, said he may seek to prevent all or part of the rate increase.

"I'm frankly disappointed in the size of the requested increase," Hay said.

He suggested Sierra Pacific Resources consider cutting its dividend if it is so financially stressed. But Higgins said doing that would make it difficult to issue new stock or borrow additional funds.

Don Soderberg, chairman of the Public Utilities Commission, said he wasn't surprised by the rate increase request, given the continued escalation in wholesale power prices in the West.

"I thought something like this was inevitable," Soderberg said.

"We really thought these (electric power increases) would begin to moderate this winter, and they haven't," Soderberg said.

"Our people had been concerned that the company's finances weren't going to be cured by the global settlement," the PUC chairman said.

He referred to the settlement that the PUC approved in July. It raised Nevada Power rates by $48 million and authorized monthly increases through 2003.

The settlement was designed to offset part of the rising cost of wholesale power. The electric utilities last year lost $200 million, however, because the rate increases authorized in the settlement didn't cover all of their power and fuel costs, Higgins said.

The new rate increase would be in addition to those monthly adjustments. Combining the two for residential customers in Southern Nevada would boost rates a total of 30 percent by March 1, compared to last summer's levels.

As a result of the new proposal alone, the typical customer in Southern Nevada would pay $12.63 more each month, based on 1,100 kilowatt hours of electric consumption. Based on the new request, residential customers on average would see their rates increase 16 percent.

The new rate increase request would keep residential rates for the first 400 kilowatt hours at their present level. Then, residential rates would increase 1.5 cents per kilowatt hour for the next 275 kilowatt hours, and then by 2 cents for all electricity used above that level.

Hay complimented the utilities for proposing lower rates for customers who use the least power. He had proposed that approach and believes it would encourage conservation.

In addition, Higgins said the company proposes to use $5 million generated by the rate increase to help low-income customers pay power bills or for conservation measures.

Other classes of customers would see rates climb by varying amounts, ranging from 16 percent for small businesses to 20 percent for large casinos. Overall, rate increases would average 17 percent.

The utilities also proposed entering into wholesale power purchase contracts as long as 10 years into the future. This could be mixed with shorter-term contracts in an effort to lower the overall cost of power.

This story is located at: http://www.lvrj.com/lvrj_home/2001/Jan-30-Tue-2001/news/15339179.html

-- Martin Thompson (mthom1927@aol.com), January 30, 2001