State to rule on rate boost

The typical Southern Nevada resident will pay $24.70 more per month for electricity this summer if state regulators approve a proposed rate increase order on Wednesday.

Public Utilities Commission Chairman Don Soderberg is recommending that Nevada Power Co. be directed to raise residential rates by about 11.5 percent starting June 1, analysts who requested anonymity said.

Sierra Pacific Resources officials had requested a 13 percent increase.

If the three-member commission approves the rate increase as Soderberg proposed, that would increase the typical summer residential bill for 2,000 kilowatt hours of electricity from $214.78 to $239.48.

In the average month, residential customers’ bills would increase by $15.70 to $152.19 for 1,250 kilowatt hours from $136.49.

The residential customer charge, which is owed regardless of the amount of power used, would increase by $2 to $8 monthly.

“We’re a little disappointed in the level of increase. We think it could be lowered and hopefully it will be lowered,” state consumer advocate Eric Witkoski said.

Nevada Power spokesman Kevin Rademacher declined to comment on the proposed rate case decision.

State officials emphasized that the full commission could trim or boost the size of the rate increase Soderberg proposed.

Analysts said it was hard to estimate the amount of the proposed rate increase because the proposed order does not specify the rate change. Instead, it only provides decisions on a variety of issues that are used to calculate the rate change.

The 11.5 percent is the best estimate available of the effect of three factors on residential power rates. One is the general rate increase, which covers utility profits and expenses for debt, operations, maintenance and administration. Another is a deferred energy rate adjustment that reflects changes in the cost of purchased power and fuel used to generate electricity. The third factor is a settlement between Nevada Power and state officials on the utility’s successful appeal of a 2002 rate case and on rate changes that will compensate Nevada Power for costs of settling power purchase disputes with wholesale suppliers including Enron Corp.

The rates don’t reflect any of the $3.8 billion cost of the Ely Energy Center, a giant coal-fired power plant and related transmission line. Some of those costs are expected to affect the next general rate case, which would take effect in 2009.

Soderberg’s proposed order would increase the possible profit margin for the company. Nevada Power currently is allowed to earn a 10.25 percent return on equity, which is a measure of profitability.

Soderberg recommended boosting the allowed return on equity to 10.7 percent, higher than any of the rate case participants, except Nevada Power, requested.

The order would cause customers to pay for a larger share of the Nevada Power executive bonuses, thus relieving shareholders of some of this expense.

The utilities commission said that the proposed order would reduce the proposed $154 million annual rate increase by 20 percent or $35 million.