Drama opens NV Energy rate hearing

Water gushing from ceilings!

Harried federal officials!

Attorney objections galore!

Who says utility rate cases are boring?

Tuesday brought an action-packed start to hearings into NV Energy’s general rate case to recoup operating expenses.

The power company wants a revenue increase of $250 million — a general rate increase of 11.5 percent — to cover expansion of its Harry Allen power plant, upgrades at peak-power stations and a bump in its return on equity from 10.5 percent to 11.25 percent, among other investments. The average monthly power bill, which dropped from $146 to $140 on Saturday thanks to lower costs for power plant fuel, would return to $146 on Jan. 1 if the state Public Utilities Commission grants NV Energy’s request.

But testimony and cross-examination in the case opened with a little drama at the commission’s 11-month-old offices in a building certified through the U.S. Green Building Council’s Leadership in Energy and Environmental Design (LEED) program.

Minutes after Commissioner Rebecca Wagner opened the session, water poured from a ceiling drain onto the commissioners’ dais, as air-conditioning condensation flowed from above. Commission staffers quickly placed a garbage can to catch the stream.

And it took a "very dangerous cab ride" to get U.S. Department of Energy attorney Lot Cooke to the hearings on time after he went to the commission’s old office on Convention Center Drive.

Once things settled down, talk turned to how much NV Energy pays for its capital, including investor return on equity. The bump in return from 10.5 percent to 11.25 percent occupied Tuesday’s session.

Dilek Samil, NV Energy’s senior vice president, chief financial officer and treasurer, spent most of the day under cross-examination by attorneys representing the PUC, the state Bureau of Consumer Protection and big power users such as hospitals and casinos. The parties asked whether NV Energy really needs to boost its return and whether it’s a good time for higher profit.

Take Thomas Sheets, who represents several local hospital chains.

Sheets noted that the U.S. Energy Information Administration pegged Nevada’s electric rates as the highest in the Mountain West last winter, at 12 cents per kilowatt hour. He also pointed to the city’s 14.2 percent jobless rate and asked Samil whether NV Energy wants that higher return so that it could pursue renewable-energy transmission lines.

Samil said that other states have different electricity prices because they use different fuels in generating stations. The increased return would help the company attract capital "to fund any number of investments we may need to make in the future, including in transmission of renewables," Samil said.

Kathleen Drakulich, an attorney who represents gaming companies, said that NV Energy’s debt cost dropped from 7.06 percent in 2008 to 6.65 percent in May. She asked why the utility wants to raise its return when ratepayers "struggle to cope with the recession."

Samil’s response: The return on equity is what markets require. Plus, the company "considered the dire economic situation" when it asked the commission to offset its general rate increase with a decrease in charges tied to the cost of natural gas to run power plants. That fuel-rate decline is just now showing up on power bills.

NV Energy also said it would help ratepayers by deferring nearly $80 million of its $250 million revenue increase for its 2014 general rate case. But Drakulich noted that the carrying cost to consumers on that deferral would be an additional $30 million compounded annually, or $31.5 million compounded monthly.

Michael Saunders, an attorney with the Bureau of Consumer Protection, said that NV Energy told an energy-investment conference in New York in September that the company is in a solid financial position with decreasing capital expenditures and cash flow beyond its capital needs. And in an earnings conference call in August, the company said investment in renewable-energy transmission is "probably quite a few years off."

Saunders wanted to know whether NV Energy wants a higher return now to support those future initiatives.

Samil said the company’s "crystal ball is not perfect." Other investment opportunities may come up sooner. The utility may need more capital if natural-gas rates spike, if the economy takes a turn for the worse or if the company has to retire existing power stations sooner than expected.

Hearings related to the company’s cost of capital continue through Friday. Testimony on revenue is scheduled Oct. 18-28. Rate design is up for discussion Nov. 1-4. All hearings are at the commission’s offices at 9075 W. Diablo Drive, Suite 250, from 8:30 a.m. to 5:30 p.m.

Consumer sessions are Tuesday at 1 p.m. and 6 p.m. at Cashman Convention Center, at 850 N. Las Vegas Blvd.

Sessions to hear customer concerns on other utility matters are today at 1:30 p.m. and 6 p.m. at the commission offices.