Utility customers can’t afford more costs

Over the past few weeks there has been a lot of media coverage of Assembly Bill 416, which Gov. Brian Sandoval vetoed. A recent letter to the Review-Journal from NV Energy CEO Michael Yackira provided the company’s perspective on a $1 billion investment in additional transmission lines to transport renewable energy to other states.

We appreciate his perspective. However, we are very concerned about potential rate impacts, since consumers cannot withstand any additional price hikes on top of the rate increases that stem from the recent investments the company has made during the worst recession Nevada has faced since the 1930s.

A customer’s bill includes a line item called the “Electric Consumption Rate.” More than half that rate comes from the general rate that pays for the company’s expenses and profits. Nevada Power’s general rate is proposed to triple over what it was in 2005 and double the rate level of 2007.

Specifically, the rate in 2005 was $.03550 per kilowatt-hour, increased to $.04638 in 2007, and now has the potential to rise to $.09143 if the Public Utilities Commission grants the full amount requested in the company’s June 6 rate increase application, which requests an increase of $245 million. The majority of the rate increases stems from the company’s enormous additional investments in infrastructure.

These increases come at a time when Nevadans can least afford them. The company appears to be more interested in expanding its investments and in protecting its market position than with the burdens these enormous investments are placing on customers.

Consequently, when we heard the company was proposing to make even more investment in infrastructure, we became very concerned. We recognize that the company plans to have these 537 miles of lines paid for by developers who plan to sell to California. However, as company officials have acknowledged, the “native load” customers, the current Nevada ratepayers, could end up paying for some portion of the cost of lines if these developers default.

Further, since transmission lines cost approximately $2 million per mile, the potential rate impact on customers for all or a portion of the additional cost of $1 billion would be detrimental to captive customers. Investment in these new lines carries significant risk because there is uncertainty about the level of sustainable demand from other states and competitive alternatives are under development.

Additionally, it should be noted that Mr. Yackira’s claims that Nevada ratepayers will not bear any of the costs related to the transmission lines are inconsistent with its rate increase application filed on June 6. In that case, the company requests an additional $ 24 million in financial return. The rationale for the increase is to put the company in a position to make the investments needed to take renewable energy resources to market.

Thus, before one pole is placed in the ground, the company is already asking for $24 million in additional yearly profits to support its transmission initiative.

As stated above, customers are already facing rate increase fatigue from additional investment in plant and thus we believe they are in no position to face the risk of an additional $1 billion in investment — customers simply cannot afford the cost or the risk. To the extent that NV Energy wants to be involved in transporting renewable energy from Nevada to other states, it should explore policy changes which allow it to construct new speculative facilities with all risks and benefits assigned to its shareholders. Nevada utility customers need to be protected from these speculative financial risks.

Eric Witkoski

Las Vegas

The writer is consumer advocate with the attorney general’s Bureau of Consumer Protection.