This story by Cy Ryan appeared Sept. 5 in the Las Vegas Sun.
The state Public Utilities Commission will start a hearing Oct. 4 on whether to increase or reduce the profit level of Nevada Power Company.
The company has applied to the commission to boost its rate of return from 10.5 percent to 11.25 percent.
Ronald Knecht, senior economist on the regulatory staff of the commission, has recommended the rate of return be reduced to 9-9.7 percent.
The utility, according to the consumer bureau, wants to boost its rate of return from 10.5 percent to 11.25 percent.
Lawton suggests the return be lowered to 9.7. Knecht says it should be in the 9 to 9.7 percent range.
In filing its application for the increase, the company said it wants to recover the cost of building the Harry Allen power plant, in addition to other plants, plus the cost of capital and depreciation rates.
Dilek Samil, senior vice president of finance for NV Energy, said the higher profit level is needed to look for new investments in renewable energy resources and transmission lines to carry this new energy.
“(The company) must in a position to see the projects through,” said Samil in prefiled testimony.
Allowing the equity return to increase will show the commission’s commitment to maintaining a financially healthy utility that is capable of making the investments that are required, said Samil.
Lawton says the proposed increase “results in harming customers who are struggling with the effects of the economic downturn.”
He said in his prepared testimony that authorized returns for other public utilities in the country are closer to 10 percent, rather than the 11.25 percent hoped for by NV Energy. Under the company’s proposal, Lawton said the profits available to shareholders would rise to $280.1 million.
“In other words, customers also must pay through rates return and income (state, federal and revenue-related) taxes such that the $280.1 million profit request is available after all taxes are paid,” said Lawton.
Knecht said the staff’s recommended 9 to 9.7 percent return on equity “will reasonably maintain Nevada Power Company’s expected financial integrity, allow it attract capital on reasonable terms, and generally satisfy the other legal requirements of regulated ratemaking.”
He said he compared NV Energy’s proposal with 70 other utilities in the nation and it’s “requested returns, however, are not supportable and are excessive.” The PUC will hold a hearing in Las Vegas on Oct. 4 on the issue.