Energy regulators propose electric rate decrease, lower profits for NV Energy

Nevadans are set to receive a late Christmas present from state energy regulators — the first substantial electricity rate decrease in more than 30 years.

According to a draft order published on Dec. 23, the Public Utilities Commission (PUC) ordered NV Energy to reduce both flat charges and usage-based electricity rates for most Southern Nevada residential customers as part of its triennial general rate case. The full order still needs to be approved by the full three-member commission at a meeting set for Friday, and won’t go in to effect until next year.

The commission cited the financial health of NV Energy, as well as growth in rooftop solar and closure of coal plants as part of the rationale to lower energy prices.

“Voices of Nevadans have been heard,” commissioner Chairman Joe Reynolds wrote in the draft order. “This reduction in both the fixed and usage-based parts of electric bills will benefit lower-income Nevadans, all while fostering growth in solar energy development and providing an incentive for even greater energy efficiency efforts.”

The decision comes as part of the state’s general rate case process, in which utilities such as NV Energy are required every three years to submit an application to the PUC detailing any proposed change in rates, along with corresponding rationale. After a 210-day period, including multiple hearings and involvement of several petitioners (including major casino giants MGM Resorts and Wynn Resorts as well as the state Bureau of Consumer Protection), approval or final rates is set out in a draft order and then approved by the full commission.

The draft order calls for a 25-cent per month decrease in the basic service charge portion of single-family residential customer power bills — the fixed part of every person’s power bill.

It also calls for an overall $30 million decrease in revenues that NV Energy can collect from volumetric charges — the variable part of a power bill that fluctuates depending on electricity used — which the commission estimates will cut monthly power bills by up to 2 percent. The order also notes that the two cuts in rates are the first since 1979.

A spokeswoman for NV Energy declined to comment on the draft order, saying that the company was still analyzing it and would wait until the final order was approved by the full commission to comment further. State law allows any party that disagrees with the final order to file a rehearing request with the commission within 10 days, and may appeal a denial to state District Court.

The utility in late November announced that it was moving away from a proposed rate hike designed to offset the supposed cost of reinstating favorable reimbursement rates for rooftop solar customers.

The draft order also required NV Energy, owned by Warren Buffet’s Berkshire Hathaway, to reduce its earn on investment from 9.8 to 9.4 percent, which the commission deemed would keep the company financially healthy.

“The rate appropriately balances the interests of Nevada Power’s ratepayers and shareholders, and it results in just and reasonable rates and the opportunity for shareholders to earn a fair return,” the commission wrote in the order.

The order also required the utility to implement a new “earnings-sharing mechanism” where any profits in excess of 9.7 percent are split equally between the utility and ratepayers, to help “rein in” over-earnings if they occur.

The utility initially requested a 10 percent return on equity, given modeling that showed that percent to be consistent with other statewide utilities and unique risks over the possible effects from the Energy Choice Initiative ballot initiative.

The commission also kept in place a so-called “regulatory asset” that the commission put in place to keep track of costs associated with implementing the new net metering rules for rooftop solar customers.

Renewable energy advocates, who protested outside the commission during a recent consumer session for the rate case, applauded the commission’s draft order.

“The Public Utilities Commission has an important role protecting Nevada consumers,” Chispa Nevada organizer Katherine Lorenzo said in a statement. “We thank them for allowing us to speak up against this fee increase, and for ruling in favor of consumers and clean energy.”

Disclosure: MGM Resorts ($350,000), Wynn Resorts ($75,000), and NV Energy ($50,000) have been financial supporters of The Nevada Independent. A complete list of Indy donors and sponsors can be viewed here.