Supreme Court adds $180 M to Nevada Power rates

The Nevada Supreme Court on Thursday directed the Public Utilities Commission to raise rates charged Nevada Power Co.'s Southern Nevada customers to recoup another $180 million the utility lost during the electric power crisis of five years ago.

That will bring the amount Nevada Power is allowed to collect to $665 million out of the $922 million in deferred energy costs the utility originally applied for.

The deferred energy bill resulted from skyrocketing electric prices during 2000 and 2001 during which there were rolling black-outs and power shortages throughout the West. Many experts and politicians have blamed on energy speculation by companies including ENRON.

With prices increasing dramatically, Nevada Power and other utilities were forced to buy power at higher rates than they were allowed to charge customers. By the time the crisis ended, Nevada Power officials said they had built up a debt of $922 million which they asked the utilities commission to make Nevada customers pay.

The Bureau of Consumer Protection and major power users including casinos fought that application saying customers shouldn't have to pay for Nevada Power's bad business practices. The utility commission split the difference, ruling about half the costs justified and the other half the result of Nevada Power's own poor management. They awarded Nevada Power rate increases to cover $485 million and both sides appealed to district court.

The Supreme Court agreed with the majority of the rulings, affirming that $485 million of the total was supported by substantial evidence and some $257 million of the debt was Nevada Power's own fault.

But the court disagreed on one key issue - the utility commission's ruling that Nevada Power was wrong to not contract with Merrill Lynch in 1999 because of a relatively minor difference between the asking and offered price for power. PUC officials wrote that reaching that deal would have saved ratepayers $180 million in electric power costs during 2000 and 2001 during the energy crisis.

The high court ruled that, far from a small dispute in price, the two sides were never close to a valid contract for power. The opinion signed by all seven Nevada Supreme Court justices concludes the evidence supporting arguments the power company acted imprudently by bowing out of those negotiations is "legally insufficient."

The court reversed the commission's and district court holding on that one point and sent the rate case back for the PUC to work out how much Nevada Power rates will have to increase to cover the $180 million.

• Contact reporter Geoff Dornan at gdornan@nevadaappeal.com or 687-8750.