An official with the Truckee Meadows Water Authority said a rebate granted to Reno-area water customers two years ago could end up costing them twice as much in rate increases.
But state regulators and the consumer advocate disagree that the $244 rebate granted to each Sierra Pacific water customer when the system was sold to the public entity is a factor in a proposed rate increase to be considered Wednesday.
They say the need for the increase is the result of other factors, including inaccurate revenue projections.
If approved as expected by the Truckee Meadows Water Authority, water rates would increase by more than 60 percent for some customers. Monthly bills for flat-rate water customers would rise from about $49 to $81 over three years.
Jeffrey Tissier, the water authority's financial manager, said the rebate ordered by Nevada's Public Utilities Commission was included in a $452 million bond issue to finance the purchase of the utility from Sierra Pacific.
The result, he said, will be that the $244 rebate received by Truckee Meadows residents two years ago will ultimately cost them about $500 over 30 years.
"It's a major oversight by the PUC," Tissier told the Reno Gazette-Journal. "The rebate was illusory. You got it but you're going to pay for it through rates."
PUC Chairman Donald Soderberg disagreed.
"There was no discussion that Sierra Pacific's gain on the sale was somehow something that was going to be artificially financed," Soderberg said. "The rebate was giving the customers what belonged to them."
Nevada Consumer Advocate Timothy Hay, who pushed for the rebate, agreed it offered an important and immediate return to the consumer.
"The consumers got about $25 million they otherwise wouldn't have gotten and they got it immediately on the front end of the deal," Hay said.
Tissier maintains it would have made more sense to have reduced the $350 million paid to Sierra Pacific by the $21 million, in turn reducing the overall bond sale to $431 million and cutting the debt owed by the public.
That could have helped avoid the kind of lofty rate increases now being contemplated by the water authority even if it didn't allow a rebate at the time, he said.
PUC spokesman David Chairez said the agency's role, after determining he sale of Sierra Pacific's water division was in the public interest, was to decide how any gains from the sale should be distributed.
The PUC ultimately decided those gains should be split between rate payers and Sierra Pacific's shareholders, Chairez said.
A primary concern driving the proposed rate hike is a looming deadline to begin $6.5 million in annual payments associated with the purchase of the water system, officials said.
Part of that cost, about $1.4 million per year over the next 30 years, will be to repay bond financing for the $21 million rebate ordered by the PUC in April 2001, Tissier said.
By the time that debt is paid with interest, the cost of the rebate would exceed $40 million, twice the amount rebated to Sierra Pacific customers, Tissier said.