Utility Hike Cut in Half and Approved

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What began as a $95 million rate increase request from Sierra Pacific Power Co. was cut in half and approved Wednesday, as Nevada regulators clashed over the utility's bid to recover some of the costs of a flawed power-generating experiment.

The state Public Utilities Commission voted 2-1 to disallow costs attributed to part of Reno-based Sierra's Pinion Pine power-generating plant, with PUC Chairman Don Soderberg pushing unsuccessfully to have the costs passed on to ratepayers.

Commissioner Carl Linvill, who wrote the order authorizing about $46.7 million in new annual revenues, countered that Sierra had to bear the costs because it failed to warn the PUC several years ago that the experimental use of gasified coal to produce power appeared to be failing.

Under Linvill's order, only about $6.8 million of the new annual revenue applies to the Pinion Pine costs. The idea behind gasified coal was to convert coal to a cleaner fuel. The plant, located at Tracy east of Reno, now operates just on natural gas.

Linvill said Sierra can't have "a blank check to complete a project at any cost" and then pass the costs to ratepayers. He noted the Pinion Pine plant ran well over budget by the time it was completed in 1996.

While Commissioner Adriana Escobar Chanos agreed with Linvill, Soderberg termed the majority order a dramatic "turning point" and a "significant deviation" that would be difficult for PUC lawyers to defend in court in the event the agency is sued by the utility.

That comment prompted Tim Hay, the state's advocate for utility customers, to say after the PUC vote that the decision "would be a slam dunk to defend." He added it was "absolutely irresponsible" for Soderberg to suggest the PUC was on shaky legal ground.

Sierra Pacific spokeswoman Faye Andersen, asked for comment from the utility on the decision, said, "We haven't received the final order yet, and we need some time to analyze it and look at our options."

Sierra Pacific filed its original $95 million rate increase request in December, proposing to raise northern Nevadans' electric rates by nearly 10 percent starting next month. As a result of Wednesday's order, the overal increase will be 5.2 percent.

For a typical residential customer using 715 kilowatt hours of electricity a month, bills will increase about $6 or $7, the utility said.

In other action, the PUC agreed to lower a small tax it imposes on utilities on gross revenues derived from their operations within the state. The tax was dropped from 2 mills to 1.9 mills, below the statutory maximum of 3.5 mills. A mill is one-tenth of a cent.

Revenues from the tax fund the annual operations of the PUC. For the current fiscal year, the levy raised nearly $7 million.