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NV Consumer Advocate Challenges $165 Million Interest on Fuel Cost Adjustments

Nevada's state consumer advocate in the attorney general's office last week filed a challenge with the state regulatory commission over interest charges of 9% that the state's major utilities are allowed to collect on delayed recovery of fuel cost adjustments under a state-mandated process that began in 2001. Since that time, one utility, Sierra Pacific Resources' Nevada Power Co., has collected $165 million in interest on deferred rate cases, the head of the state Bureau of Consumer Protection contends.

Eric Witkoski, the bureau chief, filed a petition with the Nevada Public Utilities Commission asking it to consider changing the rules so the interest charges don't end up being what he considered "excess profits" for the investor-owned utilities.

A spokesperson for the Sierra Pacific Resources' two utilities said the utilities are studying the petition, but had no immediate comment, other than to verify that the charges are based on the utilities' rates of return and were established in the Nevada PUC's regulations, dating back to the early 1980s.

Witkoski countered that the 5.05% rate used by the utilities to pay on customer deposits would be fairer in charging the unpaid balances that build up between deferred rate cases. Low-risk investments, such as six-month Treasury Bills carry a yield of 5.05%, and the consumer advocate contends the deferred energy balances are similarly low-risk.

Nevada Power's sister utility, Sierra Pacific Power Co., has collected about $16.2 million in interest charges, and is assessing an interest charge that amounts to 38% of the $6.1 million the utility currently is seeking to recover in a deferred energy rate case filed earlier this month.

The state consumer unit's petition alleges the utilities are not just recovering prudent costs, but earning extra profits at the expense of retail utility customers. The charges have become too expensive for the consumers, it argued.

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