NEVADA NEWS & VIEWS 09/10/2015

MGM Resorts witness says Nevada Power is 'over-earning,' tone deaf to economy

By Sean Whaley
Review-Journal Capital Bureau

CARSON CITY — A witness for MGM Resorts International is highly critical of Nevada Power Co. in testimony filed with the state Public Utilities Commission, saying that the gaming company intends to proceed with its application to leave the utility as a retail customer despite the potential of having to pay an "exit fee" of as much as $90 million.

The casino company's witness called Nevada Power tone-deaf and "significantly over-earning" for several years.

Testimony was submitted Tuesday on behalf of MGM by Mark Garrett, president of a company specializing in public utility regulation. In that testimony, Garrett described Nevada Power, a subsidiary of NV Energy serving Southern Nevada, as "tone deaf to the current and ongoing economic recession."

Instead of filing applications to reduce its rates to eliminate its over-earnings and to bring its prices in line with market-based prices in the region, Nevada Power has continued to seek further increases even when they are clearly not in the public interest and are detrimental to the Nevada economy, he said.

Nevada Power had no comment on the testimony.

Garrett cited the company's proposed solar project at the Moapa River Paiute Indian Reservation that was rejected by the PUC last year as an example of the company aggressively pursuing a profit-motivated project at above market rates that was not in the public interest.

He also cites a proposal in the company's latest capacity replacement filling that would terminate a power agreement with Griffith Energy that provides gas-powered electricity to Nevada Power customers during the peak months in Southern Nevada from June through September.

The agreement would be terminated in 2017 and Nevada Power is instead proposing to replace the 570 megawatts from the Griffith plant with a new company-owned 706 megawatt gas plant, which would increase estimated ratepayer costs by more than $70 million a year, Garrett said.

"Again, the company's efforts appear to be driven by a desire to add to its rate base to increase earnings," he said.

Garrett said that Nevada Power is continuing to over-earn, exceeding its authorized rate of return of 9.8 percent by hitting an 11 percent return for the period ending June 30. The company over-earned an estimated $84 million from 2012 to 2014, he said.

"A regulated monopoly such (Nevada Power) should not be permitted to consistently over-earn at the expense of its captive customers," Garrett said. "This is an important factor in MGM's decision to pursue its 704B exit application."

Contact Sean Whaley at swhaley@reviewjournal.com or 775-687-3900. Find him on Twitter: @seanw801