Power play: Regional ratepayer advocates concerned about looming NV Energy deal
October 23, 2010
LAKE TAHOE and#8212; California power customers from Markleeville to Portola and Lake Tahoe in between can expect to see a new name on their monthly bills starting in December.
NV Energy is selling its California electric distribution facilities and Kings Beach station to California Pacific Electric Company. NV Energy still uses the Sierra Pacific Power Company name for its California operations.
Some are concerned the sale will lead to higher energy rates in coming years for customers in Sierra Pacificand#8217;s service area, including customers on the California side of the Lake Tahoe Basin.
California Pacific Electric Company, known as CalPeco, is owned by two publicly-traded Canadian companies, Algonquin Power and Utilities Corporation and Emera Inc. The companies formed CalPeco solely to take over Sierra Pacificand#8217;s operations.
The sale is expected to cost $132 million or more. NV Energy representatives have said the sale will allow the company focus on its Nevada operations and consolidate operations under one regulatory agency.
In filings with the California Public Utilities Commission, representatives of both CalPeco and Sierra Pacific contend the sale will maintain or improve service because the same employees and facilities will be used by CalPeco, CalPecoand#8217;s senior management will be present in the service area, the use of renewable resources should be increased, electronic billing will be introduced and a customer service center in South Lake Tahoe will be reopened.
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The amount each customer will pay will also remain the same, at least for the time being, according to the filings. CalPeco has accepted Sierra Pacificand#8217;s general rate case cycle, meaning it will file its first general rate case in 2011, for rates effective in 2012.
The California Division of Ratepayer Advocates has opposed the sale, contending the smaller utility company will pose greater risks to power customers, who could see a significant rate increase in 2012.
NV Energy serves about 1.2 million customers in Nevada, while Sierra Pacificand#8217;s coverage includes 46,000 customers in Nevada, Placer, Sierra, Plumas, Mono, Alpine and El Dorado counties; 80 percent of Sierra Pacificand#8217;s California customers are in the Lake Tahoe Basin.
In light of the potential risk, the DRA asked for several protections for ratepayers in filings to the public utility commission, including postponement of CalPecoand#8217;s next general rate case until 2014.
and#8220;There are too many risks associated with this transaction that would be detrimental to the affected California ratepayers,and#8221; wrote DRA Attorney Kimberly Lippi in an Oct. 4 filing. and#8220;At the very least, DRA urges the Commission to impose the provisions recommended by DRA as additional safeguards to the California ratepayers, and to require Sierra to take back the California utility in the event CalPeco is unable to fulfill the conditions set forth in the decision.and#8221;
The California Public Utilities Commission approved the sale Oct. 14, finding there was insufficient evidence to show CalPecoand#8217;s purchase would create cost increases significant enough to hurt ratepayers and the smaller size will not necessarily increase the cost of CalPeco incurring debt.
The commission said CalPeco will be under a microscope when it presents its next rate increase. CalPeco and Sierra Pacific are referred to as and#8220;Joint Applicantsand#8221; in filings with the utilities commission.
and#8220;Joint Applicants have established that the transfer will not harm ratepayers; in fact, certain service improvements are likely in the near term, at no cost to ratepayers,and#8221; according to the commissionand#8217;s final decision. and#8220;To the extent service improvements trigger higher costs that result in a request for an increase in rates in 2012 and beyond, CalPeco is on notice that we will carefully scrutinize its 2012 general rate case showing.and#8221;
The sale still requires approval from the Public Utilities Commission of Nevada. Approval is expected in December.