NV Energy’s plan to issue a $120 million rate reduction and substantial one-time bill credit to customers has been approved by state energy regulators, under a stipulation agreement that will see the credit applied during the October billing cycle.

Members of the Public Utilities Commission voted 2-0 to approve the stipulation agreement on Wednesday, the final stamp of approval before the utility company can begin processing the bill credit for customers (Commissioner Tammy Cordova abstained, as she worked on the docket in her previous role as a regulatory attorney for the commission).

The bill credit will equate to roughly $107 per single-family residential customer, $60 per multi-family unit customer and $53 for typical small business customers. The bill credits will be standardized for smaller classes of customers but will be individually set for the utility’s largest customers on an individual basis.

In a statement issued last week after a draft of the stipulation was published, NV Energy CEO and President Doug Cannon said it would provide “immediate and long term electric cost reductions” to utility customers.

“Customers will see an immediate $120 million one-time credit and will see long term savings associated with lower energy rates going forward,” he said in the statement. “This historic agreement lowers energy costs for our southern Nevada customers and will help drive Nevada’s economic recovery.”

The stipulation agreement includes not only PUC staff and NV Energy, but a large number of other parties that intervened in the utility’s company’s general rate case, including the state’s Bureau of Consumer Protection, 10 large casino companies, Walmart, Kroger and solar panel installer Sunrun.

The $120 million bill credit comes from the following sources:

• $57.9 million in an over-earnings sharing account created by the commission during NV Energy’s 2017 rate case. The commission approved remitting those funds back to customers last month and said the current order “effectively modifies” the past decision
• $26 million in excess accumulated deferred income tax, essentially a holding account for corporate taxes that was modified by the 2017 federal tax bill
• An expected $20 million in revenue from the existing earning sharings mechanism for the year 2020
• $9 million in carrying charges on the earnings sharing liability that accrued between 2019 and 2020
• $5 million in “other expense adjustments”

In its order approving the stipulation, members of the commission wrote that the “ordered one-time bill credit successfully balances the interests of ratepayers and shareholders by returning the balance of the earnings sharing regulatory liability and other amounts due to ratepayers, as identified in the Stipulation, in a time of need, without unduly harming [NV Energy].”

The utility company announced plans last year to request the $120 million rate reduction, filing the application to do so as part of its normal General Rate Case filing in June. Cannon said the reduction is possible due to a variety of factors, including a restructuring of debt, the decreased corporate income tax and lowered operating expenditures.

Nevada’s electric model operates under a system that authorizes one company (NV Energy) to have an effective monopoly on electric service for the vast majority of the state. In return, the company is required to have rates and other core business practices approved by state-appointed regulators — the Public Utilities Commission of Nevada — with the power to hold hearings and make decisions on the company’s prices for electric rates.

Under the order, the company is required to disclose within seven days its plans on eligibility information, timing on the bill credit and how it plans to communicate the information to the public. Within seven days of issuing the bill credit, NV Energy is also required to report to the Commission how many credits were issued to each customer class and the total dollar value of the bill credits.

The stipulation also sets the utility company’s return on equity (a measure of financial performance created by dividing net income by shareholder equity) at 9.4 percent, and a rate of return (the profit margin NV Energy is allowed to make on the sale and service of electricity to incentivize capital development and pay shareholders) at 7.14 percent. Those are slightly below what the utility initially requested in its General Rate Case application filed in June. 

The commission also will hold a supplemental hearing on the general rate case next week to determine whether to extend the cost-sharing mechanism over the next three years.