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Trump tax bill could lead to another cut in electric rates for Nevadans

Riley Snyder
Riley Snyder

Nevadans could soon see another reduction in their power bills, thanks to the recently passed tax legislation approved by Republicans in Congress and President Donald Trump.

In a flurry of last-minute filings submitted late Tuesday — the deadline for any motions to reconsider the Public Utility Commission’s decision in the three-year general rate case — several entities, including NV Energy, said they wanted state regulators to take another crack at determining the effect the recently approved Tax Cuts and Jobs Act could have on the state’s electric rates.

The requests come weeks after members of the Public Utilities Commission approved a slight lowering of electric rates — a 25 cent per-month decrease in basic power charge and roughly 2 percent decrease in volumetric charges (the part of the electric bill based on use). The order also required NV Energy to reduce its allowed return on investment from 9.8 percent to 9.4 percent, and created a new “earnings-sharing” mechanism that would split any profits over 9.7 percent between the utility and electric customers.

Though the commission's order, which was released on the same day the tax legislation was signed by President Trump, created the earnings-sharing mechanism to “balance and temper” the possibility of a financial windfall to NV Energy, at least three other groups are asking for the commission to at least take a closer look at the tax bill and what effect it will have on the utility’s revenue.

As with other investor-owned public utilities, NV Energy is allowed to charge rates high enough to both recoup their operating costs, including taxes, and make a profit for their shareholders, as long as the final rates are “reasonable” and approved by state energy regulators.

In a letter on an unrelated clarification request, a NV Energy attorney signaled that the utility was preparing to reduce electric prices even further than the commission’s order to reflect corporate tax rates being cut from 35 percent to 21 percent.

“While Nevada Power recognizes that the Order establishes an earnings sharing mechanism designed to further align operational interests with the interests of customers, together with Sierra, Nevada Power intends to make a filing with the Commission to further reduce electric prices in a timely manner to reflect the impact of the Tax Cuts and Jobs Act of 2017,” utility attorney Elizabeth Elliot wrote in a letter to the Commission.

NV Energy spokeswoman Andrea Smith said the utility was still doing calculations on how the tax bill would affect the utility’s bottom line, and what steps it would take to benefit customers.

In a separate letter sent late Tuesday to the commission, state Consumer Advocate Ernest Figueroa requested the commission study the rate on return for all public utilities through an investigatory docket, noting that several other states had taken similar steps to ensure ratepayers aren’t overcharged based on out-of-date assumptions on tax rates.

“Unless the Commission reduces the Nevada Investor Owned Utilities (IOU) revenue requirement tax rate from 35 percent to the effective rate of 21 percent, Nevada utility ratepayers of the large IOU will overpay for their electric, water and gas service by tens of millions of dollars,” he wrote.

Electric companies in several states, including Massachusetts, Illinois, Oregon and Washington D.C. have announced plans to cut rates following passage of the tax bill. A group of attorneys general and consumer advocates from several states — including Nevada Attorney General Adam Laxalt — signed a letter to federal energy regulators last week asking them to ensure that electric savings from the tax bill are made to ratepayers.

A filing made on behalf of Southern Nevada Gaming Group — an entity representing multiple gaming properties including Boyd Gaming, Station Casinos, Las Vegas Sands, Affinity Gaming and Tropicana Las Vegas — requested that the commission reconsider the order, primarily to ensure that the money saved through the tax cuts is provided to ratepayers.

The group estimated that Nevada Power (the entity serving Southern Nevada) would see a savings of $93 million over the next three-year rate cycle, and that Sierra Pacific Power Company (the entity serving Northern Nevada) would save an additional $29 million over the same time period (both entities are owned by NV Energy).

The group posited that the Commission’s proposed 50-50 cost sharing mechanism for excess profits didn’t go far enough, and would be an “unjust windfall” that would “likely add to its over earnings.”

“What is clear, however, is that NPC did nothing to reap these savings,” Lucas Foletta, an attorney representing the group, wrote in the filing. “Consequently, there is simply no rationale by which they should retain them.”

A separate filing by Smart Energy Alliance, backed by data center giant Switch, also requested a reconsideration in the case, citing lingering uncertainty over specific payments required of large electric customers that applied and were able to leave NV Energy’s service and displeasure with the proposed 50/50 “earnings sharing mechanism.”

“Nevada Power should be entitled to the full amount of any earnings it achieves up to its authorized ROE, but, Nevadans (and only Nevadans) should benefit from earnings above the ROE,” the group wrote in a filing.

The group noted that several provisions of the tax law appear to have a direct impact on what savings for public utilities must be used for, and that the “once-in-a-generation fundamental landscape shift” in corporate taxes should benefit ratepayers, not the utility.

BCP letter to PUC by Riley Snyder on Scribd

Disclosure: Switch, NV Energy, Boyd Gaming and Station Casinos are financial supporters of The Nevada Independent. A complete list of Indy donors and sponsors can be viewed here.


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