NV Energy, the state’s largest utility company, has applied to combine two subsidiaries into one entity. This could affect how the company will fund projects in the future and how the company will be regulated.
State regulations require that power company mergers must benefit consumers in order to be approved by the Public Utilities Commission.
NV Energy said that joining its subsidiaries, Nevada Power, which serves customers in Southern Nevada, and Sierra Pacific Power, which serves customers in Northern Nevada, will save consumers money by reducing tariff increases. I’m here. But it’s unclear when and how these savings will come into effect, and testimony filed last week by a number of businesses, including Wynn Resorts and Walmart, as well as the Consumer Protection Agency, to the PUC left many skeptical. It shows that
“The Wynn-SEA (Smart Energy Alliance) is concerned about the proposed deal because it is not clear at this time why such a deal is necessary, at least from the perspective of rate payers.” I testify on behalf of Wynn and the Smart Energy Alliance.
Mark Garrett, president of Garrett Group Consulting, filed testimony on behalf of the Consumer Protection Agency, saying, “Without a specific plan to protect rate payers, the proposed deal would be a deal-breaker for Sierra and Nevada.” It could create significant inequity among Power’s customers.”
Of the five testimonies submitted to the PUC, only one was in favor of the merger. Walmart said he is not against the merger because he wants to pay flat electricity bills to his 43 stores in the state.
Jennifer Schuricht, director of corporate communications at NV Energy, said updating the company’s corporate structure will ultimately benefit rate payers.
“The proposed merger will make our legal corporate structure more consistent with how we operate on a day-to-day basis. Our customers will benefit from a simplified corporate structure, cost savings related to operational efficiency, and NV Energy will benefit from new integrated financial activities,” Schuricht said in an email Friday. “We look forward to working with both companies to address their concerns and demonstrate the benefits our merger will bring to our customers and the State of Nevada.”
The utility plans to provide a more detailed answer by Sept. 7, when the rebuttal testimony comes from the PUC.
favorable interest rate
NV Energy claims the merger will reduce the amount of debt owed to the company and bring savings to consumers. In the filing, the utility said that providing better debt would improve NV Energy’s credit rating and limit rising consumer rates due to “credit index issues.”
“Combining Nevada Power and Sierra into one entity will create a single bond issuer, and this increased scale will provide improved access to bond market capital markers and better pricing of bond issuances. ,” said NV Energy Chief Financial Officer Michael Cole. He said in a testimony provided to the PUC.
According to Cole’s testimony, the merger is estimated to cost NV Energy $1.1 million in legal and administrative costs, and could save customers $4.1 million annually.
NV Energy expects to need to refinance $2.1 billion of debt when it matures by 2032, so it is focused on restructuring to earn more favorable interest rates on its debt offerings.
According to Schuricht, the company also projects more than $17 billion in investment costs over the next 20 years for projects such as the $2.5 billion transmission initiative Greenlink Nevada. The massive project begins in Las Vegas and consists of Greenlink West, an estimated 350 miles of new power lines and substations across 13,600 acres of public and private land, and Greenlink North, an estimated 235 miles. split into two. From Ely to Yellington.
The potential savings from the merger won’t be seen by customers until NV Energy files its first post-merger general rate lawsuit in 2023, Schuricht said. If an investor-owned utility, such as NV Energy, wants to change the rates it charges customers, it requires a general rate case application every three years. This process requires his approval from the PUC.
Despite NV Energy touting potential savings, PUC staff question the need for a merger.
PUC economist Swetha Venkat said, “Many of these benefits already exist under the current structure, where Sierra and Nevada Power are separate companies, and staff will be able to leverage the additional benefits provided by the merger. It is difficult to substantiate the existence of benefits.” said in the testimony submitted. “The cost of issuing bonds as separate entities post-merger is unknown and difficult to determine, even with interest rate cuts.”
PUC Senior Electrician Adam Danise also pointed out the “very different” geographic regions of northern and southern Nevada.
He notes that the Sierra Pacific coverage area of northern Nevada is more susceptible to wildfires than Nevada Power’s area of southern Nevada, and that Nevada Power’s insurance policies are not in place because of the risk of wildfires in northern Nevada. said that a situation could arise in which there is an increase in
“Legal Fiction”
According to Bradley Wimmer, UNLV economics professor, the two subsidiaries have been operating jointly since 1999 and have been under NV Energy since 2008, so the merger is almost a “legal definition”1. will be one
But according to Danise, legal definitions can have a big impact on the programs and regulations that NV Energy must follow.
“Many of the enacted energy programs and policies [Nevada law] was created to define specific requirements for the definition of a power company,” says Danise.
Although regulations are subject to change, Wimmer believes the merger will still be approved.
“For shareholders, it’s kind of a legal fiction that they are a single company and there are different companies,” he said. “But I think it’s very hard to say no to a merger because it doesn’t change the fundamentals of the business.”
PUC will hold a public hearing to consider NV Energy’s merger request on September 19-20.
The merger also requires approval from the Federal Energy Regulatory Commission. According to NV Energy’s merger filings, a federal decision may be made on him by November 1.
Contact Sean Hemmersmeier on Shemmersmeier@reviewjournal.com or Twitter. @seanhemmers34.
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