(SPPC) 2019 Electric General Rate Case Volume 2
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SIERRA PACIFIC POWER COMPANY d/b/a NV Energy ELECTRIC DEPARTMENT BEFORE THE PUBLIC UTILITIES COMMISSION OF NEVADA In the Matter of the Application by SIERRA PACIFIC ) POWER COMPANY D/B/A NV ENERGY, filed ) pursuant to NRS 704.110(3) and NRS 704.110(4), ) addressing its annual revenue requirement for ) general rates charged to all classes of electric ) customers. ) Docket No. 19-06____ __________________________________________ ) VOLUME 2 of 18 Application Exhibit A Exhibit B Exhibit C Exhibit D Exhibit E Recorded Test Year ended December 31, 2018 Certification Period ended May 31, 2019 Page 1 of 117 Index Page 2 of 117 Sierra Pacific Power Company d/b/a NV Energy Electric Department Volume 2 of 18 Index Page 1 of 1 Description Page No. Application 4 Exhibit A Proposed Tariffs 23 Exhibit B Current Tariffs 55 Exhibit C Listing of Prior Proceedings Related to Proposals in the Application 86 Exhibit D Draft Notice 110 Exhibit E Proposed Notice of Hearing 113 Page 3 of 117 Application Page 4 of 117 1 BEFORE THE PUBLIC UTILITIES COMMISSION OF NEVADA 2 In the Matter of the Application by SIERRA ) PACIFIC POWER COMPANY D/B/A NV ) 3 ENERGY, filed pursuant to NRS 704.110(3) ) and NRS 704.110(4), addressing its annual ) Docket No. 19-06___ 4 revenue requirement for general rates charged ) to all classes of electric customers. / 5 6 APPLICATION ADDRESSING ANNUAL REVENUE REQUIREMENT 7 8 Sierra Pacific Power Company, d/b/a NV Energy (“Sierra” or “the Company”), hereby 9 makes this Application, pursuant to Nevada Revised Statutes (“NRS”) § 704.110 and the 10 regulations implementing NRS § 704.110 (the “Application”). Specifically, NRS § 11 704.110(3)(a) requires that by the first Monday in June every 36 months, Sierra must file an 12 application seeking a review of its electric division general rates. Sierra’s last general rate Pacific Power Company Pacific Power Company d/b/a NV Energy 13 review application was filed on the first Monday in June, 2016. This general rate review is Nevada Power Company Company Power Nevada Sierra Sierra and 14 mandated by statute and is filed in compliance therewith. Chapter 703 of the Nevada 15 Administrative Code (“NAC”) sets forth the body of regulations implementing NRS § 704.110. 16 Specifically, NAC § 703.2201 through NAC § 703.2481, inclusive, prescribe the manner in 17 which general rate applications are to be prepared and filed. Following these regulations and 18 informed by Public Utilities Commission of Nevada (“Commission”) preferences and practice, 19 Sierra has prepared and filed all of the financial statements, schedules, and supporting 20 information required to accompany a general rate application. NRS § 704.110(2) provides that 21 the Commission must issue a written order approving or disapproving, in whole or in part, a 22 general rate review application within 210 days of its filing or the application is deemed 23 approved. The “deemed approved” date for this Application is Monday, December 30, 2019. 24 25 1 Page 5 of 117 1 I. INTRODUCTION 2 Sierra has prepared a full and complete general rate review filing consistent with NRS 3 § 704.110(3) and (4), NAC § 703.2201 through NAC § 703.2481, inclusive, as well as prior 4 Commission directives, compliances and precedent. That work is included with this 5 Application. Sierra is requesting that the Commission find that Sierra has met all statutory and 6 regulatory requirements by filing this triennial general rate review application, and approve 7 rates that will collect $5 million less in annual revenue than is generated by current rates. 8 Sierra’s request is without precedent. While it seeks to implement rates designed to 9 collect $5 million less in annual revenue, the statements and schedules that accompany this 10 application demonstrate that Sierra’s annual revenue requirement for its core operations should 11 actually increase by $5.3 million. 12 Sierra has publicly stated its commitment to maintain and, when possible, reduce its Pacific Power Company Pacific Power Company d/b/a NV Energy 13 rates. This request, which seeks authority to implement rates that will collect more than $10 Nevada Power Company Company Power Nevada Sierra Sierra and 14 million less in revenue than its statements and schedules demonstrate, is made in order to fulfill 15 this commitment. Rates have been designed based on a fresh marginal cost of service study, 16 and proposed rates for most commercial classes are lower than current rates. The request to 17 reduce revenues by $5.0 million is calculated to insure that despite increases in the cost to serve 18 residential customers relative to other customer classes, residential customers will receive a 19 reduction in rates. 20 Moreover, while reducing its revenue requirement and its rates, Sierra will continue to 21 safely, reliably and efficiently operate the power grid to deliver top-tier energy services to 22 customers. 23 24 25 2 Page 6 of 117 1 II. JUSTIFICATION FOR THE APPLICATION 2 As a general matter, an applicant filing a general rate case must provide a complete and 3 accurate explanation of the circumstances and conditions relied upon as justification for its 4 application. NAC § 703.2211. This Application was prepared using the best and most current 5 information available. Pursuant to NAC § 703.2231, this Application, together with the 6 exhibits, statements, schedules, workpapers, prepared direct testimony and responses to the 7 Commission’s master request for information attached hereto, sets forth all material facts that 8 Sierra is prepared to prove to meet its prima facie burden to prove 1) that Sierra’s cost of 9 service showing supports an increase in annual revenue requirement of $5.3 million, and 2) 10 that notwithstanding the cost of service showing made herein, Sierra’s request to reduce current 11 rates to collect $5.0 million less in annual revenue is just and reasonable and not unduly 12 discriminatory or preferential. Pacific Power Company Pacific Power Company d/b/a NV Energy 13 Sierra’s request to reduce its annual core electric revenues by $5 million reflects the Nevada Power Company Company Power Nevada Sierra Sierra and 14 Company’s confidence that it can continue to manage expenses, make prudent investment in 15 facilities, make sound decisions on expenditures and continue to deliver top tier service to 16 customers within its existing revenue requirement. Over the past 10 years, total operating costs 17 have declined on average by 3.4 percent per year (3.9 percent annually when fuel costs are 18 removed). The Company is focused on living within its means. This focus has served Sierra’s 19 customers well. Sierra’s request to not implement the change in revenue requirement indicated 20 by the showing that accompanies this Application evidences the Company’s commitment to 21 select the lowest cost solution to each challenge and to strive to achieve balanced results that 22 allow the Company to safely, reliably and efficiently operate the power grid to deliver top-tier 23 energy services to customers. 24 25 3 Page 7 of 117 1 A. MAJOR ELEMENTS OF THIS GENERAL RATE CASE 2 Sierra is asking that the Commission reduce its annual revenue requirement for its core 3 electric operations by $5 million. Nevertheless, under current law, Sierra is required to present 4 its historical results of operations for the most recent 12-month historical period for which data 5 were available. Sierra has also prepared estimates of changes in results of operations that are 6 known and measurable with reasonable accuracy at the time of filing and that will become 7 effective within six months after the last month of the 12 month historical period. The 8 calculations prepared pursuant to these regulations demonstrate that Sierra’s annual revenue 9 requirement should increase by $5.3 million. The 12-month historical period upon which the 10 filing is based ends December 31, 2018, and estimated certification adjustments have been 11 prepared for changes in results operations that are expected to occur no later than May 31, 12 2019. The Company is not seeking to update its filing pursuant to NRS § 704.110(4) for Pacific Power Company Pacific Power Company d/b/a NV Energy 13 demonstrated expected changes in circumstances. Nevada Power Company Company Power Nevada Sierra Sierra and 14 Sierra has prepared a complete cost of capital analysis that demonstrates that an increase 15 in its authorized overall rate of return from the current rate of 6.65 percent to the proposed rate 16 of 7.00 percent is warranted. Sierra’s rate of return (with incentives for previous critical facility 17 and demand-side management investments) is calculated based on three factors: cost of debt, 18 cost of equity, and capital structure. Sierra is requesting a modest increase in its return on 19 equity from 9.6 percent (set in Sierra’s 2016 general rate case, Docket No. 16-06006) to 10.00 20 percent. Sierra’s estimated capital structure as of the certification period for this rate case 21 application is approximately 49 percent debt, 51 percent equity. 22 23 24 25 4 Page 8 of 117 1 B. COMPLIANCE ITEMS AND DIRECTIVES SATISFIED 2 The Commission has directed Sierra to include several analyses and adjustments to cost 3 of service in this Application. These include the following items: 4 • From Docket No. 18-06003 (the first joint integrated resource plan filed by Sierra 5 and Nevada Power), Paragraph 148, the Commission directed Sierra and Nevada 6 Power to make a single-purpose filing to address the allocation of costs associated 7 with One Nevada Transmission Line (“ON Line”) and if that filing proposed a 8 reallocation of ON Line costs between Sierra and Nevada Power, that the proposal 9 should be reflected in Sierra’s 2019 general rate filing.