In New Rate Case, NV Energy Seeks Changes To Remove "Unreasonable Incentive" To Leave Bundled Service For Competitive Supply

June 5, 2019

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Copyright 2010-19 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

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In a newly filed rate case at the Nevada PUC, Sierra Pacific Power Company d/b/a NV Energy has proposed changes to the recovery of transmission costs from unbundled distribution-only service customers (customers on competitive supply) to eliminate what the utility called an "unreasonable incentive" to leave bundled service

NV Energy proposes changes for the recovery of unbundled transmission costs between fully-bundled service and unbundled distribution-only (DOS) service

Specifically, for classes with demand charges, NV Energy proposes to remove the differences in Transmission charges that would be paid under rates charged under the Federal Energy Regulatory Commission ("FERC") OATT rate compared to bundled service from the TOU demand charges of the class for recovery through the Interclass Rate-Rebalancing ("IRR") $/kWh charges

A witness for NV Energy said that there is currentlt a difference between the total amount of transmission revenue produced by the utility's "bundled" retail electric service rates to the total amount of transmission revenue produced by the utility's federally-approved transmission service rates, the latter of which are paid by competitive supply customers

"The results of this analysis show that the Company's retail electric service rate design provides more transmission service revenue from certain customer classes than the application of the federally-approved transmission rate to the relevant transmission billing determinant," a witness for NV Energy said

"The difference I found reveals that certain customers have an incentive to transition from bundled retail electric service to unbundled transmission and distribution-only service. Stated differently, some customers might be able to reduce their overall electric service costs for the same service because of the differences between federal and state ratemaking and price setting. This type of incentive should be eliminated. Decisions to transition from one type of service- retail electric service, for instance -- to another type of service -- unbundled electric service comprised of energy purchased from a provider of new electric resources, transmission service procured from Sierra pursuant to its Open Access Transmission Service and distribution-only service procured from Sierra pursuant to DOS tariff- should be driven by fundamental operational and efficiency decisions of the customer and the State's public policy goals," a witness for NV energy said

A witness for NV Energy said the difference exists because FERC and the Nevada PUC establish revenue requirement and design prices differently, and because rates are most often established at different times. For instance, FERC transmission rates are set based on how the FERC defines a transmission system. For the NV Energy companies, FERC views the northern (Sierra) and southern (Nevada Power) systems as a single transmission system, and sets rates based on the combined transmission investment of the two utilities. The Nevada PUC sets rates for Sierra and Nevada Power separately, and with the exception of the ON Line, looks at transmission investment made at each utility separately. Similarly, FERC sets the federal transmission rate using a 4-coincident peak methodology but NV Energy currently bills these customers based on 12-coincident peak billing determinants.

"While there are differences, both the rates set by the Commission and the FERC are just and reasonable. As I explained in the previous answer, a decision by a bundled customer to opt for bundled versus distribution-only service should not be based on the arbitrage of federal versus state ratemaking policies," a witness for NV Energy said

"To eliminate the unreasonable incentive -- one that encourages decisions that do not inherently advance the State's public and energy policy goals -- I took the difference between the revenue produced by state-jurisdictional transmission service charges and federal-jurisdictional transmission service charges and removed this difference from the TOU $/kW demand rates and created a volumetric rate. I incorporated this volumetric rate into the interclass rebalancing rate," a witness for NV Energy said

"This rate design has little if any impact for the overall class of customers who purchase energy from the Company (i.e., fully-bundled retail customers) as the reduction in demand charges is offset by the increase in the volumetric IRR [Interclass Rate-Rebalancing] $/kWh charge. Reducing the bundled demand charges by this amount equalizes the transmission demand revenue collected through FERC and state demand rates for the class and minimizes the impact to individual customers by placing the difference in the flat IRR charge. Since DOS customers pay the IRR, it does affect those customers. However, it does so in a nondiscriminatory way because it treats retail direct access customers the same way as it does retail electric service customers. Making these changes will eliminate the incentive at the class level so that transmission service charges will be equivalent between fully-bundled and distribution-only service classes," a witness for NV Energy said

NV Energy also proposes to set all rates for the distribution-only (DOS) classes equal to those of the otherwise applicable bundled-service classes. "This removes differences in rates that provide inefficient signals to choose either service, since the nature of the distribution service does not vary between whether or not a customer chooses fully-bundled service or to receive their energy from a different energy provider," a witness for NV Energy said

Docket: 19-06002

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