Critics: Buffett’s buy of NV Energy is no bargain
October 30, 2013
The pending sale of NV Energy Inc. to billionaire Warren Buffett is no bargain for electricity customers in Nevada, according to critics who also want state regulators to order a rate reduction for customers.
In a filing with the state Public Utilities Commission, the Nevada attorney general's Bureau of Consumer Protection said the utility already is earning excessive returns. It asks regulators to order a rate reduction of more than $30 million, the Las Vegas Review-Journal reported Tuesday.
The bureau also wants regulators to delay the closure and replacement of coal-fired generation facilities until at least 2020 because it says NV Energy has enough generating capabilities to meet demand.
Dan Jacobsen, technical staff manager for the bureau, noted that Nevada residential customers already pay the highest electricity rates among the nine mountain states. Average rates are now just less than 12 cents per kilowatt-hour, compared with slightly less than 9 cents in Idaho.
In 2012, Jacobsen said, NV Energy subsidiary Nevada Power Co. took in $28 million more than authorized, while its Sierra Pacific Power Co. subsidiary brought in $6 million more than authorized. NV Energy provides electricity to 88 percent of Nevada.
The PUC's own staff also questioned part of the deal to sell the Nevada utility to MidAmerican Energy Holdings, which is a subsidiary of Buffett's Berkshire Hathaway Inc. Under the proposal, ratepayers would end up paying half of a $2 billion "acquisition premium" as part of the purchase. In a filing, PUC staff member Yasuji Otsuka said the commission only once in its history has permitted such a premium, which he said was a bonus for shareholders, the newspaper reported.
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Otsuka recommended removing any harm to customers caused by the acquisition premium and noted that no state or federal agency has approved an acquisition premium sought by MidAmerican for a rate-regulated utility.
The PUC is scheduled to begin hearings on the $5.6 billion buyout Nov. 18.
MidAmerican said in May that it would pay $23.75 per share for all 235 million shares of NV Energy. NV Energy shareholders approved the deal in September.