SB417 - Revises provisions relating to public utilities. (BDR 58-1106)

- 83rd Session (2025) Senate Bill No. 417–Committee on Growth and Infrastructure CHAPTER.......... AN ACT relating to public utilities; requiring the Public Utilities Commission of Nevada to adopt regulations governing the filing of an application for the establishment of an alternative rate-making plan by a natural gas utility; setting forth certain requirements for the submission and approval of such an alternative rate-making plan; revising certain provisions relating to the application and approval for an alternative rate-making plan by an electric utility; and providing other matters properly relating thereto. Legislative Counsel’s Digest: Existing law sets forth certain procedures for a public utility to make changes to a general rate schedule by applying to Public Utilities Commission of Nevada. (NRS 704.100, 704.110) Section 11 of this bill requires the Commission to adopt regulations establishing procedures for a natural gas utility to apply to the Commission for the approval of an alternative rate-making plan, which establishes the alternative rate-making mechanisms that the natural gas utility is authorized to use to set rates during the time period of the plan. The regulations adopted by the Commission must: (1) establish the alternative rate-making mechanisms that may be included in a plan and any limitations on such alternative rate-making mechanisms; (2) prescribe the information that must be included in an alternative rate-making plan and an application for the approval of such a plan; (3) specify the circumstances under which a natural gas utility for which an alternative rate- making plan has been approved must file a general rate application; (4) provide a process to educate customers of a natural gas utility regarding alternative rate- making mechanisms; (5) require a natural gas utility for which an alternative rate- making plan has been approved to keep certain records; and (6) establish criteria for the evaluation of an alternative rate-making plan. Additionally, section 11 requires that, if a natural gas utility files an application for an alternative rate-making plan that includes formula rates or a multi-year rate plan, the alternative rate-making plan must include: (1) an earnings-sharing mechanism; and (2) certain information and calculations relating to changes in risk to the natural gas utility. Section 12 of this bill authorizes a natural gas utility to submit an application to establish an alternative rate-making plan pursuant to the regulations adopted by the Commission, establishes time limits for the Commission to approve or deny such an application and requires the Commission to conduct a consumer session in each major geographic area in which the natural gas utility provides services before taking action on such an application. Section 12 requires an application for the approval of an alternative rate-making plan to include a plan to educate the customers of the natural gas utility regarding the alternative rate-making mechanisms in the plan proposed by the utility. Section 12 prohibits the Commission from approving an alternative rate-making plan unless the Commission determines that the plan meets certain requirements. Section 12 also authorizes an alternative rate-making plan to include certain provisions, including, without limitation, a mechanism for earnings-sharing with the customers of the utility. Additionally, section 12 authorizes a natural gas utility to reject an application for an alternative rate-making plan with modifications approved by the – 2 – - 83rd Session (2025) Commission. Finally, section 12 authorizes the Commission to investigate and change rates, tolls, charges, rules, regulations, practices and services relating to an alternative rate-making plan under certain circumstances. Section 13 of this bill provides that the provisions of this bill do not limit the existing rate-making authority of the Commission. Sections 3-10 of this bill define certain terms relating to alternative rate-making plans. Sections 14 and 15 of this bill create exceptions from the procedure set forth in existing law to change a general rate schedule to authorize a natural gas utility to file an application to establish an alternative rate-making plan pursuant to section 12. Existing law requires the Commission to adopt regulations to establish procedures for an electric utility to apply to the Commission for the approval of an alternative rate-making plan. (NRS 704.762) Section 16 of this bill requires that, if an electric utility files an application for an alternative rate-making plan that includes formula rates or a multi-year rate plan, the alternative rate-making plan must include: (1) an earnings-sharing mechanism; and (2) certain information and calculations relating to changes in risk to the electric utility. Existing law authorizes an electric utility to apply to the Commission to establish an alternative rate-making plan and sets forth certain requirements relating to the approval of the plan by the Commission. (NRS 704.7621) Section 17 of this bill requires that, if the Commission approves an application for an alternative rate- making plan that authorizes the recovery of the costs of a capital expenditure: (1) the electric utility must prove the capital expenditure was prudent; and (2) if the Commission determines that the electric utility did not prove the capital expenditure was prudent, the Commission shall require the electric utility to refund the costs of the capital expenditure charged to the customers of the electric utility. EXPLANATION – Matter in bolded italics is new; matter between brackets [omitted material] is material to be omitted. THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS: Section 1. Chapter 704 of NRS is hereby amended by adding thereto the provisions set forth as sections 2 to 13, inclusive, of this act. Sec. 2. As used in sections 2 to 13, inclusive, of this act, unless the context otherwise requires, the words and terms defined in sections 3 to 10, inclusive, of this act have the meanings ascribed to them in those sections. Sec. 3. “Alternative rate-making mechanism” means a rate- making mechanism in an alternative rate-making plan and includes, without limitation, performance-based rates, formula rates, multi-year rate plans, an earnings-sharing mechanism, decoupling mechanism or any other rate-making mechanism authorized by the Commission by regulation. Sec. 4. “Alternative rate-making plan” means a plan that would implement one or more alternative rate-making – 3 – - 83rd Session (2025) mechanisms to be used in addition to or in place of the rate- making process established by NRS 704.110. Sec. 5. “Decoupling mechanism” means a mechanism that disassociates a natural gas utility’s financial performance and results from the sales of natural gas by the natural gas utility. Sec. 6. “Earnings-sharing mechanism” means a mechanism designed by the Commission that requires a natural gas utility to share earnings with its customers. Sec. 7. “Formula rates” means rates that are periodically adjusted based on a predetermined formula approved by the Commission without the need for a natural gas utility to file a general rate application pursuant to NRS 704.110. Sec. 8. “Multi-year rate plan” means a rate mechanism under which the Commission sets rates and revenue requirements for a multi-year plan period of more than 36 months, including, without limitation, a plan which authorizes periodic changes in rates, including, without limitation, adjustments to account for inflation or capital investments, without a general rate application. Sec. 9. “Natural gas utility” means a public utility which purchases natural gas for resale. Sec. 10. “Performance-based rates” means rates that are set or adjusted based on the performance of a natural gas utility, as determined by such performance metrics as the Commission may establish. Sec. 11. 1. The Commission shall adopt regulations to establish procedures for a natural gas utility to apply to the Commission for the approval of an alternative rate-making plan. The regulations must: (a) Establish the alternative rate-making mechanisms that may be included in such a plan and any limitations on such alternative rate-making mechanisms as the Commission deems appropriate, including, without limitation, any restrictions on the types of alternative rate-making mechanisms that may be used in concert within the same alternative rate-making plan. (b) Prescribe the information that must be included in an alternative rate-making plan and an application submitted in accordance with the regulations adopted pursuant to this section. (c) Specify the circumstances under which a natural gas utility for which the Commission has approved an alternative rate- making plan is required to file a general rate application pursuant to NRS 704.110, including, without limitation, if the alternative rate-making plan ceases to meet the criteria established by the – 4 – - 83rd Session (2025) Commission pursuant to paragraph (g) or after any period of time established by regulation of the Commission. (d) Provide a process to educate customers of a natural gas utility regarding the available alternative rate-making mechanisms that may be included in an alternative rate-making plan. (e) Establish requirements for a natural gas utility for which the Commission has approved an alternative rate-making plan to keep or cause to be kept any information and records which the natural gas utility would have been required to submit to the Commission as part of an application filed pursuant to NRS 704.110 or 704.185, if the filing of any such application is delayed or excused pursuant to the alternative rate-making plan. (f) If the Commission determines that it is practicable, require a natural gas utility to include in its application for the approval of an alternative rate-making plan: (1) One or more cost-of-service studies; and (2) An analysis estimating and comparing: (I) The rates that would be charged and the revenue that would be collected under the alternative rate-making plan proposed in the application; and (II) The rates that would be charged and the revenue that would be collected pursuant to the rate-making process established by NRS 704.110. (g) Establish the criteria for the evaluation of an alternative rate-making plan for a natural gas utility which may include, without limitation, whether the plan: (1) Provides for just and reasonable rates that are comparable to rates established pursuant to NRS 704.110; (2) Ensures that customers of a natural gas utility benefit from lower regulatory administrative costs where appropriate; (3) Aligns an economically viable utility model with state public policy goals; (4) Enables the delivery of natural gas service and options for service and pricing that customers of a natural gas utility value, including, without limitation, the development and use of low carbon fuels by customers that prioritize such an option over other factors, including price; (5) Fosters statewide improvements to the economic and operational efficiency of the natural gas infrastructure system; (6) Furthers the public interest, including, without limitation, the promotion of safe, economic, efficient and reliable service to all customers of the natural gas utility; – 5 – - 83rd Session (2025) (7) Enhances the resilience and security of the natural gas infrastructure system while addressing concerns relating to customer privacy; (8) Facilitates the research and development of innovative natural gas services and options to benefit customers; and (9) Balances the interests of customers and shareholders by providing services customers want while preserving reasonable shareholder value. 2. In addition to any requirement adopted by regulation of the Commission pursuant to subsection 1, if a natural gas utility files an application for an alternative rate-making plan that includes formula rates or a multi-year rate plan, the alternative rate-making plan must include, without limitation: (a) An earnings-sharing mechanism; and (b) A discussion identifying any changes in risk to the natural gas utility and a calculation to adjust the rate of return of the natural gas utility based on the changes in risk to the natural gas utility, which must demonstrate the impact of the changes on the rates charged to customers of the natural gas utility. 3. The Commission is not required to accept applications to establish an alternative rate-making plan if the Commission determines, after a reasonable investigation, that the use of an alternative rate-making plan is not consistent with the criteria established by the Commission pursuant to paragraph (g) of subsection 1. Sec. 12. 1. Except as otherwise provided in subsection 3 of section 11 of this act and in accordance with the regulations adopted by the Commission pursuant to section 11 of this act, not earlier than the date on which the Commission first adopts regulations pursuant to section 11 of this act, a natural gas utility may apply to the Commission to establish an alternative rate-making plan which sets forth the alternative rate-making mechanisms to be used to establish rates during the time period covered by the plan. 2. A natural gas utility may file an application pursuant to subsection 1: (a) At the same time the natural gas utility files a general rate application pursuant to NRS 704.110; or (b) Not later than 6 months after the date on which the Commission issues an order approving a general rate application filed by the natural gas utility pursuant to NRS 704.110. 3. The Commission shall approve, with or without modifications, or deny an application submitted pursuant to – 6 – - 83rd Session (2025) subsection 1 not later than 210 days after the Commission receives a copy of the application unless the Commission, upon good cause, extends by not more than 90 days the time to act upon the application. If the Commission fails to act upon an application within the time provided by this subsection, the application shall be deemed to be denied. 4. The Commission shall conduct a consumer session pursuant to NRS 704.069 in each major geographic area in which the natural gas utility provides services to solicit comments from the public before taking action on an application submitted pursuant to subsection 1. 5. The Commission shall not approve an application submitted pursuant to subs [Text truncated for display. Full text available on LegiScan.]