Thanks to order from Lombardo appointee, ratepayers to foot bill for NV Energy employee bonuses 

Nevadans, many of whom are struggling to pay their electricity bills, are now being asked to reimburse NV Energy for $5.75 million in employee bonuses, thanks to an amended order from Gov. Joe Lombardo’s appointee to the Public Utilities Commission, Randy Brown.   

Brown, the only new member of the PUC appointed by Lombardo, amended a draft order from Commissioner Tammy Cordova that would have split the cost of the bonuses between ratepayers and the utility. Instead, ratepayers are now on the hook for the entire amount. 

In a rare move, the PUC’s own staff is asking the Commission to reconsider its decision to have NV Energy customers pay for the bonuses. Ernest Figueroa, Consumer Advocate for the Attorney General’s Bureau of Consumer Protection (BCP), is also asking the PUC to reconsider. 

NV Energy’s successful effort to recover the cost of the bonuses from ratepayers comes on the heels of the PUC’s approval of the company’s general rate hike of $92.7 million. 

“The issue in this case is whether ratepayers or shareholders should bear the financial burden for the 95% STIP (short-term incentive pay) amounts that have already been paid out to Nevada Power employees for 2022,” says the petition filed by PUC staff.

Nevada Power is NV Energy’s utility arm serving Southern Nevada.  

NV Energy’s net income for the third quarter of 2023, the last reported, was $275 million. 

By NV Energy’s own admission, its employees achieved 56.9% of their goals in 2022, but the utility nevertheless paid workers 95% of the bonus pay, amounting to $5.7 million.   

“Allowing a full STIP payout at 95% even though only 56.94% was achieved is akin to a college student getting an A for attendance despite the fact that the same student’s performance on his classwork and testing merited an F,” Senior Deputy Attorney General Whitney Digesti wrote in the BCP’s petition. 

The BPC argues that data presented to the Commission for 2022 reflects increased complaints from NV Energy customers and “abandoned calls skyrocketing.”

In December, Cordova, based on a recommendation from the BCP, issued an order that customers would pay 56.9%, or $3.25 million toward the bonus pay.  

“…it appears that NPC (Nevada Power Company) has created an employee expectation that the STIP will be funded at or near 100%, regardless of the corporate scorecard achievement,” Cordova wrote. “The Commission agrees with Staff that this negates the STIP’s proposed purpose of being variable at-risk compensation that has to be re-earned every year. The Commission finds that NPC’s request to recover 95% of STIP in rates creates a situation where ratepayers are being asked to pay for STIP costs that do not have corresponding, measurable ratepayer benefits.”

Cordova went on to say the current scheme renders STIP “a second form of base pay and removes the incentive for employees to go above and beyond to earn a higher STIP payment.” 

Days later, Lombardo’s new appointee Brown drafted an order approving recovery of 95% of the STIP amount, despite NV Energy’s own representation that employees merited less, based on a corporate scorecard. The Commission approved Brown’s amendment.  

“Commissioner Brown’s only rationale for his reversal on the STIP issue was his recognition of the ‘current labor environment and staffing issues NPC faces in hiring and retaining front line and customer facing staff…’” the BCP wrote in its petition for reconsideration. “In other words, Commissioner Brown… changed Commissioner Cordova’s order that unearned bonus pay be ordered for all NPC employees at a manager level or below because of ‘staffing issues’ and not based on evidence received during the hearing – a violation of law and mistake of fact.” (Emphasis included)

Brown’s reasoning is “plucked from thin air instead of relying on substantial evidence…” says the BCP’s petition. 

“A decision that lacks support in the form of substantial evidence is arbitrary or capricious, and thus an abuse of discretion that warrants reversal,” the BCP argues. 

Staff’s petition notes the PUC has broad discretion, bound only by the “legislative directive that rates charged for services provided by a public utility must be ‘just and reasonable’ and that it is unlawful for a public utility to charge an unjust or unreasonable rate.” 

NV Energy has already paid employees the 96% bonus, the BCP notes, adding the commission’s order only causes the utility to charge “…customers for this unearned bonus pay – further showing that the allowance will in no way, assist with retention.”

The BCP says the order is “biased in favor of the company at a time NPC ratepayers are already struggling with high utility bills” 

July 2023 energy bills for single family homes increased 70% to an average of $407, the BCP wrote, citing news stories, and added that testimony to the Nevada Legislature indicated customers in Southern Nevada paid 54.2% or $844 a year more for electricity in 2022 than in 2021.

On Wednesday, Nevadans at a session for consumer comment called by NV Energy in preparation for its Integrated Resource Plan to be filed in June, complained that electricity has become unaffordable for some residents. 

Dr. Mary House of Mountaintop Faith Ministries said she’s “borne witness to the hardships and inequality” of high electricity costs, describing residents who are “sleeping with socks, and sleeping with extra blankets, sleeping with house coats” because they can’t afford to heat their homes.  

It’s unknown if or when the PUC will take up the petitions for reconsideration. Nevada Administrative Code renders petitions denied if the Commission takes no action within 40 days. A party may appeal a denial to District Court.