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We and the Utilities Have Information Symmetries
Michael Saunders, Bureau of Consumer Protection, Nevada
AUTHOR: Atanas Georgiev

This interview with Michael Saunders, Esq., MBA, Senior Deputy Attorney General at Nevada Attorney General's Bureau of Consumer Protection is also published in the Bulgarian UTILITIES magazine.

Disclaimer: The interview represents Michael Saunders’ personal opinions and these opinions do not necessarily reflect the views of the Nevada Attorney General’s Bureau of Consumer Protection.

Mr. Saunders, what are your main responsibilities as a Senior Deputy Attorney General with the Nevada Attorney General's Bureau of Consumer Protection?

As a Senior Deputy Attorney General with the Nevada Attorney General’s Bureau of Consumer Protection (BCP), I represent the public interest in cases involving the rates and services of electricity, natural gas, water and telecommunications utilities before the Public Utilities Commission of Nevada (PUCN) and various courts of law. The role of the PUCN is to provide for just and reasonable rates for utilities customers and to balance the interests of utilities ratepayers and the shareholders of privately-owned utilities. The BCP represents the public interest before that body, PUCN, and the role of the BCP is to advocate for reliable utility service at the lowest reasonable cost, particularly for residential and small business customers of public utilities.

What is the power market structure in Nevada – do you have full liberalization or full regulation of electricity prices?

It is still fully regulated with respect to our natural gas and electricity utilities. It is somewhat deregulated on the telecommunications side and we have still fully regulated privately-owned water utilities.

What is the place of the Bureau of Consumer Protection in the process of tariff-setting and customer relations between utilities companies and their clients?

The BCP participates in the utility tariff approval process by reviewing the tariffs that the various regulated utilities file with the PUCN. But it is the PUCN that ultimately approves the proposed utility tariffs.

The BCP does not handle individual customer issues. Rather, the PUCN is the agency that handles such individual utility consumer issues. This function is performed through the PUCN’s Consumer Complaint Resolution Division.

Our institution represents the interests of the consumers collectively with respect to rate issues.

And what about large commercial and industrial consumers – do you defend their interests as well, or they prefer to have their own advocates in the rate-setting process?

The large industrial consumer interest groups may intervene in utility cases, if they meet certain standard. They are represented by private counsels. Sometimes the interests of all consumers overlap, other times large industrial consumers may be at odds with household consumers, particularly in rate design, when you have to decide how the burden of the rate increase should be shared or allocated to specific groups. That process may become quite contentious. It is up to the regulator to balance these interests and this is really a tough job, because there is so much to know in the utility area, it is very complicated.

Are there enough resources for consumers’ protection? Do you feel that utilities companies have more resources for legal cases than consumers’ organizations?

Generally speaking, the utilities are able to recover all the prudent costs incurred during the rate cases through the general rates. I think any agency charged with consumer protection would always welcome and want more resources to better protect consumers’ interests. However, with that said, I believe we do the best with the resources that we do have. We do have a fair degree of resources at our disposal that we effectively leverage to protect consumer interests.

Perhaps our greatest resource is our talented, dedicated staff, which includes accountants, economists, engineers and other lawyers such as myself. Many people on the BCP staff have multiple decades of experience in the area of utility regulation. Our people are our greatest asset. Also, we importantly have to the ability to retain outside experts in order to assist us in our mission of protecting utility consumer interests.

But, with all the above said, I do think that it is probably fair to state that utilities, particularly investor-owned utilities, typically do have more resources (more staff, etc.) than consumer organizations. It is not always about how many resources you have, but more how you use those resources.

How do you access utilities-owned information for your work? Are they obliged to cooperate and do they provide all the data you ask them to?

This is an interesting question. The PUCN regulations provide for discovery, the utilities have to provide the information we request and we are authorized to review the books and records of the utility. So the law provides for that access for us, as well as for the staff of the PUCN.

When we file an information request, the utility is required to give response within a given period. And if we believe that they are not cooperating and responsive, then we will raise these questions to the PUCN. Typically, the utility has all the information, and there are information asymmetries that are very tough to tackle.

Do you partner with other consumer advocates in the USA? What are the similarities and differences in the processes among different states?

We do not actively partner with other utility consumer advocate agencies during litigation, but we actively share information with other such agencies. There is an active association of utility consumer advocates known as NASUCA (National Association of State Utility Consumer Advocates).

What is the level of consumers’ protection in Nevada? How do you defend consumer rights?

The level of protection in Nevada is fairly uniform to other jurisdictions in the other states. The way that we protect consumers’ interest is through litigation. When a utility files a rate increase, i.e. for a new generation plant, our office will perform a review discovery on that filing and we will present a recommendation to the PUCN as to how they should handle that application.

We file written testimonies of expert witnesses in specific utility-related cases. After all written testimony of all parties (i.e. the Utility, the BCP, and the PUCN’s Regulatory Operations Staff among others) is submitted with the PUCN, a hearing is held where witnesses offer live testimony and are subject to cross-examination. After the hearing and after all evidence has been submitted, the Commission will issue an order based on the evidence.

There is also rule-making process. We participate in the setting of regulations that the utility is bound to follow, and that is another way in which we defend consumers’ interests.

Also, in Nevada we hold Consumer Sessions, where utility consumers are able to address issues relating to their utility service directly to the regulators. The Consumer Sessions provide an important forum for utility consumers to air their concerns relating to their utility service. There are both case specific Consumer Sessions (such as when a utility is proposing to increase rates) as well as general Consumer Sessions at which any issue relating to utility service may be aired.

How often do these price reviews take place?

It depends. In Nevada we have two rate elements: the “general rate”, which allows the utility to get a fair return on investment and to have their profit, and the “fuel and purchase power” component, where a dollar spent by utilities is just transferred to consumers without profit. We used to set the fuel element annually, but now because of the possibilities for sharp increases in resources prices, this component is set quarterly on the basis of 12-month rolling average in order to mitigate huge rate spikes.

The “general rate” is set every three years. But utilities may ask for general rate change even during this period. Our office could theoretically also require such rate review through a petition process.

What is the regulatory solution when fuel prices rise? How could we deal with such situation on the market?

It is imperative to have knowledgeable regulators and reasonable regulation. Thus you can go a long way in protecting consumers from price spikes. They can make creative solutions, mechanisms that diminish rates volatility and price shocks, as is the case in Nevada.

There are other mechanisms that the utility itself may implement. In Nevada, our utilities offer equal payments plan, which allows consumers to know for sure what is the exact amount to pay each month. Also, the utility offers energy efficiency audits and many programs for conservation.

In the process of regulation, the regulatory bodies are like judges. How do you observe their independence and how could it be guaranteed?

In Nevada, the utility regulators are appointed by the governor for 4-year terms. They do not run for office at election, so they are somewhat a part of the political process. They have an independence, which helps to keep the integrity of the system.

At the same time, a consumer advocate is appointed for 4 years term by the Attorney General, who is the chief law enforcement officer for the state. This is a politically elected office, directly by the population. Thus, we have a very good balance.

Also, the balance between ratepayers’ and utilities’ interests is clearly spelled out in the law.

Michael Saunders is Senior Deputy Attorney General with the Nevada Attorney General's Bureau of Consumer Protection. At the BCP, he represents the public interest in cases involving the rates and services of electricity, natural gas, water and telecommunications utilities before the Public Utilities Commission of Nevada and various courts of law.
In addition to his education and work experience in the law, Michael has extensive education and work experience in business, public relations, and marketing.

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