NV Energy’s plan for future power gets early approval

It’s a 155-page document we can summarize in one word: Yes.

A draft order scheduled to come before the Public Utilities Commission of Nevada on Wednesday largely gives the nod to power company NV Energy’s integrated-resource plan, which describes how the company plans to obtain and finance its electricity for the next two decades.

Among the plan’s major components are a $301 million smart-meter system, several power-purchase agreements with renewable-energy providers and a $510 million transmission line to link NV Energy’s northern and southern power grids.

Though the proposal’s key elements largely survived the commission’s vetting process, commission Chairman Sam Thompson’s order called for extensive oversight as NV Energy rolls out its smart-meter program.

The order also questioned the “inferior” performance of a geothermal company from which NV Energy buys power, and it noted that just half of the renewable energy the utility has contracted for has actually been delivered. The rest has been delayed or canceled, and that’s made it tough for the utility to meet the state mandate requiring it to obtain a certain share of its power portfolio from renewables.

NV Energy officials said they would reserve comment until the commission issues its final order Wednesday.

On NV Energy’s Advanced Service Delivery smart-meter system, Thompson’s order noted eight areas of concern, including whether the technology is mature and reliable, whether consumers will embrace smart meters and whether NV Energy has crafted effective customer-privacy and cyber-security protections. The order also examined how to ensure smart meters and their related programs, such as optional peak-pricing initiatives, don’t erode consumer protections, and it evaluated the initiative’s cost and budget risks.

Among the findings: The $301 million Advanced Service Delivery system probably wouldn’t be financially viable without $138 million in stimulus grants NV Energy secured from the federal government. Save for that funding, it’s “highly unlikely that the commission would countenance this investment in the current economic environment,” Thompson wrote.

NV Energy said it will save more than $35 million a year in operating costs thanks to the remote service connections and disconnections that smart meters will allow. Thompson’s order calls for a separate investigation into whether remote disconnections will threaten consumers’ health and safety, though the order also noted that NV Energy’s proposed disconnection threshold of $75 in unpaid bills exceeds the state Consumer Bill of Rights’ $50 delinquency minimum.

NV Energy can’t change its disconnection policies until the commission has completed its consumer-protection investigation, the order said.

The commission will lead a separate examination of NV Energy’s proposal to test optional peak-pricing programs, which would let the utility charge higher prices for electricity use from 3 to 7 p.m. in the hottest months. Consumers participating in dynamic-pricing programs would have in-home or online displays that show them the hourly cost of power, enabling them to shift some electricity use to cheaper times of the day.

The draft order also approves all of the renewable-energy power-purchase agreements NV Energy submitted in its proposal, including SolarReserve’s Crescent Dunes solar-thermal plant and Ram Power Corp.’s Clayton Valley geothermal project, both in or near Tonopah; NextLight Renewable Power’s Silver State Solar photovoltaic plant in Primm; WMNRE’s landfill-gas recovery operation in Lovelock; Pattern Energy Group’s Spring Valley Wind farm in eastern Nevada; and Ormat’s McGinness Hills and Hot Sulphur Springs 2 geothermal plants, both in Northern Nevada.

Pricing details revealed after a public-records request by the Review-Journal found that NV Energy plans to pay 8.6 cents to 13.5 cents per kilowatt hour to buy power from the plants. That’s two to four times higher than the 4 cents per kilowatt hour the utility has been averaging in the last year or so on its overall wholesale-power buys, which come mostly from natural-gas generation.

Nevada’s renewable portfolio standard requires NV Energy to obtain 12 percent of its power from renewables in 2010, and 25 percent of its power from green sources by 2025.

Despite the contract approvals, the order had pointed words regarding Ormat, a Reno geothermal developer. The commission is “deeply concerned” about NV Energy’s contracts with Ormat, which “has a history of inferior project performance,” the order said.

Ormat owns and operates nine geothermal projects that sell energy or energy credits to NV Energy; eight of those plants are underperforming, the order noted.

Paul Thomsen, Ormat’s director of policy and business development, said Thursday that the company is in compliance with all the contracts it has with NV Energy. For the time periods listed in the draft order, Ormat has exceeded its contract expectations for renewable-power credits delivered to the state and to NV Energy, Thomsen added.

Ormat, which is responsible for about 90 percent of the nation’s installed geothermal capacity, also provides a constant power source, unlike other green energy such as solar power and wind farms, Thomsen added.

Through 2009, geothermal and wind project cancellations, delays and production problems cost NV Energy more than 8 million kilowatts of portfolio credits. From 2006 to 2008, a number of geothermal suppliers fell short of contracted supplies because of resource shortages and equipment problems. If the projects in service had met their contractual supply amounts, NV Energy would have exceeded its 2009 portfolio standard of 12 percent by a wide margin, the order said. (NV Energy reached the 10.5 percent mark.)

What’s more, only a third of renewable projects NV Energy contracts for actually get completed on time, the order said. Another third are delayed, sometimes for years, and roughly a third are canceled.

“The commission finds it disingenuous for (NV Energy affiliate Nevada Power Co.) to claim valiant efforts to comply with the (renewable portfolio standard), yet enter into so few (power-purchase agreements) knowing the historically high project attrition rate,” Thompson wrote.

The draft order called for approval of the proposal’s third major piece — the One Nevada transmission line (ONLine) — provided the agreement between NV Energy and codeveloper LS Power doesn’t change significantly in its final form.

The 500-kilovolt ONLine would run 235 miles, from Ely to NV Energy’s Harry Allen Generating Station in Apex. The line would let NV Energy tap into green power generated in rural areas, and it would allow the company’s subsidiaries to share resources ranging from hydroelectric power in the north to natural gas in the south.

The full commission is scheduled to discuss the draft order and issue a final decision Wednesday at 9:30 a.m., inside commission headquarters at 101 Convention Center Drive, Suite 250.

Contact reporter Jennifer Robison at jrobison
@reviewjournal.com or 702-380-4512.