Companies seek to leave Nevada Power, utility considers adding capacity

On Earth Day last month, just as a hearing was getting underway on data-storage company Switch’s application to leave Nevada Power Co. and buy 34 megawatts of power on the wholesale market, the utility’s parent company issued a little-noticed press release.

The NV Energy statement said the company had exceeded Nevada’s 18 percent Renewable Portfolio Standard requirement for 2014. It added that NV Energy has issued two requests for proposals for up to 200 megawatts of incremental renewable energy in Nevada that will be presented to the Public Utilities Commission for approval later this year as part of its continued commitment to renewable energy.

The plan is to have the new projects built before the end of 2016.

Nevada Power is also pursuing plans to build another 54 megawatts of alternative energy production as part of its application, approved last year by the PUC, to eliminate coal-fired electricity from its overall generation. A $438 million solar plant on the Moapa River Paiute Indian Reservation was part of this original plan, but the PUC rejected the project because of its cost and because it was not competitively bid.

But at the Switch hearing, Nevada Power Senior Vice President Shawn Elicegui said four gaming companies — Wynn Resorts Ltd., MGM Resorts International, Caesars Entertainment Corp. and Las Vegas Sands Corp. — could all follow Switch’s lead and leave Nevada Power. All have submitted letters to the PUC announcing their intentions to purchase power from a “qualified energy provider” for their energy needs.

Because the companies haven’t yet filed applications, there are no details on where they might purchase their power.

But those four gaming companies collectively have a peak demand of about 370 megawatts of electricity, Elicegui said.

By contrast, Nevada Power’s peak demand in 2014 was 5,572 megawatts.

Some are asking why NV Energy, operating as Nevada Power in Southern Nevada, is proposing 200 megawatts of new alternative energy, costing tens of millions of dollars in construction costs, that would be borne by ratepayers, if 400 megawatts worth of current use could vanish in the next few years.

‘LONG CONCERNED ABOUT CUSTOMERS’

When asked about the concern, the state Consumer Protection Bureau responded, “We have long been concerned about customers having to bear higher costs when electricity demand is not growing. Based on these concerns, we have opposed much of the expansion of NV Energy’s generation capacity over the past eight years. Now that very-low-cost electricity is available on the wholesale market, policymakers should be even more skeptical about future NV Energy proposals to build more generation capacity.”

NV Energy Public Relations Manager Jennifer Schuricht offered this statement, “We are required to issue requests for renewable energy proposals and to bring the results of that process to the Public Utilities Commission of Nevada as part of our integrated resource plan. We believe the integrated resource planning process is the best way to address the uncertainty associated with forecast energy demands, and to identify the best resources to meet the needs of our customers in a cost-effective manner.”

But legislators are also raising questions about whether the 2001 law allowing large companies to exit and purchase power on the wholesale market should be reconsidered. There is also some criticism aimed at those considering leaving Nevada Power.

State Sen. Kelvin Atkinson, D-Las Vegas, a Senate Commerce, Labor and Energy Committee member, said having large customers leave the utility is “probably inappropriate.”

“You don’t come up with those plans overnight; that has been something that has been planned for years,” he said of the alternative-energy development plans by Nevada Power. “I just think that it’s a slap in the face. Because they were in these discussions early on about where we should be. And sometimes when people don’t get what they want, they come up with these ideas.”

If the big gaming companies leave, it will be a huge detriment to ratepayers, Atkinson said.

“So I hope they think about the ratepayers,” he said.

Assembly Minority Leader Marilyn Kirkpatrick, D-North Las Vegas, said lawmakers need to revisit the 2001 law.

The measure’s intent 14 years ago was to help reduce cost pressures on the utility at a time of high demand, a situation that no longer exists.

“The game has changed in our state on renewables, and the Legislature at the very least should in the interim go back and revisit it,” Kirkpatrick said. “I think we should ensure that we have all the protections in place for ratepayers.”

It would be a big discussion to try to have with the few days left in this session, she said.

“Maybe it warrants a special session,” Kirkpatrick said. “I don’t know.”

ISSUE NOT FRONT AND CENTER

Senate Majority Leader Michael Roberson, R-Henderson, said the issue is not front and center for most lawmakers given the focus on completing the budget, but that could change over the next 30 days. The Legislature must adjourn by June 1.

A filing by PUC staff at the Switch hearing, which concluded in late April, suggested that the company should pay $27 million to leave the utility to cover the exit costs to other ratepayers, including disposing of excess electricity capacity on the wholesale market at a potential loss.

The new alternative-energy projects Nevada Power is pursuing are the result of Senate Bill 123, passed by the 2013 Nevada Legislature, which directed the utility to move away from coal-fired electrical generation and into alternative energies.

The utility plans to close its coal-fired plant at its Reid Gardner facility at Moapa by Dec. 31, 2017. Some units were shut down at the end of 2014. It will also end its interest in the coal-fired Navajo Generating Station near Page, Ariz., by Dec. 31, 2019.

But if major companies leave the utility, the new alternative energy projects meant to replace Reid Gardner and provide for growth in demand could generate unneeded capacity.

The potential of excess capacity is one reason the PUC staff is recommending the $27 million exit fee rather than $18 million proposed by Switch.

Ratepayers will face other costs in coming years as a result of the move to drop coal and close Reid Gardner.

The PUC, in calculating Switch’s share of the costs for remediation of the plant, estimated those total costs at more than $100 million.

Contact Sean Whaley at swhaley@reviewjournal.com or 775-687-3900. Find him on Twitter: @seanw801.