NV Energy rejects legislation it sought

Majority Whip Howard Watts speaks during the Committee on Natural Resources on Monday, March 27, 2023 in Carson City Nev. (Trevor Bexon / Nevada Current)

by Dana Gentry, Nevada Current
Legislation proposed by NV Energy to expand its production in the state and avoid costly energy purchases on the volatile open market doesn’t “go far enough” to secure an adequate supply of electricity, according to the utility’s CEO Tony Sanchez. “The great majority of what’s in Assembly Bill 524 already can be done by the utility in the context of the integrated resource planning process.”

Union officials lined up Tuesday behind the utility to testify against AB 524, a measure supporters say is designed to give customers relief from electricity rate shock and require better planning from the power company.

Nevada’s Consumer Advocate projects power bills in Southern Nevada will average $470 for July.

NV Energy, a prolific contributor to lawmakers, is used to getting what it seeks at the Legislature.

“A lot of people have gotten a little bit of what they want,” the bill’s sponsor, Democratic Assemblyman Howard Watts testified Tuesday before a joint hearing of Assembly and Senate Growth and Infrastructure committees. “A broad range of people have also been told ‘no’ for some of the things that they’ve wanted to get in this bill.”

“I believe this bill strikes the appropriate balance and any suggestion it doesn’t go far enough should be looked at very carefully because you don’t have the evidence before you,” testified attorney Laura Granier, representing the Nevada Resort Association. “If you want to give customers relief from the skyrocketing energy rates, he (Watts) has hit the nail on the head.”

Talks with NV Energy, according to Watts, included stakeholders “from labor to consumer advocates, community organizations, conservation environmental groups, customers large and small,” and focused on reliability.

He noted the Public Utilities Commission is investigating whether NV Energy has adequate resources and is planning properly to ensure “the supply of energy is sufficient to satisfy demand and maintain reliable continuous service.”

The focus of Watts’s bill is strengthening the energy resource planning process.

“What we want is to have public policy that ensures that we are addressing issues of reliability, that we’re addressing issues of affordability, and that we are continuing to develop clean energy resources,” that are vetted through a regulatory process, he said.

NV Energy has what’s known in utility parlance as an ‘open position,’ a lack of diversity in its energy resource portfolio that subjects it to market exposure and requires it to resort to purchasing costly energy on the open market.

“While NV energy can generate a megawatt of energy for about $50, purchasing that exact same amount of energy in the open market cost more than three times as much,” Janet Wells, NV Energy’s vice president of regulatory affairs, testified Tuesday before a joint hearing of the Assembly and Senate Growth and Infrastructure Committees.

The utility spent $1 billion during 2021 and 2022 to buy energy on the open market, according to Sanchez. He says $724 million of that “would have been unnecessary” if the utility had more in-state resources.

“There is a need to have a strong pronouncement from the state that we need to close that open position,” Sanchez testified.

NV Energy wants the Legislature to fast-track approval of renewable projects so it can take advantage of a 50% federal tax credit to offset investments on clean energy and storage projects.

“And if we don’t take advantage now, we lose that opportunity,” testified Wells of NV Energy. “We estimate that every 100 megawatts we build and add to our grid, we will save customers an average of $10 million a year.”

Granier warned lawmakers to be wary of the utility’s proposals.

“You will have no idea of what kind of rate impact it will have if you were to accept the invitation to create some directive to the utility or to the commission to close that open position,” she testified. “So please be cautious if proposals like that are made.”

‘Full vetting’

AB 524 seeks to stem the utility’s penchant for getting what it seeks in short order, rather than abiding by a planning process that takes place every three years.

Granier noted what she called a number of “unusual expenses that are already being undertaken” by the utility. The most recent instance – the expansion of a natural gas-generated plant designed to cover demand during peak use, with an estimated cost to taxpayers of $366 million. It was the utility’s fourth amendment of its integrated resource plan since it was formulated in 2021.

“In addition, that utility recently in the last few months has filed a three-year natural disaster protection plan, pursuant to which it proposes to spend $75 million guarding against natural disasters,” she said. The NRA later said Granier misspoke and meant to say $475 million.

NV Energy is also upgrading electric vehicle transportation at a cost of $170 million.

“If you don’t improve that process and allow the Public Utilities Commission to have a transparent, full, thorough vetting of the utility proposals, then you will only worsen the problem because you don’t have the information before you to vet utility proposals,” testified Granier. “And it begs the question… why the utility would not just put all of that evidence before the commission for a thorough vetting where the rate impacts can be fully analyzed?”

Supporters of the bill also voiced concerns about NV Energy evading regulatory approval of capital projects from the PUC by seeking legislative approval instead. Utilities are permitted to pass the cost of capital projects on to their customers.

Assemblywoman Heidi Kasama, a Republican, asked PUC General Counsel Garrett Weir for an example of legislative intervention in the regulatory process.

Weir cited the 2021 bill to approve Green Link, construction of transmission lines along the west and north ends of the state. NV Energy turned to lawmakers after the PUC rejected a portion of the plan.

“There were a lot of Field of Dreams analogies of ‘if you build it, they will come,’ and that sort of speculative analysis doesn’t often result in an approval of a plan at the Commission,” Weir testified.

The $2.5 billion cost of the project has yet to be factored into customer’s rates.

“These issues must not be decided with legislative mandates or with short circuits of the Public Utilities Commission process,” testified Granier. “The Legislature should not give a directive to the Commission to prefer any plan put forward by the utility or to accept any plan put forward by the utility. Any legislative directive that is proposed but circumvents that process or directs the Commission to prefer an alternative could have devastating rate impacts on customers.”

Many of the charges on NV Energy’s bills can be directly traced to legislation.

AB 524 would allow NV Energy to revisit its resource plan with the PUC at least every three years and more frequently, if necessary.

“If time is of the essence, it is in their court under this bill to put all of the information before the commission so it can be fully and properly vetted,” testified attorney Granier, and “avoid unintended consequences like rate shock to customers.”

The bill “ensures that the workload on our Public Utilities Commission isn’t too great by ensuring there’s only one rate case under consideration” at a time, Watts said.

He also addressed concerns that more frequent rate cases would “allow rates to go up faster.” He said phasing in some rates over time, rather than all at once, could be beneficial to customers.

The bill also seeks to use a strong planning process to ensure a mix of energy generation sources in the state, and to reduce demand, especially during peak periods, according to Watts.

“We still get a significant majority of our power generation from natural gas generation. And it’s those prices… that have really pushed bills up,” Watts said. The “general direction of this bill is let’s build out more local clean energy resources and dedicated clean energy resources.”

AB 524 “allows full vetting by the Public Utilities Commission in Nevada, and allows them to make findings concerning what it is in the public interest when setting just and reasonable rates,” Consumer Advocate Ernest Figueroa testified. “This is a very important component of this legislation and some do not like that.”

DANA GENTRY, Nevada Current
Dana Gentry is a native Las Vegan and award-winning investigative journalist. She is a graduate of Bishop Gorman High School and holds a Bachelor's degree in Communications from the University of Nevada, Las Vegas.

This article was republished under the Creative Commons license and through the generosity of Nevada Current