NV Energy doesn’t need legislative action to shutter coal plants

By Andrew Doughman

Monday, April 8, 2013 | 2 a.m.

NV Energy made waves last week with a major legislative amendment that called for divesting from coal and investing in renewable energy and natural gas.

The amendment left some wondering why the proposal was before the Legislature at all; if the state’s utility company wants to say "out with coal and in with renewable energy and natural gas," it can accomplish that through existing regulation; a change in state law isn't necessary.

Although the company’s bill would accelerate the closure of coal plants, NV Energy wrapped that plan with additional policy changes that worried legislative observers who had scant time to review the lengthy amendment when it was introduced at a hearing Wednesday.

The company could ditch the legislative amendment if it forgoes those other policy changes and focuses solely on accelerating the closure of coal plants and concurrently accelerating investment in renewable energy.

“This all can and will be done at the (Public Utilities) Commission if the Legislature does not approve this bill,” said Dan Jacobsen, consumer advocate with the state’s Bureau of Consumer Affairs.

The company is considering closing its controversial Reid Gardner coal-fired power plant in Clark County; it has to file a comprehensive report about the plant to the PUC — the regulatory body that oversees NV Energy — by Aug. 15.

Like the bill in the Legislature, that report will consider the future of the coal plant and possible replacements, including renewable and natural gas options.

But a plan stemming from the report due this summer would not necessarily have the added benefit of boosting NV Energy’s profits, Jacobsen said.

The utility’s “NVision” plan calls for the Legislature to approve a long-term plan that mandates a year-by-year schedule for the accelerated retirement of coal-fired assets and construction of natural gas and renewable energy assets to replace coal.

NVision plan would likely make the company more money than a commission-led resource plan, Jacobsen said.

That’s because NV Energy makes money when it builds things such as power plants and transmission lines. This is part of its rate base.

A higher rate base means the utility can levy higher charges on ratepayers and collect more profits for the company and its shareholders.

“The company is trying to get a guaranteed profit over the next 12 years by doing it at the Legislature instead of the PUC,” Jacobsen said.

NV Energy’s proposal could also mean it would be less responsive to ratepayer concerns and less flexible in responding to prevailing market conditions, said Stacey Crowley of the Governor’s Office of Energy at a legislative hearing Wednesday.

For example, in 10 years, the price of various types of energy and the composition of the regional energy market could be vastly different from today. But NVision would mandate certain types of investment and ownership schemes on an annual basis with NV Energy — not the PUC — responsible for making changes to the plan.

The company says it’s best to pursue a legislative strategy because the PUC has a “minimum cost” plan that places paramount concern on ratepayer impact.

“The minimum cost plan likely would not include the retirement of coal and the addition of renewable facilities in the short run,” NV Energy spokesman Rob Stillwell wrote in an email.

Stillwell also said that NVision envisions a “long-term plan for Nevada’s energy future,” so it’s best that state legislators have a say in such an important energy policy change.

The PUC sets policy through its three-year “integrated resource plan,” a responsibility that complements its rate-making authority.

But this long-range plan goes beyond the three-year commission plan, Stillwell said.

“This was about setting policy for the state of Nevada, which is something that would typically come out the Legislature,” he said.

The commission can also consider a plan to close three-quarters of Reid Gardner by 2014, which is what NVision calls for.

At any time, the company can file an amendment to its resource plan that could ask the commission to accelerate closing coal plants.

The commission “provides an avenue for NV Energy to transition from coal to natural gas/renewables,” PUC spokesman Peter Kostes wrote in an email.

The commission would have 135 days to review the proposal and see how the coal plant could be replaced with a mix of energy efficiency measures, construction of natural gas or renewable energy plants, and power purchase contracts with a variety of in-state and out-of-state energy providers.

The NV Energy proposal would give the commission 210 days to review and approve the NVision plan.