NV Energy expects purchase of Arizona natural gas plant to bring needed new power

By Daniel Rothberg

Friday, July 8, 2016 | 2 a.m.

As part of a pending sale with electricity generator Calpine, NV Energy plans to acquire an Arizona natural gas plant for $75.6 million and invest about $21 million in the facility.

The price was disclosed in a filing that NV Energy made with the Public Utilities Commission. The filing outlines forecasts for NV Energy’s Northern Nevada operations, which are conducted through its subsidiary, Sierra Pacific Power Co. The filing was posted on the commission’s website Thursday and contains the utility’s proposed plan for meeting energy demands in the coming years.

In addition to purchasing the Arizona natural gas plant, the filing of more than 1,000 pages calls for a relatively small increase in funding for energy efficiency programs and seeks additional funding for a $33 million transmission line. It also asked for more time providing the utilities commission with an analysis of the environmental and economic impacts of renewable resources, including rooftop solar.

“(The plan) is being filed at a time of rapid change in the electric energy industry,” the utility wrote, noting that natural gas prices are expected to remain low and that the price of large-scale solar has decreased significantly. “As a result, short-run wholesale electric prices are projected to remain low.”

NV Energy’s plan, which requires commission approval, will be vetted in the coming months and could change. For now, the utility’s preferred plan revolves around the South Point Energy Center, the $75.6 million natural gas plant NV Energy plans to buy from Calpine. Under the proposed plan, NV Energy would tap some of South Point’s power — most of which will go to Southern Nevada — for its northern operations. Doing so, NV Energy argues, is its most cost-effective and reliable option.

Buying the South Point Energy Center

Calpine and NV Energy entered into a purchase agreement for the South Point Energy Center on April 1, after the utility had put out a solicitation seeking 400 to 700 megawatts of energy for customers. Pending regulatory approval, NV Energy plans to finalize the sale at the end of the year.

In addition to spending an initial $100 million on the 550-megawatt South Point Energy Center, the utility expects to spend an additional $111.9 million on the cost of transmission from the facility.

Calpine’s South Point Energy Center would help provide NV Energy with new electricity as several power sources come offline. The utility has argued that purchasing an existing facility would be more reliable than constructing its own fossil fuel plant, something it does not expect to do in the next decade. NV Energy needs new power as a natural gas contract ends and a coal plant goes offline.

A deal between NV Energy and Calpine requires approval from the Federal Energy Regulatory Commission. An application with FERC said South Point Energy Center is in need of significant investment and that Calpine had been unable to operate it profitably, given low prices for natural gas. But the filing also said such a facility could present an opportunity for a utility, presenting a low-cost resource at a fraction of the cost to construct a new natural gas plant. A newly constructed facility producing a comparable amount of power would cost $711 million, NV Energy has estimated.

The FERC application argues that the sale “presents a unique value to NV Energy’s customers, and that (it) will not result in any adverse effect on competition or any harm to wholesale markets.”

Energy efficiency, the cost and benefits or renewable

In its plan for Northern Nevada, NV Energy proposed investing $39.9 million in energy efficiency programs over the next three years. Its budget would be set at about $12.8 million in 2017 but rise slightly in 2018 and 2019. Energy advocates have criticized the utility in the past for not spending enough on these programs, but it is also constrained by how much utility regulators allow it to spend.

Last year, the utilities commission denied a request by NV Energy for a $56 million annual energy efficiency budget in Southern Nevada. It set the budget around $40 million and cut several energy efficiency programs, including one for residential LED lights and another for efficient pool pumps.

In part because of that same order, NV Energy is ending a residential lighting and refrigerator program in Northern Nevada. With the $39.9 million budget, it argued that it was opting for a less aggressive plan to keep rates down for customers, including those not participating in the programs.

Given the high-pitched debate over rooftop solar, the commission asked in April that NV Energy examine costs and benefits of several renewable resources, from large-scale wind to rooftop solar. NV Energy included an analysis over 100 pages but asked regulators for more time as it keeps looking at environmental factors and economic impacts. It plans to file that information within 60 days.