MINUTES OF THE
SENATE COMMITTEE ON COMMERCE AND LABOR
Sixty-seventh Session
June 1, 1993
The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 9:30 a.m., on Tuesday, June 1, 1993, in Room 227 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda. Exhibit B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Senator Randolph J. Townsend, Chairman
Senator Sue Lowden, Vice Chairman
Senator Ann O'Connell
Senator Mike McGinness
Senator Raymond C. Shaffer
Senator Leonard V. Nevin
Senator Lori L. Brown
GUEST LEGISLATORS PRESENT:
Senator Ernest E. Adler, Carson City, Capital Senatorial District
Speaker Joseph E. Dini, Jr., Lyon, Storey, Carson (Part) No. 38
STAFF MEMBERS PRESENT:
Brian Davie, Senior Research Analyst
Sheri Asay, Committee Secretary
OTHERS PRESENT:
Lorne Malkiewich, Legislative Counsel, Legislative Counsel Bureau
Tim Carlson, Executive Director, Commission on Economic
Development, State of Nevada
Ray Bacon, Lobbyist, Nevada Manufacturers Association
John Mendoza, Chairman, Public Service Commission, State of Nevada
Scott Craigie, Chief of Staff, Governor's Office, State of Nevada
Kelly Jackson, Staff Counsel to Regulatory Operation Staff, Public Service Commission
Max Jones, Vice President of Marketing, Sierra Pacific Power Co.
John Sande, Lobbyist, Promus Corporation, Harrah's
Senator Townsend opened the meeting and announced a discussion of Senate Bill (S.B.) 231.
Senate Bill 231: Requires public service commission of Nevada to adopt regulations authorizing public utilities to provide electricity to steel mills at flexible or interruptible rates; and providing other matters properly relating thereto.
Senator Ernest E. Adler, Carson City, Capital Senatorial District, addressed the committee regarding S.B. 231. He introduced Lorne Malkiewich, Legislative Counsel, Legislative Counsel Bureau, who he said would explain the bill to the committee.
Mr. Malkiewich stated that he would be speaking about Bill Draft Request (BDR) 58-\, which replaces S.B. 231 (Exhibit C).
Bill Draft Request 58-\: Makes various changes relating to encouragement of new industry in Nevada.
Speaker Joseph E. Dini, Jr., Lyon, Storey, Carson (Part) No. 38, addressed the committee with regard to the BDR 58-\. He noted that other western states have been going all out to attract major industries, by changing their laws to include incentives. Speaker Dini remarked, "I believe this version that's being proposed here today, goes a long way to making Nevada competitive with other western states, in trying to attract major industries."
Speaker Dini noted Arizona's attempts to woo Fort Howard Paper Company. He also mentioned the efforts of the Commission on Economic Development (CED) and Sierra Pacific Power Company to attract businesses to Nevada. Speaker Dini stressed the need for all Nevadans to encourage major industries which offer good paying jobs, and will increase the tax base, to relocate to Nevada. He added that, "Gaming is not going to be able to support this state completely...."
Mr. Malkiewich read from BDR 58-\ (Exhibit C), and explained changes in sections 1 through 5. He noted that there are three benefits, outlined in sections 1, 3 and 5, available for businesses who meet the CED certification requirements listed in section 4.
Mr. Malkiewich discussed the constitutional questions that might arise from section 5, subsection 3 (Exhibit C). He stated that, "...Article 10 of the Constitution specifically allows the legislature to exempt classes of personal property from taxation...."
There was discussion on how BDR 58-\ would correlate with S.B. 231.
Regarding S.B. 231, Senator Townsend explained that the Senate Committee on Commerce and Labor has an intense interest in the bill. He asked, "Are we shifting some public policy responsibilities from the Public Service Commission to the Commission on Economic Development?" He also questioned the terminology in section 4, subsection 2, asking if it needed to be as specific as the 85 percent figure and the word "recycled." Senator Townsend also wondered about the threshold of $25 million (section 4, subsection 3) and the 75 percent of personal property (section 5, subsection 1).
Senator Adler responded that this bill is the first step in this direction, not "the overall generic economic development bill."
He said that the 75 percent of personal property figure was important in the negotiations with Northstar Steel, in order for Northstar Steel to compare Nevada to the Arizona tax rate. Regarding the 85 percent rate (an Arizona figure), Senator Adler explained that California has a 50 percent rate, but that he has no problem with adjusting the rate.
Senator Adler spoke about the $25 million figure. He said he would not be opposed to dropping it to $15 million, explaining that the 85 percent figure and the $25 million were specific for the steel plant.
There was further discussion on the method used to arrive at the different figures.
Senator Townsend asked if the personal property tax goes to the county. Senator Adler responded that it does, except for the amount that goes to build prisons.
In response to a question by Senator Townsend about "providing for the county of location the option to forgive the other 25 percent at their discretion," Senator Adler said there needs to be a uniform standard for the state. He added that the legislation should not result in "pitting a large county against a small county and vice versa."
Senator Brown expressed concern that the counties might lose more than they bring in when they "...cut out three-fourths of the property tax." Senator Adler explained how that situation could be avoided.
Tim Carlson, Executive Director, Commission on Economic Development (CED), State of Nevada, responded to Senator Brown's concern, and explained the action taken by the CED in regard to tax abatement.
Senator Nevin asked if section 5 (Exhibit C) was modeled after Arizona legislation. Senator Adler replied that it was not, and that Arizona, unlike Nevada, has been allowed by constitution to give different tax rates to different industries.
In response to a concern by Senator Townsend, there was general discussion on the recycling provision in the proposed legislation.
Senator Nevin asked if any business has shown an interest in opening a recycling plant in Nevada. Senator Adler responded that there is a potential candidate willing to relocate to northern Nevada, which would take care of all of the state's recycling needs. He added that Northern Steel would consume all of the state's steel waste, i.e., old refrigerators, abandoned cars.
Ray Bacon, Lobbyist, Nevada Manufacturers Association, addressed the committee. He spoke of a company considering relocating to Fernley, Nevada, which would recycle newspapers and convert them to usable building products.
Senator Adler discussed a problem the Public Service Commission (PSC) has with the proposed legislation, in regard to subsidizing the electrical power costs of the new businesses. He talked about the electrical needs of a steel mill, and explained how "mini mills" recycle such things as electric furnaces.
Senator O'Connell wondered if Nevada has a sufficient water supply for potential new businesses. Senator Adler replied that the location site for Northern Steel has a high water table. He said the Fort Howard Paper Mill, which uses a lot of water, is considering locating in Washoe County. Senator Adler explained that the state water engineer would have to issue permits and show that they would not exceed the water capacity.
John Mendoza, Chairman, Public Service Commission, State of Nevada,
addressed the committee on S.B. 231. He said this legislation involves the PSC in a merger with the Commission on Economic Development (CED), and he wants to see a finer delineation between the two. Mr. Mendoza wanted clarification on S.B. 231, specifically on how to apply the legislation to consumers and other businesses. He said the PSC is drafting language to outline their proposed changes.
Senator Townsend said:
For a utility to make a proposal to any large user, if it is to be done within their current rate base, they have a right to do that without consulting the public service commissioner. If they choose, in their next general rate case, to make an application to apply some or all of the discount and place it into rate base for reimbursement, that is the appropriate time for them to make that application. Is that a fair assessment of the process?
Mr. Mendoza replied that it was and agreed that the PSC has the authority to deny the application if they thought it was not in the best interest of the public. He expressed concern about the language in section 1, subsection 1, of the BDR. Mr. Mendoza wondered about the term "reduced," if it implies that there would be a subsidy from the other ratepayers. Senator Townsend explained that the word "may" in lines 3 and 5 was intended to give the PSC discretion in determining the rate. He said the word "reduced" was also intended to give that discretion.
Mr. Mendoza expressed other concerns with the language in the BDR.
There was further discussion on subsidies by other ratepayers.
Scott Craigie, Chief of Staff, Governor's Office, State of Nevada, stated that Senator Adler and Speaker Dini had done an excellent job of "crafting...a program that will not have a subsidy paid by other customers..." He explained that the Governor totally opposed anything that was a subsidized rate, but added that there may be other ways to take advantage of lower rates.
Mr. Craigie referred to section 1, subsection 1 (Exhibit C), and said:
Rather than requiring that this new load be done as a joint venture...we discussed in the meetings allowing this company, and others that would meet this standard, to take advantage of what's called retail wheeling. That is the ability to take electric capacity from outside the state, or from some other generating entity, and bring it directly to the retail customer. In this way, Northstar, for example, would not be a customer in the traditional sense of Sierra Pacific Power Company. Sierra Pacific would not be developing new plant, in order to serve that customer, they would basically buy that electric capacity from out-of-state and they would bring it to that customer...."
Mr. Craigie explained that a policy statement should be decided on rather or not to allow retail wheeling. He said, "I would require that the commission approve a FERC [Federal Energy Regulatory Commission] retail wheeling rate for these customers." Mr. Craigie said it is his understanding that FERC would build in the expense of transmission facilities into that retail wheeling rate. He added that, "Any facilities that have to be built, that have any impact on customer load, other than that brought by this specific customer, would have to go through the resource planning procedure...."
On page 3, Mr. Craigie explained that the state is "...authorizing a bypass of the generation within our state, in a way that allows this company, Sierra Pacific, to offer this transport rate." He explained that the issue of subsidy has been eliminated.
Mr. Craigie concluded his remarks by noting, "This is a very risky business for everyone here...it is in step with some of the changes that are being made at the federal level. Frankly, I think that there is a benefit for the average residential and business customer as well." He elaborated on the benefits to customers.
There was discussion on other states' involvement with retail wheeling.
Kelly Jackson, Staff Counsel to Regulatory Operation Staff, Public Service Commission, addressed the committee. He explained that there are cases currently pending before the PSC, which involve projections of the impact on Sierra Pacific Power Company if Northstar loads are added.
Mr. Jackson said that he had problems from a legal perspective with section 1, subsection 1 (Exhibit C). He thought the language does not provide significant direction to the PSC, and added that it might open the door for litigation if customers are charged varying rates.
Mr. Jackson suggested adding language outlining general criteria that would be applied by the commission in making decisions. He reiterated that the changes were not as yet formalized, and explained them as follows: (1) before authorization by the commission, it would have to be shown that the new business would not locate in Nevada without the reduction, (2) the other economic benefits, that will be derived the by state, are greater than what is being given up by utility ratepayers, and (3) PSC would need to insure that the state would actually get the benefits upon which the reduced costs are predicated.
There was general discussion on rather or not the existing ratepayers would be subsidizing the new businesses coming into the state.
Senator Townsend stressed that he did not want to see the legislation be so specific that "it only ends up dealing with one company."
Mr. Jackson told him that is not the intention of the legal counsel for the Regulatory Operation Staff. He said they are contemplating "general standards the commission could look at..."
Mr. Craigie added, "First of all, I think it would be dangerous for us to open the door to subsidy, under any circumstances...we are opposed to subsidy." He explained that Northstar is not asking for a subsidy, merely trying to get the best rate in the "entire marketplace, not the local marketplace."
Mr. Craigie added:
...You have some options, Mr. Chairman. If you do decide to go the route of the subsidy, I believe you have to define the criteria suggested by the commission. But, without making some statement, you leave this company with the responsibility of offering service to a new customer based on its existing tariffs only. You could have a number of different choices...(1) you could require the possibility of reopening and establishing a new tariff outside a general rate case, which could ultimately result in a subsidy...(2) you could allow for this FERC rate to be passed through...(3) you could define a specific subsidy that's possible.
Mr. Craigie said he would favor using the FERC retail wheeling rate.
Senator Townsend responded that everyone concerned is in agreement that subsidies would not be considered.
Stan Warren, Lobbyist, Sierra Pacific Resources, expressed concern about the $25 million figure in section 4, subsection 3 of Exhibit C. He prefers a $50 million investment in the plant.
Mr. Warren introduced Max Jones, Vice President of Marketing, Sierra Pacific Power Co.
Mr. Jones expressed concern over a statement made by Senator Townsend, that we could "cut the deal with the customer, then go to the Public Service Commission and get approval somewhere down the road." He explained that they arranged the situation with Northstar to go to the PSC "arm in arm, if you will, to try to expedite that."
Mr. Jones concluded:
Two points...should be addressed...it's not intended that we would eliminate or bypass any of the existing rules, such as the resource planning, the environmental impact requirements of the state. The other thing is...time. You have to have things in place, so that if you have to build a generator you can cut back, but time is very important, too....
Mr. Jones added that with Northstar Steel, there is no way they can meet the deadlines.
Senator Townsend announced that further discussion on S.B. 231 would take place at a subcommittee meeting on Thursday, June 2.
Senator Townsend opened discussion on Senate Bill (S.B.) 434.
SENATE BILL 434: Provides for licensing of administrators of residential facilities for groups.
Senator Nevin said there had been a subcommittee meeting on S.B. 434 prior to this meeting, and explained the amendments that were added.
There was discussion on the tests involved in S.B. 434.
SENATOR NEVIN MOVED TO AMEND AND DO PASS S.B. 434.
SENATOR SHAFFER SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR O'CONNELL ABSTAINED.)
* * * * *
Senator Townsend closed discussion on S.B. 434 and opened discussion on Senate Bill (S.B). 346.
SENATE BILL 346: Provides that prohibition against discrimination against employee for use of product outside premises of employer does not preclude higher health insurance premiums.
There was discussion on the exact meaning of S.B. 346. Senator Townsend said he understood there were going to be amendments to the bill. Senator Nevin thought there would be guidelines forthcoming on what would constitute valid reason for increasing premiums. He wondered who would determine which product is considered hazardous to an employee's health.
John Sande, Lobbyist, Promus Corporation, Harrah's, addressed the committee. He explained that, "Until 1991, an employer could charge higher premiums for any product that was used." Mr. Sande said he had not seen the new language proposed by Lobbyist Sam McMullen.
Senator Townsend said that if the S.B. 346 was not amended by Friday, June 4, the committee would move the bill as it is. Mr. Sande responded:
...I have no problem if you want to limit it to certain products...but this is a practice that is going on, has been going on. And last session when we adopted this so-called non-discriminatory language at the behest of the tobacco industry, it was done on the basis that this wouldn't affect anybody's practices. That was just to prevent them from firing somebody who smokes....
Senator Townsend held further discussion on S.B. 346 until Friday, June 4. He asked Brian Davie to distribute to the committee a letter of intent to the Attorney General, with regard to Senate Bill (S.B.) 375.
SENATE BILL 375: Makes various changes relating to solicitation by telephone.
Senator Townsend spoke about Bill Draft Request (BDR) 53-1861.
BDR 53-1861: Adopt preferred worker program.
SENATOR SHAFFER MOVED TO INTRODUCE BDR 53-1861.
SENATOR O'CONNELL SECONDED THE MOTION.
THE MOTION CARRIED UNANIMOUSLY.
* * * * *
There being no further business, Senator Townsend ajourned the meeting at 10:53 a.m.
RESPECTFULLY SUBMITTED:
Sheri Asay,
Committee Secretary
APPROVED BY:
Senator Randolph J. Townsend, Chairman
DATE:
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Senate Committee on Commerce and Labor
June 1, 1993
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