MINUTES OF THE meeting

of the

ASSEMBLY sELECT Committee on Energy

 

Seventy-First Session

March 27, 2001

 

 

The Select Committee on Energy was called to order at 1:30 p.m., on Tuesday, March 27, 2001.  Chairman Douglas Bache presided in Room 4100 of the Legislative Building, Carson City, Nevada.  Exhibit A is the Agenda.  Exhibit B is the Guest List.  All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

 

COMMITTEE MEMBERS PRESENT:

 

Mr.                     Douglas Bache, Chairman

Ms.                     Barbara Buckley, Vice Chairman

Mr.                     Joseph Dini, Jr.

Ms.                     Sheila Leslie

Mr.                     Roy Neighbors

Mr.                     David Parks

Ms.                     Debbie Smith

Ms.                     Kathy Von Tobel

Mr.                     Lynn Hettrick

Mr.                     David Humke

Ms.                     Sandra Tiffany

 

 

GUEST LEGISLATORS PRESENT:

 

Assemblywoman Marcia de Braga, District No. 35

Assemblyman David Goldwater, District No. 10

 

STAFF MEMBERS PRESENT:

 

Kevin C. Powers, Committee Counsel

David S. Ziegler, Committee Policy Analyst

Cheryl Meyers, Committee Secretary

 

OTHERS PRESENT:

 

John Wellinghoff, Attorney at Law, Representative, Sierra Concepts, Inc., Green Energy Business Council of Nevada, Las Vegas, Nevada

Dave McNeil, Building and Efficiency and Renewable Energy Projects Manager, Nevada State Energy Office, Carson City, Nevada

Debra Jacobson, Director/Government and State Regulatory Affairs, Southwest Gas Corporation, Las Vegas, Nevada

Mike L. Baughman, Representative, NTS Development Corporation, City of Caliente, Eureka County and Lincoln County, Carson City, Nevada

Timothy Hay, Chief Deputy Attorney General, Consumer Advocate, State of Nevada, Carson City, Nevada

Robert B. Liden, Chief Financial Officer, Stirling Energy Systems, Inc., Phoenix, Arizona

Scott M. Craigie, President, Alrus Consulting, Reno, Nevada

Judy Stokey, Government Affairs Executive II, Nevada Power and Sierra Pacific Power, Las Vegas, Nevada

Mike Smart, Vice President, Resource Management, Nevada Power and Sierra Pacific Power, Las Vegas, Nevada

Daniel Schochet, Vice President, Ormat, Sparks, Nevada

Donald Soderberg, Chairman, Public Utilities Commission (PUC), State of Nevada, Carson City, Nevada

Marion Barritt, Director, Sunrise, Sustainable Resources Group, Gardnerville, Nevada

Joseph Johnson, Government Relations, Toyiabe Chapter of the Sierra Club, Reno, Nevada

Ernie Adler, Representative, Nevada Housing Coalition, Carson City, Nevada

Charles Horsey, III, Administrator, Nevada Housing Division, State of Nevada, Carson City, Nevada

Bernard T. Santos, J.D., Capital City Task Force Coordinator, AARP, Carson City, Nevada

C. E. Edwin Fend, Representative, AARP, Reno, Nevada

Michael Hillerby, Office of the Governor, State of Nevada, Carson City, Nevada

Ernest Nielsen, Washoe County Senior Law Project, Washoe County Senior Services, Reno, Nevada

Thomas Wilson, Representative, Nevada Utility Reform Alliance, Carson City, Nevada

Douglas R. Ponn, Vice President, Governmental and Regulatory Affairs, Nevada Power and Sierra Pacific Power, Las Vegas, Nevada

Mike Willden, Administrator, Department of Human resources, Welfare Division, State of Nevada, Carson City, Nevada

 

 

Chairman Bache stated the sponsors of the bills for today’s presentation were needed in the Assembly Ways and Means Committee shortly after 3:00 p.m.  He asked if witnesses could keep their testimony concise and to the point in regard to the bills.

 

Assembly Bill 418:  Revises provisions concerning conservation of energy and use of alternative sources of energy. (BDR 58-1198)

 

Assemblywoman Marcia de Braga, District 35 spoke as the sponsor of A.B. 418, which she hoped would provide some incentives for the exploration and development of renewable sources of energy in the state.  Nevada had tremendous renewable resources and in light of the current jump in energy prices it seemed to be the perfect time to look at development of those resources.  Until now, trying to encourage utilities to purchase any significant amount of energy from renewables had been very difficult.  Sierra Pacific Power Company actually purchased more than most.  Even though the price had been higher than the cost of energy from other sources they had purchased considerable energy from renewable sources.  It had been a vicious circle, she stated.  Funding for exploration had been contingent upon the ability to sell the power and purchase of the power was contingent upon the energy being competitively priced.  This had resulted in a less than promising atmosphere for developers.  The recent spike in the cost of other forms of electrical generation could have helped the developers, she stated.  Utilities would take the position that if the renewable portfolio was increased they would have to have the ability to raise rates to compensate.  The utilities would also state at the present time the percentage of renewables that was advocated by A.B. 418 was not available.  Therein lay the problem, she stated.  She hoped the bill would begin to look for a solution by offering incentives that would encourage the development of those resources so there would be sufficient alternatives available for purchase to meet the portfolio. 

 

Section 1 of A.B. 418 defined biomass.  Section 3 added biomass, geothermal, natural gas, propane, solar energy and wind to the list of fuels that could be used by net-metering systems.  She recommended the bill be amended to add hydrogen.  Another amendment could be to change the net-metering provisions so individuals that generate power in excess of the amount they used were paid for the generation returned to transmission instead of receiving a credit as done now.  The net-metering provision was put into law by Senator Titus in 1997.  The provision had been helpful for individuals that have generated more than enough power for their personal use.  The suggestion to change the net-metering provision could be an additional incentive if the individuals were paid rather than given a credit in the future.  Section 4 enlarged the portfolio standard to 5 percent by the end of 2002 and increased 2 percent each year thereafter until 15 percent of the total amount of electricity consumed.  If the 15 percent was not available now, she hoped through the proper incentives it would be available by the target date.  It was hoped in the time allotted there would be sufficient energy produced at an affordable cost to allow the utilities to fulfill the requirement.  Section 4 further stated the terms of a contract for power from a renewable energy source be written for a minimum of ten years.  She was not sure it was a sufficient length of time; however, others testifying would be able to shed light on the pros and cons of the stipulation.  Subsection 2 of Section 4 revised the reporting requirements and timelines.  Section 5, subsection 6 required the Commission on Economic Development to disseminate information on new facilities.  The Public Utilities Commission (PUC) performed some of the tasks now and perhaps the office could give more information to what extent their information mirrored the bill.  In some states the program had been enhanced by providing a rebate for buying power produced from renewables.  There was an even greater rebate for purchasing power produced from renewables produced in a particular city in order to encourage local businesses and industry to develop there.  Section 6 would require that construction or renovation of a building larger than 6,000 sq. ft. requires analysis of the cost effectiveness of installation of alternative sources of energy including co-generation.

 

Ms. de Braga stated Section 7 adds, in addition to solar, all types of alternative sources of energy, and hydrogen could be added in this section.  She remarked the committee was aware of how serious the energy crises was and could be.  She added there was an opportunity because of the shortage of power for the state.  She felt the state could be headed toward establishment of smaller generating units that could serve specific towns or areas of the state.  Whether the idea became the new direction or not, the legislators needed to look at some of the problems that had already been created even this early in the power generation shortage.

 

Ms. de Braga indicated Antelope Valley, west of Austin, was created because Sierra Pacific gave the farmers a very low interruptible power rate.  The area would never have been developed without the rate.  Currently it was a productive area with farms thriving.  Under the present energy crises, the power rates would increase from 70 percent to 146 percent over the next couple of years. Often, she indicated, there were people that commented if their rates were increased they would go out of business.  In the case of the farms in Antelope Valley, there was no question. There were probably other businesses around the state that were dependent on Sierra Pacific’s interruptible rate.  The state needed the ability to reduce those rates at least until some alternative power source could be developed to meet their needs.  The state also needed to provide the help necessary to establish such power generation.  She had been told wind-generated power would be the easiest type of power for Antelope Valley to utilize; however, something had to be done before their production was shut down.  Another possibility would be for the farmers to have access to power generated in Dixie Valley, geothermal power.  At present all of the power generated in Dixie Valley went to Bishop, California.

 

Ms. de Braga wanted to discuss another area of the state.  She presented maps of Nevada (Exhibit C) to the committee members, explaining there was an interesting problem, recently created, with potential for the committee to solve.  One map showed the northwestern part of Nevada in Humboldt.  The area outlined on the map showed geothermal deposits.  The area was above the Empire area of Nevada.  On the left-hand side of the map there was the Pacific DC Intertie power line and it was 38.5 miles from the green areas on the map that were privately owned land with tremendous geothermal potential.  Individuals were waiting anxiously to have the green light to go ahead with the project; however, the 38.5 miles of line that would have to be built went across the Black Rock Desert and was included in the 797,000 acres of national conservation area of the Black Rock Desert.  There was a county road through the middle of the property and whether the state could obtain the kinds of permission needed to build the power line along the road to comply with the conservation designation was unclear.  There was no way to the north, east or west because of the land-lock situation due to the conservation area.  The other maps were more detailed and showed the geothermal resources in that area.  Ms. de Braga stated the area was just a small portion of the state and besides geothermal there was a tremendous potential for solar and wind generation.  The main benefit of the area mentioned was it was on private land and that would speed up the process considerably if transmission lines could be built.  The area was just a short distance to major transmission lines. 

 

There could be other changes proposed to this particular bill; however, she indicated the state had a real economic opportunity.  There were some property tax benefits that applied to resources other than geothermal already in statute.  The bill had language with the ability to delay payment of net proceeds taxed by geothermal development.  There were some incentives already in the laws.  The state could try to find a way of expanding the exemptions or giving tax credits, remaining cautious not to impact the local governments’ budgets; however, these types of developments would be tremendously beneficial to the area where they were established.  She remarked to keep in mind there were other technologies being developed and there could be even greater opportunities in the near future for customer-sided generation.  She hoped the state could find the proper avenues to help make sure the markets for renewable energy would be available so interest could be revived and funding could be obtained for the development of those renewable energy sources. 

 

Assemblywoman Buckley congratulated Ms. de Braga on the sponsorship of the bill so the state could begin the discussion about the current energy crises and the role of conservation and alternative sources of energy and how they fit into solutions.  She was not familiar with the issues, however, having never been on a committee that considered them.  She asked Ms. de Braga to discuss the current state standard in terms of goals for the portfolio and what increases were envisioned previously including the 9 percent language.  She also wanted to know what other states were doing in terms of renewables.

 

Ms. de Braga indicated the state’s portfolio had .02 percent coming from renewables.  In 1997 Senator Titus and she had collaborated on a bill to require a 2 percent portfolio and the bill had been set aside.  The bill was not well received.  Until this point in time it had been more expensive to produce the wind, solar and the geothermal energy than gas or coal.  Utilities and the PUC had to look at protecting the shareholders and the charge to protect them was a significant problem currently.

 

Jon Wellinghoff, Attorney at Law, Beckley, Singleton, Jemison, Cobeaga & List, spoke representing his clients that included a geothermal developer, solar developer and a wind developer in favor of A.B. 418. The presentation he gave was primarily on Section 4 of the bill, the renewable portfolio standard (RPS) part of the bill. (Exhibit D)  The provision of Section 4 was contained in a companion Senate bill S.B. 372.  He queried why renewable energy was important to Nevada and stated the reasons included diversification of the state economy and a boost to rural economy.  Renewable energy was a hedge against fossil fuel price escalation and reduced local and global emissions.  Renewable energy also reduced the need for nuclear energy.  He stated this reason could be very important for Nevada.  On MSNBC last week, Vice President Cheney stated the fastest way to stop global warming was to start building new nuclear plants.  Mr. Wellinghoff did not feel anyone in the state would like to see that happen given the fact Nevada had been targeted as the state to dispose of the waste.  Nevada could be a model for the nation, and demonstrate to the nation the state could help solve the energy problem by boosting our renewable portfolio substantially and in turn there could be a reduction in the support for nuclear power.  He queried why the state needed an RPS and if it was competitive why was there a need for incentives.  He stated there were two different kinds of competitive.  Geothermal, wind, biomass and solar could be competitive on a consumer price basis; however, they were not currently competitive on a financial basis in the financing markets for a number of reasons.  Renewables could cost more in the early years, although he believed it may not be the case in the future due to some incentives in the works in Washington, DC, that could lower the cost.  The reason renewables cost more in the early years was because the fuel was paid for up front with solar, wind and geothermal.  Because of the capital costs of the plant, a company was in essence buying the fuel in the beginning through the life of the plant.  Another difference, hardly noted, was the value of public benefits included in the cost of the plant; benefits such as not polluting the environment, not causing asthma, not causing other negative health effects from the emissions of the plants.  There were also non-price barrier issues, including less familiarity with the technology, affecting the usage of renewable energy resources from companies such as power plants and banks that finance plants.  The fossil fuel and nuclear industry had been heavily subsidized and were promoted by very large companies.  Project financing for renewable energy plants required at least ten-year contracts from banks and investors because of the capital costs, the company size, and the technological familiarity.  He stated the reason why it was necessary to have an RPS was to encourage the issuance of capital funding. 

 

He indicated 15 percent was a reasonable jump from the 1 percent currently required due to the increase in the energy problems/situations in the western states.  He stated the percentage was reasonable for a number of reasons: renewable energy was abundantly available in Nevada, and Nevada had a track record of developing renewables with over 190 megawatts of geothermal currently on line and reliable.  He stated the estimates of over 2000 megawatts of geothermal were quite reasonable.  Similar estimates of that amount of wind and solar -- constrained primarily by price, but the numbers could go even higher -- were attainable.  It had been estimated that 100 square miles of Nevada could supply power for the entire United States.  There were very large wind proposals at the Nevada Test Site currently underway in southern Nevada that could supply 200 megawatts of wind.  Certainly he felt 15 percent would be available, and even a 20 percent portfolio standard would be reasonable.

 

He presented the committee with a map of the wind potential in the United States.  The dark red and dark purple colors on the map were the best places for wind in the United States and the only places better for wind than Nevada were Idaho, Montana, Wyoming and Colorado.  Nevada had many locations of outstanding or excellent wind potential.  Exhibit D also depicted the Nevada geothermal potential, showing areas best suited for electric generating plants to tap into geothermal energy.  Nevada had been called by the Federal Department of Energy the “Saudi Arabia of geothermal energy.”  The maps showed Nevada had rich potential for geothermal energy that remained virtually untapped, he indicated.  The following page of Exhibit D indicated the status of renewable portfolio standards in the United States.  Mr. Wellinghoff stated Nevada had been a forerunner in the past with the 1983 Least Cost Utility Planning Act, which was one of the first comprehensive utility planning acts in the country that was eventually modeled by 17 other states.  In the case of RPSs, there were 12 other states that had enacted the portfolios ranging from 1 percent to 30 percent. 

 

There was a question, he indicated, that asked if an RPS would raise rates for power.  He believed in the long run the answer would be no; however, in the initial years the cost could be slightly higher.  If there was a Federal Production Tax Credit (PTC), however, the rates would not be higher at all.  Currently Senator Reid had a bill in Congress, S.249, 107th Congress (2001) and Senator Murkowski had a bill as well that would, if passed, place a PTC for wind, geothermal, solar and biomass production.  If the bills passed, it would reduce the price by $.015 per kilowatt-hour for all renewable resources.  Mr. Wellinghoff stated the tax credit would place the renewables in a cost competitive environment.  Further, an RPS would act to stabilize rates in the future.  The other benefit of an RPS was how it would benefit state income overall.  The Union of Concerned Scientists’ Steve Clemmer had done a study that indicated a state that installed a 7.5 percent RPS would be worth a benefit of approximately $0.02 per kilowatt-hour.  Another chart presented showed having a RPS in place acted as a hedge against higher natural gas prices. 

 

Mr. Wellinghoff stated the elements of an effective RPS had a percentage obligation on all retail electric providers with a long-term obligation.  The RPS required the amount to grow over time with controls by the PUC keeping the energy produced at least cost.  Noncompliance by companies would be subject to high penalty.  The cost of non-compliance could not be lower than the cost of compliance, he stated.

 

Vice Chairman Buckley thanked Mr. Wellinghoff for presenting excellent information to the committee.  She stated she thought pursuing renewable energy made great sense for the state and for the country; however, she wondered if now was the time with the costs higher.  She also wondered if some of the higher costs were a result of construction and the financing of development.  She questioned if there were any bonds or ways the state could offer to help keep the costs lower. 

 

Mr. Wellinghoff stated there was a dilemma.  The state could not continuously look to the short-term and if there was an initial start to look at the alternatives for a portion of the overall requirements for ten-year contracts, the rates would stabilize in five years.  The renewable energies might cost more for two or three years; however, there would be a definite benefit in five years.  He did not see the cost of the renewables raising rates by $0.01 per kilowatt-hour.  In his opinion the rates in northern Nevada would be at $0.12 per kilowatt-hour very soon, perhaps in 20 to 30 months, and rates in southern Nevada would be at $0.10 per kilowatt-hour in the same timeframe.  All the state could do to help get out of the energy problem in the western states would be to look at diversification of the portfolio away from what California was doing.  The state would have to look at indigenous resources that were the renewable resources that could be put into effect.  In California the California Department of Water Resources was acquiring power for all of the investor-owned utilities, because investor-owned utilities did not have the credit-worthiness to do so.  The contracts were on a ten-year basis at an average price of $0.069 per kilowatt-hour.  At that price, geothermal, wind and biomass could be competitive.  The new gas generation price contract was not stabilized but had gas escalators.  Renewable energy contracts would not have escalators tied to fossil fuels.  Over time, he stated, the state would ultimately be paying less. 

 

Mr. Wellinghoff addressed Ms. Buckley’s second question of financing costs with funds from other avenues.  He had testified on S.B. 22, which was designed to raise the bonding limit from $5 million to $50 million for energy conservation.  The Senate Finance Committee had decided they did not want to raise the limit because they felt the state was getting close to its bonding capacity for building new buildings.  He understood the state did not have the bonding capacity available to lend out to placing energy conservation or renewables.  He felt it would be beneficial if there was a way to form a partnership between renewable developers and the state of Nevada.  If the state could not increase the bonding for its own state buildings, however, he did not feel it could perform for a renewable developer. 

 

Assemblywoman Smith asked Mr. Wellinghoff if there were financing opportunities available in construction that financed renewable energy sources construction that allowed payments to be made when profit was attained.  Mr. Wellinghoff stated his understanding of the financing for renewable developers required that those developers had a contract in place with a credit-worthy entity, such as a utility to ensure fulfillment of the contract, and then proceed to a bank to finance the project.  Ms. Smith also asked about page 3, line 47, section 4, subsection (b) in regard to “day lighting.”  She stated “day lighting” was not mentioned in any of the solar language in the proposed bill.  She asked if the section would allow “day lighting” to take place.  She stated she felt it would only allow for a solar hot water type of product, but nothing more.  Mr. Wellinghoff stated the bill was primarily designed and oriented towards center generation systems that were utility-scaled systems bigger than a megawatt.  What Ms. Smith was referring to were decentralized systems in someone’s home or in a commercial building.  Theoretically these types of systems could be added to the bill because a utility could contract with an entity to provide them with renewable energy at the end-user site.  He believed the bulk of the 15 percent RPS would be central geothermal plants, central wind plants, central biomass and solar plants that were not located specifically at the user site, but remotely.  Ms. Smith asked if the residents of the state should be looking at products that reduced the consumption of energy.  Mr. Wellinghoff stated we should be examining those products and in S.B. 372 there was another section that provided for the PUC to look at developing new performance standards for new residential construction that would take into account items such as “day lighting” and other aspects that would reduce the overall demand impact.  Ms. Smith stated Arizona and California had recently adopted some policies within the school systems in regard to school construction.  In Section 6, number 2, subsection (a)(1) on conservation of energy, the language did not define the word “conservation” and Ms. Smith asked if the bill was talking about a more aggressive type of product or about measures that could be taken to reduce consumption.  Mr. Wellinghoff was not sure what was contemplated in that area of the bill. 

 

Assemblyman Hettrick stated Mr. Wellinghoff had mentioned in order to finance the renewable energy projects it took a contract with a financially secure buyer.  He wondered what Mr. Wellinghoff’s thoughts were on the deferred energy issue.  Mr. Wellinghoff stated he thought the utilities should be financially secure and if deferred energy would help them do that he believed it would be a good thing to do.  Mr. Hettrick stated, as everyone knew, electricity could not be stored.  The problem and concern with renewables, he indicated, was the normal utility could generate during peak times or certain times at certain values but to assure supply there had to be the typical plant because if the wind did not blow or it was cloudy or rainy there still had to be enough power supply.  He asked Mr. Wellinghoff if the costs had been weighed for providing renewables -- the cost borne by the utility plants that would sit idle just so they could provide for peak loads.  While the costs were fairly competitive for renewables on one hand, what would the costs be for traditionally generated fuels if they were sitting only for peak load use, he asked.  Mr. Wellinghoff stated it was thought generally that renewables were intermittent.  The only renewable in this state that was intermittent, he indicated, was wind.  Geothermal, in fact, had produced energy at a higher capacity factor for longer periods of time than the fossil fuel plants the state had.  From the standpoint of reliability and providing base load over a period of time the state needed to move toward more geothermal plants.  Solar could provide peaking, in fact being available during the peak times in southern Nevada.  The renewables could serve the additional incremental loads in the future.  He did not see the traditional plants sitting idle and, in fact, Sierra Power in southern Nevada was only producing 50 percent and purchasing the other 50 percent of its power on the open market. 

 

Assemblywoman Tiffany questioned Mr. Wellinghoff in regard to his assumptions about the traditional utilities’ costs staying high and increasing.  She believed some of his assumptions on the renewables were questionable.  Mr. Wellinghoff stated assumptions on the utilities were based on studies of natural gas prices he had reviewed.  If a person studied the Canadian basin and the Permian basin, the two primary areas where natural gas was derived, they were very old gas fields and additional incremental drilling would be more expensive.  He did not see the costs decrease as a result of the efforts.  Last winter the Canadian Gas Board released a study that stated what they had said the year before was wrong.  They had stated in the Canadian basin they felt there would be additional supplies they could produce cheaper.  In fact, when they went back and looked at the data they determined the only increase was an overall production increase of 1.2 percent, even though there was a tremendous increase in the number of wells drilled.  The ultimate result was western gas prices were not going to decrease in the long foreseeable future, if at all.  Secondly there were two major pipelines built in the Canadian basin that ran to the Chicago area that increased competition for that gas.  The result was more competition, very old gas fields, less gas available and then another factor of 40,000 megawatts of planned construction of new power plants.  Ninety-eight percent of those would be fueled by natural gas.  There was a potentially huge increase in the demand for natural gas with waning supplies.  Ultimately, he believed the results would be much higher prices for natural gas that would drive the price of electricity.  Ms. Tiffany stated that was his one assumption -- the price of natural gas.  He stated in the affirmative and unless there was an increase in nuclear energy plants very quickly he could not see any difference in the outcome.

 

Assemblywoman Von Tobel asked Mr. Wellinghoff about page 4, lines 38 and 39, speaking about proximity to lines from the transmission of electricity.  She asked what would be considered a normal proximity and what would the cost be.  She questioned if his clients planned on exporting some of the power to other states.  Mr. Wellinghoff stated he did not participate in the drafting of Section 5 of the bill and he could not comment.

 

Ms. de Braga stated on the maps presented they indicated a specific area of the state where there was already a line in place.  Proximity from any other place than those shown would vary from location to location.  In some cases the costs of putting in transmission lines would be a very big factor, she indicated, because they would not be in close proximity.  Ms. Von Tobel stated that was the point of her question.  The language in the bill stated “close proximity” and did that indicate the state would only accept certain geothermal fields and who would bear the cost of the lines.  She asked Mr. Wellinghoff to address the question of exporting some of the power to other states.  Mr. Wellinghoff stated his clients and other geothermal, wind and solar developers in Nevada were negotiating with people in California to sell energy to the extent there was transmission available.  Ms. Von Tobel asked if the language in A.B. 418 gave any guarantee of what portion of the energy would remain in Nevada if the state was charged with “biannually thereafter 2 percent of the total annual electric consumption.”  She asked how the state accomplished the cost to the portfolio and if there were any guarantees.  Mr. Wellinghoff stated there was a guarantee.  The requirement would be the seller of electricity in the state, whether the vertically integrated electricity utility or in a deregulated environment and there were alternative sellers, under A.B. 418 the seller would have to procure renewables produced in the state of Nevada and ultimately 15 percent of their total portfolio would have to be from renewables.  It was a mandate and a policy statement that when a company sold energy in the state of Nevada the state wanted 15 percent of that to come from indigenous Nevada resources.  The bill only amended existing law from 1997 that imposed the mandate from a policy standpoint into effect.  Ms. Von Tobel asked if there was a provision that kept a percentage in Nevada.  Mr. Wellinghoff stated what they sell in Nevada, the electric provider, in this case Sierra Pacific and Nevada Power, must demonstrate to the PUC that 15 percent of what they were selling came from renewable resources that were producing it in Nevada.  Ms. Von Tobel wanted clarification on whether his clients could sell a large portion of those renewable resources to another state.  Mr. Wellinghoff stated his clients and others were not restricted in any way by the bill.

 

Assemblywoman de Braga stated part of the goal of the bill, given the energy shortage, was for Nevada to be a large exporter.  It would be to the benefit of the state after taking care of the needs of the state first.  Eventually Nevada did have the potential for exportation and that was what made this bill such a tremendous opportunity.  Right now geothermal energy was purchased for around $0.06 to $0.07.  There was a lure to sell to California where the rates were much higher.  If Nevada became an exporter the rates leveled off so that everyone was paying a fair price.  She asked the Chair if she could answer Assemblywoman Smith’s question on Section 6.  The section was written to mandate if someone were to construct or renovate a public building there must be consideration and analysis of the cost advantage to using an alternative source of energy for the building.  The analysis must include how much energy would be conserved and the need for co-generation and then determine the cost effectiveness.  Ms. Smith stated she appreciated Section 6 because it seemed as if the state was moving toward consideration of a whole life cycle of a building versus just the cost of engineering and building.  She wondered if conservation meant more aggressive products or looking at some more passive items.  Ms. de Braga stated that was exactly the point.  If a builder installed solar panels, what could be saved in terms of the consumption of energy to run the building? 

 

Assemblywoman Buckley revisited Ms. Von Tobel’s question and asked if the state made the utilities buy a certain percentage, what guarantee would there be that the energy was available for them to buy.  Mr. Wellinghoff stated basically Nevada would be competing with other states, that was correct, however it would be easier for his clients to sell in Nevada instead of outside of Nevada because of the cost of transmission to other states.  From a competitive standpoint, the renewable energy should be available in this state at a price that was at or below what the producers would be selling it for to other states.  It would cost additional money to get the power to Oregon, California or Arizona. 

 

Ms. Buckley stated the reason made sense but asked if the other states that were embracing the same approach, especially on a larger percentage, had some sort of an “out” that stated if the power was not available or somewhat competitive did the ratepayers have to absorb the higher costs.  Mr. Wellinghoff stated he believed there were some states that had written in a “cap.”  There was no cap in A.B. 418, he indicated.  There may be other states that had language as to unavailability as well; however, he could not recall those exact states.  He could provide the information back to Ms. Buckley in more detail if she wished.  She stated that would be helpful.  She asked if the issues that confronted the construction of the other types of energy plants were similar with renewable sources.  A state because of the Commerce Act could not restrict where owners sold their power; however, there was some leeway in cases were water rights were given and a conditional was put on the sale, or required first right of refusal or long-term contracts.  She wondered if those same issues were as important with alternative energies because of the location of the plants or the natural resources at issue.

 

Ms. de Braga stated as far as geothermal plants, sometimes they involved water rights and sometimes they did not.  Water used in geothermal power generation was re-injected back into the ground.  These plants overall did not use a great amount of water and there would not be a tremendous need to purchase water rights.  There was a very minimal disturbance of the ground where the plant would be built and almost no environmental threat.  The pipes used to haul the water away for re-injection was perhaps the only unsightly part of the whole operation.  Ms. de Braga stated if the Legislature did not pass a bill such as this one or the legislators made an “out” on the portfolio requirement, the state would not get to the point where there was encouragement of development of the resources.  She pointed out if there were too many restrictions the development would never come to Nevada.

 

Ms. de Braga stated she was remiss in her disclosure to the Chairman that she received royalties in a geothermal development.  She would not vote on the measure if all of the provisions of the bill passed even though it would not affect her anymore than anyone else. 

 

Assemblywoman Leslie stated she and Ms. Tiffany were very interested in the maps Mr. Wellinghoff presented showing the different states with the RPSs.  She asked if all of the standards were mandated by law.  Mr. Wellinghoff stated most of them were either mandated by state statutes or enacted by the Public Utilities Commission under their broad authority.  Ms. Leslie asked if his testimony would be it would be better to have the mandate in statute rather than leave it up to the PUC.  Mr. Wellinghoff stated he did not believe the PUC in Nevada had the statutory authority to mandate the standards.  Ms. Leslie asked if Mr. Wellinghoff thought the state should encourage geothermal production and mandate a percentage of the 15 percent be geothermal.  Mr. Wellinghoff stated that he did not feel the state should mandate the percentages for any of the wind, solar, biomass or geothermal productions because the competition was important.  The state wanted all of the resources to compete against each other into the portfolio to get the best prices for consumers. 

 

Assemblyman Humke stated Mr. Wellinghoff mentioned the recent comments by the Vice President in regard to the modern development of additional nuclear power.  He asked in a general sense what the lead-time was for the development of a nuclear power facility as compared to any other type of generation plant.  Mr. Wellinghoff stated, although not sure, he would suspect ten to twenty years because he could not imagine a community giving instant approval for a nuclear power plant.  Finding a site for a nuclear power plant would be the biggest hurdle.  Historically, the lead-time for a nuclear power plant had been in the seven to ten year range.  A wind, geothermal or biomass plant could be in operation in two to three years.  Mr. Humke asked if it was correct that approximately 20 percent of power generated in the United States was nuclear, and was any considerable portion of that power in the western United States.  Mr. Wellinghoff stated he believed the percentage was correct and there were nuclear power plants in the western states, California and Arizona.  Mr. Humke was not trying to advocate anything by posing the questions and, having stated that, asked if Mr. Wellinghoff from his sources believed the Vice President’s comments were serious.  Mr. Wellinghoff stated the Vice President was the head of the President’s energy policy committee and by making the public statement that he felt the fastest way to reduce global warming was not by compliance with the protocols but instead to build nuclear plants, he took him very seriously.  He thought the administration was looking at a diverse portfolio -- nuclear, coal and renewables.  The administration realized that the United States was in an energy crisis and there was a need to examine everything and the nation could not put all its hopes in fossil fuels. 

 

Assemblyman Hettrick stated there had been some comments on Section 6 and he would point out in line 25, “included in the construction or renovation of the building each measure identified.”  He believed it to be possible to have measures that would have overlap where a product would generate 8 percent savings if the roof were fixed or 8 percent if the windows were done, etc.  He suggested clarifying the language in the bill by removing the word “each.” 

 

 

Ms. Von Tobel asked Mr. Wellinghoff if his clients had contracts in California to provide renewable energy power.  Mr. Wellinghoff stated they did not; however, he knew of other renewable resource developers in the state of Nevada that were in the process of signing contracts.  Ms. Von Tobel stated she did not want to end up in a bargaining war with the state of California required to have 20 percent RPS and Nevada required to have 15 percent.  She felt Nevada would be at a disadvantage because California would need as much renewable power as they could and she did not want a bidding war.  Mr. Wellinghoff stated the state was in a bidding war currently with regular power.  The Department of Water Resources in California was contracting for thousands of megawatts of fossil fuel generation.  Currently there was no entity in the state of Nevada that would do any long-term contracting at all, which was a very frightening situation.  To answer Ms. Von Tobel’s question, Mr. Wellinghoff stated if California did enact the proposal for the 20 percent RPS, California had renewable resources of its own including wind, geothermal, and biomass.  The same situation would occur for developers in California as in Nevada involving the cost situation to sell into California versus outside of the state.  Ms. Von Tobel stated she was not comforted by the answer and that was the reason the Legislature had considered legislation in regard to the four new proposed power plants in Nevada required to sell up to 50 percent of their power to the state.  She said the state would not be in a comfortable position until there was a guarantee for enough power produced in the state to stay in the state.  She hoped there would be a component in A.B. 418 that required a percentage of the renewable power would stay in Nevada. 

 

Ms. Buckley stated at a future hearing she would like to see a briefing from legal counsel as to what things the state could or could not do in terms of keeping power inside the state without violating the Commerce Clause.  She felt there were very important points to consider, wanting to give everyone relief from the energy crisis, but ensuring Nevada would be served first. 

 

Assemblyman Hettrick commented if the contract from a viable purchaser allowed the developers of renewable energy to finance production it could be a way to limit the ability to sell elsewhere.  Without the contract they could not get financed to build and the viable purchaser might have the ability to contract for a portion of the power.  He also asked for legal counsel’s opinion on the issue.

 

Dave McNeil, Building Efficiency and Renewable Energy Projects Manager, Nevada Department of Business and Industry, Nevada State Energy Office, began his testimony by reading from Exhibit E, stating his office supported A.B. 418.  He indicated this winter’s massive escalation in the price of all energy resources demonstrated the wisdom of a state energy strategy that supported investment in a balanced energy program that included renewable energy resources, customer-sited generation and energy efficiency to offset high fossil fuel costs.  With respect to that necessity he had invited Debra Jacobson, Director of Government and Regulatory Affairs with Southwest Gas Corporation, to join him on the panel.  He stated it was important to consider the investment in renewable energy, customer-sited generation and energy efficiency strategies was typically quicker and less costly to install than new large central station power plants and transmission lines.  The renewables also provided local economic development benefits and value-added, environmentally benign energy solutions to Nevada communities.  Until last summer his office typically received one call per week from a constituent asking about financial incentives for retrofitting their homes or programs of financial incentives for the purchase and installation of renewable energy systems.  His office now received ten times the amount of phone calls.  He could only tell the callers there were extremely constrained net-metering systems or assessed value exemptions in NRS 361.079.  Consumers were looking for incentives or relief from the high power bills and neither existing statute served to provide the kind of incentive consumers were really looking for from the Legislature.  With that in mind, he wished to recommend several modifications to the bill that he believed were critical to strengthening the bill’s desired impact.

 

He suggested to include in Section 3 a further modification to the net-metering stature contained in NRS Chapter 704 that would require the utility to credit the customer-generator for the full retail value of the electricity prevailing at the time it was generated and fed into the utility’s distribution system, and remove the current limitation on the number of customers that could take advantage of this statute as stated in NRS 704.773.  An expanded net-metering provision would be one way to encourage substantial private investment in renewable energy resources, stimulate in-state economic growth, reduce system demand for electricity during peak consumption periods, help stretch the capacity of Nevada’s energy supply infrastructure and enhance the continued diversification of Nevada’s energy resource mix.

 

The recommendation was necessary to reflect the availability of existing and new customer-sited generation technologies including not just solar, wind and biomass renewable energy systems that were so appropriate for homeowners, but also internal combustion engines, micro turbines, fuel cells and combustion turbines that could provide residential, commercial and industrial building owners with on-site generation capability.  More of Exhibit E provided detailed information in regard to the distributed generation opportunity available to all Nevada building owners.  The net-metering modifications he recommended would allow owners of such systems, and the state as a whole, to capture their full benefit.  The modification would demand if the utility had to purchase more expensive peak electric resources, the utility be required to purchase the energy from in-state customer-generators at the prevailing price in order that such entities could achieve better economic use of their generation investment installed for the purpose of reducing the impact of higher thermal and electric energy costs.

 

Another suggested bill change from Mr. McNeil was the modification of NRS 361.079 to include ground and water source heat pumps and biomass energy systems among the list of “qualified systems.” He also included in Exhibit E information on the current version of the bill in the California Legislature modifying their net-metering laws.

 

Debra Jacobson, Director, Government and State Regulatory Affairs, Southwest Gas Corporation, was present to support specifically Section 3 of A.B. 418, which expanded the primary sources of fuel to include natural gas.  She strongly believed the section provided an opportunity for expansion of customer-site generation including both co-generation and distributed generation.  Southwest Gas was very supportive of these measures in Nevada and the other two states they served.  Nationally, Southwest Gas was part of the Distributed Generation Power Coalition and several other national industries.  She believed it would provide benefits for the electric utility and customers. 

 

Mr. Hettrick asked Mr. McNeil about the retail value prevailing and if net-metering equipment marked when electricity was put back on the system.  Mr. McNeil asked him to repeat the question.  Mr. Hettrick stated in Exhibit E Mr. McNeil had mentioned the customer-generator should be credited for the full retail value of the electricity.  He asked if the existing net-metering system logged the time the power was put back into the system.  Mr. McNeil stated he did not believe the state had what was required and known as time-of-use meters in place.  The meters would be a cost issue.  Mr. Hettrick stated he was curious about the way to measure the power and assumed at that point the utility would have to enter into a contract basis over the period of times and just use the amount of power generated.  Mr. Hettrick stated in reference to the suggestion about removing the current limitation on the number of customers that could take advantage of the statute he believed the current system allowed for 100 customers north and south and only 7 customers had taken advantage of the incentives.  Mr. McNeil stated he believed that was correct.  Mr. Hettrick stated his concern that the net-metering laws, normally meant for homeowners and not large producers, involved the power companies having to pay for the net-metering equipment and conduct the installations at their expense.  He was concerned if the law were changed to allow more net-metering he believed the utilities would have to be offered some kind of price recovery.  Mr. McNeil said the comment from Mr. Hettrick was very logical and covered an issue that needed to be considered with respect to the representatives of the utilities.  His suggestion of offering the provision for receiving the fair retail value for the time the power was put into the grid would offer an economic incentive for the building owner to install the generation and also offset the cost to the owner and offset the cost of the utility.  Mr. Hettrick agreed and stated his concern had been the utility was on the spot-market buying power today at $0.15 and if there was no way to time when the net-metering individual dumped power back in to the grid, did the utility give the individual the $0.15, the price at the moment, or the average for the day.  Without having time certainty, it would be difficult deciding the amount to reimburse.  He did not see a problem with the utilities buying power from individuals on net-metering because they were buying anyway and the utility might as well buy from Nevada individuals.

 

Ms. Smith stated the language in the bill Mr. McNeil commented on addressed the issue raised about the individuals versus the big suppliers.  She had mentioned “day lighting” as an example of the products not included in the big generation selling power but the practice certainly reduced consumption and seriously could impact the power situation in the state.  She asked if the net-metering provision would address the issue for individuals and businesses.  Mr. McNeil stated his viewpoint was the net-metering vehicle would not be the most appropriate for the type of legislation she was speaking about.  He felt what was needed was a bill that would incentivize more intelligent design and construction of buildings to incorporate strategies such as “day lighting” and higher levels of energy conservation and measures to reduce solar gain and air conditioning loads.  Typically, he indicated, those types of issues were handled more at the local level through minimum building energy efficiency standards.  His office had been working very hard to try to provide incentives to the building industry that in turn would incentivize their interest to go beyond just building to the minimum building energy standards.  He believed there was much more opportunity that would be cost effective than what traditional minimum building standards currently required.

 

Mike L. Baughman, Representative, NTS Development Corporation (NTS), City of Caliente, Eureka County and Lincoln County, testified the areas he represented supported A.B. 418.  Lincoln County, NTS and the City of Caliente had been working cooperatively for the past couple of years to develop alternative energy projects in that area.  The NTS Development Corporation was organized to create employment and income on and around the Nevada Test Site to make up for the many thousands of jobs that were lost when weapons’ testing was stopped in the area.  They currently had some very aggressive programs, including a 260-megawatt wind energy project on the Nevada Test Site.  He stated the committee could recall there was an announcement several months ago with Senator Reid and others covering the agreements to provide the land area for the project.  In addition, NTS was working with Lincoln County to develop an industrial park in Caliente, Nevada, and working with the BLM to develop a biomass energy project that would be located in the county.  The biomass would be derived from pinion juniper woodlands.  The BLM was in the process of preparing a very long-term landscape management plan that would allow the BLM to selectively harvest and thin the pinion juniper woodlands in the eastern part of the state to provide for better habitat for wildlife, watershed and help abate the serious fire hazard that existed.  Mr. Baughman stated his organizations looked forward to working with the BLM to actually take the resulting biomass from that area and put it into productive industrial uses including the production of energy.  He stated they were looking at small modular plants up to five megawatts and one would be located in Lincoln County.  Eureka County had operating geothermal plants in the Beowawe area.  They were hoping the facilities could continue to operate and expand in the future and were interested in the bill to expand renewable resources in Nevada.  From a local government perspective, he assured the committee the counties were very interested in the location of the renewable energy resources projects in their areas.  The projects would help to diversify the local economies and perhaps provide a local supply of energy that would help to then attract industry to the areas. 

 

Timothy Hay, Chief Deputy Attorney General, Consumer Advocate, State of Nevada, was present with Mr. Bob Cooper, the renewable expert from Mr. Hay’s staff, in attendance.  Mr. Hay indicated to the committee his office had prepared a chart (Exhibit F) that was a graph of geothermal, wind, photovoltaic and solar thermal prices per kilowatt-hour historically and projected into the year 2005.  He indicated all of the prices had declined dramatically as presented on the chart.  In answer to Assemblywoman Tiffany’s question to Mr. Wellinghoff, Mr. Hay stated his office had provided the energy information agency’s projection of natural gas costs for the preceding three years and the next years.  Unfortunately, the news was not very good; the darker line on the chart estimated the gas prices would level out around $5.00 by the year 2002.  Mr. Hay stated his office strongly supported the existing portfolio standard and the legislation to expand the portfolio.  The best public policy of the state, he believed, would be served by a balanced resource portfolio.  The state had never had an opportunity as now, with market prices as they were today, to show that Nevada could be a leading state in the development of its vast array of renewable resources.  The state was abundant in wind, solar, geothermal and biomass and he believed all of those energy sources could play an important role in development of fuel supplies that could be produced to somewhat insulate the state from the volatile marketplace of fossil fuels experienced in the last year.  It appeared the west would be on a building binge for new fossil fuel plants and he believed it would be important to balance the building phase with some environmentally responsible development as well. 

 

Mr. Hay wanted to make an additional point that concerned the rural areas of the state, such as Antelope Valley, that were extremely impacted by the recent rate increases due to the need to irrigate the many facilities almost 24 hours a day.  If the state proposed a strategy that had some distributed generation in the area, particularly wind, the agricultural interest could use the wind power during the summer for some of their irrigation needs, and could also sell wind power into the rest of the grid during the remainder of the year when their consumption of electricity was low.  The proposal would allow at least a fair amount of mitigation to occur on the ratepayer group that was most severely affected.  The potential for many of those farming operations to go out of business due to high power rates was substantial.  He believed the balanced portfolio approach advocated by A.B. 418 and the state public policy since 1997 was appropriate.

 

Ms. Buckley asked Mr. Hay to respond to her questions earlier concerning the issue of fallback provisions if the power companies were not able to purchase the level of renewable energy or if it was priced so competitively with the California market it was not competitive with other sources of energy.  Mr. Hay responded he believed there should be some flexibility that could be either discharged through the PUC or another administrative mechanism.  Since the portfolio standard increases gradually over time, he anticipated it would act as a stimulus to producing renewable resources.  The decision was one the Legislature and the regulatory agencies could revisit every two years.  Whether the state needed a regulatory “out” incorporated in A.B. 418 was not clear.  He felt the state would have the ability to get reports periodically from the PUC and the utilities on how they were doing with compliance of standards.  He believed the economic conditions in the west at the current time were going to provide a substantial incentive for building the cleaner resources.  While the portfolio standard was gradually increasing over the next few years, he did not see a large problem with compliance.  It would be up to the utilities and the alternative sellers to work with the developers to make sure they were cooperative in bringing new supplies on line.

 

Ms. Buckley asked Mr. Hay what the general consequences to the general ratepayers would be if the state took this approach, and was now the right time to consider it in light of some of the steep increases that inevitably were going to happen.  Mr. Hay stated there was no better time to do this than right now, particularly since wind and geothermal were cost competitive with natural gas fueled generating sources.  As the graph provided (Exhibit F) indicated, it did not look like the price of natural gas was going to return to the historically low levels that were enjoyed in the 1990s.  As others had indicated, there were going to be a number of new power plants built in the west with natural gas.  The new generation plants would cause the natural gas prices to increase.  From a cost standpoint, his office believed wind and geothermal would not have an adverse impact on ordinary consumers.  The real advantage was the “safety net” provided to insulate the consumers of Nevada against future fossil fuel rate shocks.  There was an assumption that everyone had seen the worst of the natural gas price increases; however, the volatility that affected the market in the last year that no one had seen coming was something Nevada wanted to guard against in the future.  Once there was a renewable resource production facility such as geothermal or wind on line there was a type of insulation from the volatility of the fuel costs since essentially the fuel was built into the capital cost of the plants, the wind was free and the geothermal production was not subject to the variables of the rest of the fuels.  In the long run this was a strategy that would protect ratepayers and due to the exceptionally high prices in the market right now, this would be the time for the state to move aggressively in the direction of renewable resources. 

 

Scott M. Craigie, Representative of Stirling Energy Systems, and Robert B. Liden, Chief Financial Officer, Stirling Energy Systems, Inc., stated their support of A.B. 418 and indicated the committee had heard about the various renewable resources.  One of the most important for the state to remember was as geothermal was indigenous to northern Nevada, solar power was indigenous to southern Nevada.  Northern Nevada was dubbed by a top official at the Department of Energy in Washington D.C. as the Saudi Arabia of geothermal, and southern Nevada could be the Saudi Arabia of solar energy.  A.B. 418 allowed the renewable resource developers to take the next step from the work done by Sea Star and the great pioneer of solar energy, Rose McKinney-James. The groundwork had been laid for the system to be developed in southern Nevada.  The technology was here and the bill made it possible for the developers to move forward.  Solar energy was a viable option for southern Nevada.  Mr. Craigie mentioned the brochures and information handed to the committee (Exhibit G.  Original is on file in the Research Library.).

 

Mr. Robert Liden mentioned his company SES was founded in 1996.  With the acquisition of some dish Stirling technology, a type of solar thermal technology, that had been developed by McDonnell Douglas and Kockums of Sweden in the mid-1980s and under tests and development ever since, SES had acquired the proprietary rights, the technology and the licensing rights to produce the engines and the systems.  SES had been commercializing the systems with the assistance of Boeing, Kockums of Sweden and the U.S. Department of Energy.  SES had also developed a relationship with Vestas Wind Systems.  The solar dish Stirling system holds the world’s efficiency record for the conversion of solar energy to grid quality electricity and had held the record for the past 16 years.  Stirling had been challenged in the commercialization of the technology.  They had systems operating on test, on sun, very reliably, on a 95 percent availability during the time the sun was shining, for several years.  The challenge had been to get the costs of the equipment down in order to make it price competitive.  With the proposed A.B. 418 they believed the state would be closer to solving the question of “which came first, the chicken or the egg?”  How did the company get the costs of the solar systems down low so people would be willing to purchase in high volume?  Once there was high volume the cost of the systems came down.  With the RPS at the significant levels proposed, it would provide the key market incentive.  The bill would make it possible to strike purchase power agreements at competitive prices and enable his company to approach his suppliers of manufactured components and show those companies a market that was viable, strong and of a significant volume that would allow SES to employ the type of automotive efficiency and manufacturing techniques that were required to bring the technology to a reasonable low-cost basis. 

 

Mr. Liden stated the dish was approximately 35 feet in diameter and made of 82 mirror facets, each approximately 3 feet by 4 feet.  The dish was manufactured by the same manufacturing techniques used to make automobiles.  The Stirling engine was an external heat engine; however, it looked like any other automotive engine.  His company needed to enlist automotive manufacturing types of expertise to get the types of manufacturing efficiencies that were required to reduce the cost of the equipment.  SES had spoken to companies such as General Motors and Ford, and all had expressed an interest in working with SES on high volume production but had asked where the market was.  What Nevada could do was provide the business basis that allowed the manufacturing companies, such as SES, to go to the manufacturers and get the cost down and to produce cost effective solar systems to serve the people of Nevada and potentially the entire southwest United States.  It would take an area of approximately 11 square miles to provide as much output of solar energy per year from the El Dorado Valley area, for example, as was generated by Hoover Dam annually.  The dam took up approximately 247 square miles for Lake Mead and the dam area.  Mr. Liden indicated a relatively small amount of landmass could generate an enormous amount of power to help serve the future power and energy needs of Nevada and the rest of the United States.  As stated earlier, an area 75 miles by 75 miles put into solar systems would generate as much power as was generated by the entire fossil fuel system used in the United States.  It was a possible scenario to use the southern part of Nevada and turn it into a Saudi Arabia or a “powerhouse” of America.  It would provide a very clean, environmentally friendly power source that would boost the economics of an area in terms of jobs and income as well as a secure, stable form of energy.  Even if the developers were able to build a 100 megawatt solar dish, which A.B. 418 made possible, the price of solar energy would rise to about $0.12 per kilowatt-hour on peak.  The solar was generated on peak and with further development as the renewable portfolio increased in future years it would be possible to bring the price down just as had happened in the wind industry.  Fifteen years ago the price of wind-generated electricity was in the $0.38 to $0.40 per kilowatt-hour range and was now at the $0.60 range in a good wind area.  Solar would have the same capabilities.

 

Mr. Craigie stated Stirling was in southern Nevada aggressively pursuing two major development areas that were inside enterprise zones. By using the enterprise zones the approval processes moved quickly and allowed the projects to move forward expeditiously.  The purpose of their attendance before the committee was to point out A.B. 418, if passed, gave them the ability to go to the banks and show them the market.  If SES could use the manufacturing techniques discussed so the components could be manufactured in large numbers and could be put together inside the enterprise zones the development project focused on currently, the 100 megawatt production facility, showed the price of solar could get down to market level prices at $0.12 per kilowatt-hour.  The important thing about solar, especially in southern Nevada, better than any of the other renewable energy sources, it was dependable following the load.  As the heat becomes more intense in southern Nevada and the air conditioners went on in southern Nevada, the solar energy was available.  Solar energy was the dependable source and got to the issue of market pricing. 

 

Assemblywoman Von Tobel stated she did not have to ask Stirling if the company would be exporting the energy; there was evidence on page 2 of Exhibit G stating they would be a significant exporter of electricity.  She was concerned about the statement indicating the bill the Assembly had just passed required Sierra Power Company to hold onto their plants out of concern for exportation of energy. She mentioned that for Stirling to export our natural resources out of Nevada seemed in conflict to the citizens of Nevada.  Mr. Craigie stated the primary business plan for the 100-megawatt facility and those immediately planned behind it were to sell into Nevada.  In fact, the Nevada market generated by A.B. 418 made it possible for Stirling to get the company project in Nevada started.  The company was looking long-term and was excited about the possibility of creating what could be for the western states a center of generation.  As Mr. Powers did his review on the Interstate Commerce Clause, spoken about at length, they believed the portfolio standard was a tool that helped start the industry of renewables in Nevada, and could be leverage for the state to look at a commitment to sell into the state.  His company was willing, either at the table or from a signed agreement, to indicate to the state they were ready with these first development projects to focus on Nevada’s market.  If his company was to be competitive on price they could not afford to have the long transmission losses and costs in the earlier stages.  The economics of the program required the sale of energy into the local market.  As his company grew his company did see themselves as exporters into the region; however, in the early projects it must and would be focused locally.

 

Ms. Tiffany stated in looking at the company’s overview it appeared as if they had $250,000 from the Arizona Public Utility Services (APS) for a contract and $6.2 million in a contract to provide a dish for University of Nevada at Las Vegas (UNLV).  She questioned if the company actually had something in operation in Arizona that would provide power and what was going on at UNLV.  Mr. Liden stated the $6.2 million project was a cost-sharing project with the U.S. Department of Energy that involved putting a dish Stirling system at the UNLV campus.  The dish would be installed in June 2001 and would be a precursor to what was proposed and backed by Senator Reid for a one-megawatt demonstration program of the dish Stirling technology in southern Nevada in the El Dorado region in conjunction with UNLV.  Ms. Tiffany asked where the one-megawatt dish would be located.  Mr. Liden stated the specific site had not been established because the funding had not yet been approved in the fiscal year budget.  The APS would be taking delivery of one of the units later in the year.  The unit would be sited as a test unit at the Star Test Facility in Tempe, Arizona.  The dishes currently in operation were located at the Boeing Huntington Beach facility and had been in operation for 18 months.  Ms. Tiffany stated it appeared the company was moving forward.  Mr. Liden stated they had signed contracts for a delivery of a unit to South Africa, several units to Spain and also units to Italy.

 

Assemblyman Neighbors mentioned he had seen the drawings proposed for a large wind project in the Amargosa area adjacent to the Nevada Test Site.  He wondered if Stirling had talked to the project managers about the use of land.  Mr. Liden had talked to the Nevada Test Site people about the possibilities of putting in solar systems on the Test Site.  They had the discussions in part with the people on the Test Site and other discussions through Senator Reid.  Of the areas that were the prime first sites for solar development in Nevada, one was on the Test Site in Nye County and the other was in El Dorado Valley.  Both were good areas, with the Test Site being a little less desirable because of the non-availability of much grid capacity to deliver the power south to Las Vegas.  Mr. Craigie stated those were the two enterprise zone areas that were the prime targets for the development projects in Nye County, the county Mr. Neighbors represented.  Mr. Neighbors asked about the power being in a cooperative there.  Mr. Craigie stated one of the key issues was how to get the power out of the area and discussions were ongoing.  Mr. Neighbors stated he knew Nevada Power and Valley Electric were on the Test Site.  Mr. Craigie stated that was correct.

 

Judy Stokey, Government Affairs Executive II, Nevada Power and Sierra Pacific Power, stated their support of the renewable energy concept and encouraged the construction of new renewable and other types of generation facilities in the state of Nevada; however, they needed to oppose the bill partly due to the magnitude of the renewables required. 

 

Mike Smart, Vice President, Resource Management, Nevada Power and Sierra Pacific Power, indicated that while the company supported the continued development of clean renewable energy resources, they felt it was important for interested parties to be aware the resources came at a premium over conventional sources.  They had looked at the modification of the bill as written.  The numbers forecasted for the loads at the company were taken into consideration with assumptions of some additional geothermal and solar in the south.  They examined how much it would cost to add those and ran the amounts back through the initial forecasted numbers to see what the additional costs would be at a premium.  The company came up with a figure of $80 million for this year.  If the forecasts went to the ten-year mark, with all different assumptions on the natural gas prices, and used the then current forward price projected, it would add $300 million as a premium to the existing rates.  He reminded the committee as the load increased so did the requirement for additional renewables, which was factored in as well into the forecast.

 

Mr. Smart added a comment about Dr. Stephen Weil, head of the Berkeley National Laboratory Energy Analysis Department and former PUC Commissioner for Nevada, providing testimony before the Governor’s energy committee and recommended Nevada evaluate the cost of renewables and determine if such a premium or added cost would be worth the price.  The direction contained in the committee’s final report did provide some valuable guidance on the subject of renewables.  They had taken some of the recommendations and wanted to reiterate those recommendations.  The recommendations included that the state of Nevada had a great potential to utilize its wind, solar and geothermal renewable resources and the committee recommended the state of Nevada develop an overall policy to support renewables in the state consistent with the following:  establishment of a standing committee in developing the policy and review of the premium costs and modification of the portfolio standards as required going forward.  The idea was to keep looking at the costs and compare them with the other alternative supplies.  Another recommendation was to revisit the existing portfolio standards set forth in NRS 704.989 to eliminate the bias toward the obvious high cost of solar renewables.  He had looked at the solar promotional materials.  The aggressiveness of the bill, as currently written, required the RPS to provide 5 percent energy sales in the first year and to grow 1 percent each year until 15 percent of the sales were provided by renewables.  In examining just the solar energy required to provide those percentages, their calculations of what it would take the first year would be roughly 60 megawatts. There would have to be a 60-megawatt installation that would grow over time to approximately 230 megawatts.  If there was a comparison done on other facilities that had some solar installed, the state could look at the Sacramento Municipal Utilities District’s (SMUD) project called PV Pioneer, currently generating seven megawatts with several years of efforts behind it.  The company had done some inquiries regarding how many solar facilities were being built and how many were being installed.  For the year 1999 with information from the U.S. Energy Information Administration, the entire United States only shipped 21 megawatts.  To have a portfolio that included 50 or 60 megawatts the first year, or the first benchmark, in Nevada he felt would be very difficult.

 

Mr. Smart stated the way the bill was currently written, with the proposed modifications, would allow customers to install generation including fossil fuels, behind the meter, and allow them to avoid paying for some utility infrastructure even though they would continue to use the utility infrastructure.  The cost of the utility infrastructure would then have to be borne by other ratepayers.  The issue would need to be accounted for somewhere in the bill.  The net-metering, if the committee remembered the discussions on the time-of-use on the metering, could create a situation where a customer could “gain the energy market.”  A customer could produce when prices were low and get a credit back into the grid and then consume when the energy prices on the market were high and “arbitrage” the system. 

 

Ms. Stokey stated even though the company opposed the bill as written they believed the renewable portfolio issue was very important and should be addressed in A.B. 661 or S.B. 372.  They were willing to meet with the parties involved and reach some amendment solutions.

 

Chairman Bache indicated he knew the amendments would be appreciated either for the current bill or for A.B. 661 in its renewable section.

 

Daniel Schochet, Vice President, Ormat Technologies, spoke as a geothermal technology developer that had been in Nevada for 17 years and had installed the first power plant in the state.  Worldwide they had installed and financed about 700 megawatts in 16 countries, 200 megawatts in the United States, 40 of which were located in Nevada.  He wanted to address several issues raised in the hearing and perhaps answer some questions that may have been raised before.  In regard to the reference to high price, today’s geothermal power plants could be built with the actual selling price of the power between $0.065 and $0.07 a kilowatt-hour.  The variation depended upon the distance to the power lines and, among other things, the length of the power sales agreement.  The longer the agreement, the less the debt service each year, and the lower the price.  They were reviewing a project in southern Nevada where the price was in that range.  In reviewing retail pricing currently, with the projected increases the range would be $0.11 to $0.12 a kilowatt-hour as an all-inclusive price in the near future.  Geothermal as a wholesale price was close to 50 or 60 percent of the retail price.  In terms of the concept of high price, it was clearly not correct but rather depended on how the future of gas prices was viewed. 

 

Mr. Schochet stated with the existing technology and the identified resources, the geothermal industry could develop upwards of 500 megawatts over the next four or five years.  If the number would be added to the existing 100 megawatts that were currently being sold to Sierra Pacific it would account for 10 percent of the power sold by the investor-owned utilities in the state.  Obviously, he stated, they were not proposing that geothermal took 10 percent of the 15 percent proposed; however, the 15 percent was not an unrealistic proposed RPS.  The geothermal side could produce the 15 percent.  As the industry moved forward, with the current scenario for gas pricing in the next years, geothermal would be economical and would be no more expensive than gas-fired power was in California and possibly Nevada in the future.  In regard to financing, Mr. Schochet stated he recently had a conversation with ANZ bank from Australia and discussed the financing of a power plant in Nevada, except in this case the power was being sold into California.  When ANZ bank heard the plant was in Nevada they were interested, and when they told them the power was being sold to California the bank stated they had a moratorium on financing projects that sold their power in California.  In the future Nevada represented a more stable market for developers of geothermal power and he suspected the situation would be the same for wind and solar. 

 

Donald Soderberg, Chairman, Public Utilities Commission (PUC), State of Nevada, wanted to share two technical comments on A.B. 418 with the committee.  In the expansion of what was previously known as net-metering, the issue of responsibility for the cost of hooking up something larger than a very small generator into the system was currently being discussed in volunteer reliability workshops between the PUC’s staff, the Consumer Advocate’s office, the utility, and various groups that intended to take advantage of what was known as parallel generation.  Currently the way the bill was structured the utility would bear the costs of hooking up those customers that wanted to have parallel generation and the cost would be passed on to all consumers.  Mr. Soderberg pointed out a better way would be to defer to the rule-making process.  He stated there was not a clear answer yet; however, he felt it was a problem that needed to be addressed.  The utility grid, not only from a transmission system but also from a distribution system, was designed to have power going one way, and now with the proposal of power going the other way they had to figure out a way to distribute those costs.

 

Mr. Soderberg pointed out it was a good opportunity to address part of Section 4 that was inadvertent drafting when the initial portfolio was drafted.  The way the portfolio standard read was by taking the standard against the total consumption of energy or electricity in the state.  However, the actual responsibility for meeting those percentages was borne by the two investor-owned utilities and alternative sellers.  His office did not have a calculation, but it essentially meant 5 percent was more than 5 percent.  He felt through some refinement of the drafting of the bill it could reflect when the initial standard was applied to what was sold by the vertically integrated utility or alternative sellers. They were only responsible for their 5 percent and not whatever 5 percent was generated through co-ops and other forms of utility sales in the state.  He would be happy to have one of the attorneys from their office work with Mr. Powers to refine the language to clear up the inverted consequence of the last bill.

 

Ms. Buckley asked Mr. Soderberg if he could express an opinion on the bill.  Mr. Soderberg stated it would be a matter of policy and he felt his office could implement the bill with the changes they had indicated.  With respect to support or not for the bill, his office was not present to endorse or not endorse the bill.

 

Ms. Tiffany asked Mr. Soderberg to comment on the other PUC commissioners and possible conversations he may have had around the United States in regard to a mandatory percentage for the total usage of energy in a state for renewable sources.  Mr. Soderberg stated he did not have an actual survey of a state-by-state mechanism.  Legislators across the country, he believed, had looked at the issue.  Other states had found ways similar to the way Nevada was proposing to “incent” renewables.  The actual number ended up being a matter of policy from a state-to-state issue.  When the bill was passed two years ago, there was a fear that as the state moved to competitive markets the RPS would thwart a competitive market because of a very high standard.  The standard was set, he expressed, as a very low standard.  Whether the standard proposed in the bill was an average or high standard was not something his office had examined.  His office could assist the Legislative Counsel Bureau (LCB) in a survey if the committee wished.  Ms. Tiffany asked what he meant by the standard.  Mr. Soderberg stated the actual percentage required in the RPS. 

 

Marion Barritt, Director, Sunrise, Sustainable Resources Group, spoke on behalf of her organization of over 700 members mostly in northern Nevada that were interested in sustainability.  She was a senior citizen on a fixed income and stated renewable energy worked for her.  Her home used a solar system to produce electricity in her home.  Her cost to install was a fixed cost and she had no additional costs except for a $3.00 monthly charge the utility put on her bill whether she had used any electricity or not.  The cost to use the solar energy would never be raised and was very important for someone on a fixed income.  She knew what her initial costs would be and knew the cost would be stable from that point on.  In June 2002 Nevada would be hosting the National American Solar Energy Society convention and one of the reasons for hosting was some people, including Rose McKinney-James, stated Nevada would be a real leader in the renewable energy field.  She still strongly believed Nevada had a wonderful opportunity to lead the way in renewables.  The state could diversify the economy and keep energy dollars in the state instead of exploiting them, provide more jobs and ultimately export clean, reliable, renewable energy to the rest of the country.  She asked the committee to look favorably on the bill and to provide incentives for people to become more involved in renewable energy in the state.

 

Mr. Hettrick thought it appropriate to state Ms. Barritt lived in Douglas County, which was not the sun capital of the world.  Douglas County did have its share of sun days although not nearly as warm as it was in the Las Vegas area.  He asked Ms. Barritt what the total cost of investment in the solar for her house was and what was her total electric bill last year.  Ms. Barritt’s first premise, she indicated, was to make her house very energy efficient, by installing extra insulation, "day lighting,” radium barriers in the attic and other weatherizing.  She put a solar system on a very small south-facing area of the roof.  She used solar slates and had 80 square feet.  She knew in advance the system would not meet all of her requirements nor did she want it to because the power company as it was currently set up did not give any money back if extra energy was produced back into the system.  She was producing 60 to 70 percent of her electricity needs and her bill was between $80 and $100 per year.  Sometimes she could watch her meter going backwards.  She indicated Douglas County had over 300 days per year of solid sunshine. 

 

Joseph Johnson, Government Relations, Toyiabe chapter of the Sierra Club, stated his group’s strong support for the amendments to A.B. 418 from the Department of Energy.  There was some concern about crediting against retail price, but they supported real time pricing.  There was equipment available and he supported the price being included in the initial capital cost of the applicant for net-metering.  The Sierra Club had a national policy in opposition to using carbon-based fuels and net-metering.  The basis for the opposition was sometimes the facilities came under the permitting requirements in areas of air quality violations.  He thought if the state were to proceed with the carbon-based inherent in net-metering there would need to be some provision in the non-attainment areas.  There would have to be an opportunity to have an overview and over-sight of potential pollution that would not come under the present permitting process.  He addressed the issue of supply.  There was difficulty in construction of alternative energy in regard to obtaining financing.  There were two things that could be included in the portfolio standard.  First, the net-metering facilities could be included under the utilities portion of their requirement.  Second, an alternative energy site, for instance, a geothermal plant, could be considered under the potential supply if there was a long-term contract to purchase.  He believed the long-term contract addressed the issue that Assemblywoman Von Tobel was concerned about; having facilities built that were simply exporting the power.  The Sierra Club was not concerned the alternative energy facilities would be built to export power; however, they were concerned if there were tax credits and some incentives of consideration.

 

Chairman Bache closed the hearing on A.B. 418.  

 

 

Assembly Bill 349:  Creates fund for energy assistance to be administered by bureau of consumer protection within office of attorney general. (BDR 58-1264)

 

Assemblyman Goldwater, District 10, stated because of the deadlines and the pressure placed on the legal drafting department, he had not read the bill before introduction and had decided after examining the original an amendment had to be made (Exhibit H).  In addition, there was a PowerPoint presentation (Exhibit I) he had for the committee.  He wanted the committee to put themselves in a different place and time, mainly July of this year.  He asked them to think about what the reply would be to a constituent when the constituent told them their power bill had reached over $250, consuming perhaps 35 to 40 percent of the monthly household income.  The constituent was going to complain and ask their representative what they had done to help them and was there anything that could be done.  Mr. Goldwater went through the PowerPoint presentation and stated in July there was going to be a very serious problem with utility bills.  He presented a chart that stated the average bill for a residential customer would be $275 by August of 2002.  The chart showed how the rates changed with the Fuel and Purchase Power (FPP) Rider and the Comprehensive Energy Plan (CEP) Rider and was very large in certain months.  He asked what the policy was by the legislators in regard to public health.  The loss of utility service he stated could be deadly.  There were programs to help people all over the country for loss of public utility service in heating and in cooling.  The process by which the state helped people was biased toward the heating months because nationally that was more of a problem.  In Nevada most of the population in the south experienced more difficulty trying to cool the air rather than heating it.  He noticed there was a shut-off moratorium for utilities in cold months and in summer months there was a need for help to cool the air.  In the summer months the people that were at risk of heat-related deaths tended to be the elderly, they tended to be alone and tended to be low-income.  The policy in the state has to be, he emphasized, that the state would help with the worst need, particularly those who were most vulnerable.  Public policy was adverse currently to low-income people in southern Nevada that needed cooling.  In LIHEAP (Low-Income Housing Energy Assistance Program), the benefit received from the federal government, was computed for heating days not cooling days.  The low-income people that needed the assistance from the federal government from LIHEAP were not being treated fairly in Nevada.  The state needed to do something to correct the situation. 

 

Mr. Goldwater indicated to the committee what other states were doing to address this issue that Nevada was not doing at the present time.  In Oregon, Pacific Gas and Electric (PG&E) and Sierra Pacific Resources (SPR), by virtue of the proposed merger, had different programs.  The Sierra low-income commitment through Oregon’s S.B.1149 stated there was a public goods charge of 3 percent that gave $71 million to the program.  He mentioned $10 million would help low-income consumers pay their energy bills.  Arizona and California had programs that ranged from 20 percent discount of the first 100 therms from November to March to 15 percent discount for 150 percent of the poverty level. 

 

Mr. Goldwater asked the committee to review the amended version of A.B. 349.  The bill funded an energy assistance and conservation fund through the Mill Assessment (NRS 704.033).  The Mill Assessment was $0.001 on gross operating revenue from intra-state operations.  The bill intended to assess the Mill on gas and electric only.  There were issues related to the Mill Assessment, however.  Some of the co-ops that were large end-users were not paying the Mill assessment.  He would suggest they should contribute to the Mill.  The end-use retail customers had distributed an electric non-bypassable surcharge of .45 Mills on all end-use kilowatt-hour sales from end-use customers and .0016 Mills on all end-use therm sales from all end-use customers.  These were projections and estimates of what assessment would be needed to raise between $14 and $16 million for the fund for energy assistance and conservation.  He suggested the ratepayers of Nevada would average $0.25 per month more on their bills if the power company did not want to distribute the money out of their profits.  The name of the program would be the Low-income Fixed Credit Energy Assistance Program (LIFEA).  It intended to retrieve the Mill Assessment, distribute 25 percent to the Housing Division for conservation, weatherization, and an efficiency program.  The Housing Division estimated it would take approximately $2400 per unit to achieve the type of weatherization conservation they wanted.  The figures indicated the fund would use the 25 percent raised through the Mill Assessment, $12 to $14 million, and then there would be a significant number of households served.  The remaining 75 percent would go to the Nevada State Welfare Division to assist individuals in paying their household bills. 

 

Mr. Goldwater explained how the fixed credit system would work.  The principle behind the fixed credit system indicated the eligible household should pay the same percentage of income as the median Nevadan paid for energy.  The poverty levels were presented to show how the system worked (Exhibit I).  As an example, the Federal Poverty Level in 2001 for two people at 100 percent of poverty would be a monthly income of $938.  The amount set for the median percentage of household income spent on utility was 6 percent of income and was calculated regularly.  Six percent of the annual income, $11,256, was $675.36 for an annual payment for energy.  After deducting from the annual energy bill the 6 percent of income, the fixed credit could be determined.  The $38.72 a month would be the fixed credit on the utility bill, reducing the total energy cost to the low-income household each month by 6 percent of their income.  Mr. Goldwater stated the Welfare Department would develop the regulations to administer the fixed credit program along with LIHEAP and the program would authorize emergency assistance.  The Housing Division was authorized to render emergency relief if the air conditioning or heating unit was unsafe. 

 

In summary, Mr. Goldwater said the state needed low-income energy assistance and as a policy it related to public health.  The utilities were using similar programs in other states and Nevada needed to start immediately.  Summer was coming, it would be hot and the legislators were going to get some telephone calls because the power bills were going to increase.  The low-income fixed credit energy assistance program was an excellent solution.

 

Ms. Buckley asked Mr. Goldwater if the programs mentioned in the other states were voluntarily established by the utilities or were they started in conjunction with other legislation or in the context of a merger.  Mr. Goldwater stated the Oregon Sierra Pacific Power program was implemented by the legislation passed in Oregon, S.B.1149.  The global settlement agreement of Sierra Pacific Power and Nevada Power stipulated certain programs.  Ms. Buckley asked if that agreement violated the law as well.

 

Douglas R. Ponn, Vice President, Governmental and Regulatory Affairs, Nevada Power and Sierra Pacific Power, responded to Ms. Buckley’s question.  He stated S.B.1149 was the restructuring bill in Oregon.  One of the provisions in the restructuring legislation was to create a systems benefit charge and the funds were collected on top of any other bills from customers and administered by a group that met annually.  Mr. Goldwater stated the $10 million annually generated for low-income bill pay assistance was not part of the S.B.1149 bill.  Mr. Ponn stated that was correct.  Debra Jacobson for Southwest Gas stated both of their programs were tariff-based.  The California program, she believed, was started by legislation, and was administered by the PUC, who set the rates.  Southwest Gas provided the discount on the bills, and other customers paid for the discount.  In Arizona the program started as a 15 percent discount.  The Public Utilities Commission, after examining the one in California, requested Southwest Gas file a program for Arizona and increased several years ago to 20 percent.  The amount of the discount was also passed onto the customers within the applicable class, meaning it was only applicable to residential customers and master meter customers.  Those customers were also the ones that paid the monthly surcharge.  The dollar amounts for weatherization were Utility Commission approved.  Customer rate charges were how Southwest Gas paid for those amounts. 

 

Ms. Buckley asked if the programs benefited Southwest Gas in any way, perhaps in less turnoffs due to nonpayment, and thus created more stable situations for the low-income customers.  Ms. Jacobson stated there was a more stable environment.  Several years ago in Arizona her company found there were not enough people on the program.  Her company tried very hard to make sure that everyone that could be was qualified, including working with the qualifying agencies asking them to hand out the applications and pre-qualify.  Southwest Gas basically took the word of the qualifying agencies in the form of a list as a self-certifying document.  Southwest Gas also had a levelized billing that Assemblyman Goldwater had mentioned.  Mr. Goldwater pointed out the proposal for A.B. 349 was even better than a straight discount of the utility bill.  The low-income people needed more assistance than just a discount as the bills continued to go higher.  When the state offered a fixed credit program and used percentages of power bills for a median household there would be more help for more people during crisis times.  Nevada’s program would be unique and more beneficial.

 

Assemblywoman Von Tobel assumed the weatherization was done prior to the application for assistance.  If the customer was in a rental property would the money be spent to weatherize the property.  Mr. Goldwater stated the program for weatherization and conservation was on-going.

 

Ernie Adler, Representative, Nevada Housing Coalition indicated the revision of the bill was particularly beneficial.  The LIHEAP people would know what the Housing Division was doing.  For instance, if there was a situation where there were very high energy bills and a low-income household, the LIHEAP staff could contact the Housing Division and tell them there was a weatherization and conservation problem.  The Housing Division could respond by handling such things as replacing the air conditioning unit or the heating unit, which would decrease the power bill and the amount of subsidy the state would have to pay to the household.  The idea of the agencies working in tandem was a good one.  The weatherization would not necessarily occur prior to the subsidization, especially in areas of emergency situations.  Assemblyman Goldwater had an emergency provision in A.B. 349 that, with a family or household in distress, allowed Human Resources to immediately begin to help without a detailed determination.  Human Resources would not have to wait in a crisis situation.  The Housing Division could replace air conditioners or heating units on an emergency basis and not wait for a catastrophe to occur.  He hoped the explanation gave the committee the idea of how the agencies would work together for the best interest of the low-income people.

 

Ms. Von Tobel asked if the low-income people were tenants how would they be helped with weatherization.  Mr. Adler stated Charles Horsey, Administrator, Nevada Housing Division, had a list of 128,000 households that needed weatherization or conservation improvements.  Mr. Horsey’s department was only able to handle 175 homes per year.  The rental properties would probably be on the list for quite awhile, he honestly stated.  The mobile home or low-income home that was owned by a low-income person would be weatherized first.  The list was so long of low-income people that owned their premises that handling the rental properties was possible; however, realistically he could not say when it would happen.  Mr. Horsey stated based upon the federal funds the Housing Division was going to receive this year they had estimated 200 homes owned by the low-income people would be weatherized, and only 15 homes owned by others, i.e., the apartment owner.  There were so many homes with so many people waiting for weatherization services, it was a huge underserved population.  His department estimated there were thousands of homes that would qualify for service.  Mr. Adler stated one of the advantages of weatherization, one the committee in considering the bill had realized, the peak load the power company had to buy was much more expensive than the standard load, and the more houses weatherized, the less peak electricity the power company had to buy.  Actually there would be a net savings to all of the consumers when a home was weatherized.  There were economic advantages to the Housing Division’s program as well as helping out the people.  He stated some people could be moved out of energy assistance if the Housing Division could properly weatherize their homes and reduce the peak load.  Some of the old air conditioning units, especially in Clark County, used twice as much energy as a new one.  Mr. Horsey stated even the $2,400 referred to by Mr. Goldwater really only covered the basic services:  weather stripping, insulation and perhaps windows.  There was more than could be done and the $2,400 was just a base figure which was “barebones” per house. 

 

Ms. Von Tobel was surprised that a landlord could have their house weatherized for their low-income tenant under this bill.  Mr. Horsey stated there were tenants that had to pay the utilities and those were the homes they focused on.  They tried to insure the benefit of the weatherization went to the tenant versus the landlord.  Mr. Goldwater stated the bill did not intend to create a program for weatherization.  The program already existed; however, it was under-funded by the state and the federal government for a long time.  The bill created a steady funding stream for the purposes of weatherization for the on-going program.  Mr. Adler stated some of the things Mr. Horsey’s agency could not do now, such as up-grading some of the systems with the federal funds, would be allowed with A.B. 349.  Mr. Adler believed Assemblyman Goldwater’s bill was more common sense oriented than what was happening with the federal funds.  It allowed the agencies to do things that would reduce the energy costs for the low-income people and step in in situations where the state should step in.  The bill, he thought, was much less bureaucratic than other programs in effect currently and much more productive. The Housing Coalition, which represented all of the housing agencies in the state of Nevada, strongly supported A.B. 349.  The Coalition regarded A.B. 349 as one of the most important bills of the session.

 

Bernard T. Santos, J.D., Capital City Task Force Coordinator, AARP, and C. E. Edwin Fend, Representative, AARP, joined Mr. Goldwater and spoke from Exhibit J.  Mr. Santos and Mr. Fend spoke on behalf of the 235,000 AARP members in the state of Nevada.  Thousands of the members were at or below the poverty level on very low fixed incomes.  The continuing increases in the cost of utilities, such as gas and electricity, were adding an unbearable burden to the members’ existence.  On behalf of all of the AARP members and all of the low-income residents in Nevada, he stated it was his privilege to offer his sincere thanks to Assemblyman Goldwater and co-sponsors of the bill for their demonstration of concern for the health and safety of low-income residents.  The AARP offered their support for A.B. 349.  The bill created a Nevada energy assistance program to help the low-income residents maintain an indispensable source of heat, cooling and electricity in their homes.  The need for electricity or gas was no longer a luxury available to only a few.  It was a necessity required by all.  For senior citizens, the loss of electrical power to maintain heat in northern Nevada in the winter months and cooling equipment in the summer months in southern Nevada was critical.  The loss of such power in either the north or the south could be fatal.  AARP believed the establishment of the state service program providing assistance with the ever-increasing gas prices to the low-income residents of Nevada would be a giant step in the interest of health and safety in the state.  AARP also believed AB. 349 created a fair, responsible program that would have long-range benefits to the state and to its citizens.  Such a program would promote energy conservation and, to some extent, personal responsibility.  Therefore, AARP supported A.B. 349 as it previously supported A.B. 209 sponsored by Assemblywoman Bonnie Parnell and urged the committee to approve the bill. 

 

C. E. Edwin Fend, Representative, AARP, voiced his concern in regard to the weatherization program.  The state had been involved in the program for a long time without much progress.  He stated the 25 percent of money given by the state towards weatherization would be better used towards the citizens that needed power bill payment assistance during the upcoming summer months.  In the long run, he commented, the state should weatherize; however, as far as he could recall, the program had not helped anyone.  When he attended the meeting of the Governor’s committee on deregulation, there was someone from Las Vegas that had testified he could not weatherize rural areas.  His comment would be that the people in rural areas were hot and cold just as in the cities.  He could not understand why the weatherization program that had been in existence was tailored, in his opinion, towards urban areas.  In response to Assemblywoman Von Tobel’s question, he did not believe anyone really knew how many rental units had been weatherized because there was no check up on the program.  He had never heard anyone testify before as to how many units would be weatherized for low-income people that owned their properties and how many would be weatherized for rental units.  He felt weatherization in the long term would save money; however, someone could put plastic over his or her windows and heat it with a blow dryer and that would save money in summer and winter.  What was the state providing to the people for $2,400 and how many people would it service, he asked.  If there were to be 200 people served with the weatherization program times the $2,400, there could be a lot of needy people served with those funds especially during the cold and the heat.

 

Timothy Hay, Chief Deputy Attorney General, Consumer Advocate, State of Nevada, commended Assemblyman Goldwater for sponsoring an innovative and forward-looking piece of legislation.  He had the privilege to serve on the Governor’s Energy Policy Task Force that met last fall through January.  One of the proposals his office had presented to the committee was a simpler version of Assemblyman Goldwater’s bill that would tie in funding for assistance to the state’s residents to a Mill tax funding mechanism.  During the decade of the 90s, the federal assistance for Nevada, due to preference in the federal formula favoring heating degree days rather than cooling degree days, combined with the rapid population growth in southern Nevada, resulted in the federal contribution to the programs in Nevada declining by about 40 percent.  On a per capita basis Nevada was at the bottom of the list with the possible exception of Hawaii.  While the population had grown and the need had expanded, the existing federal funding had proven to be inadequate and declining.  Mr. Hay referred to Exhibit K, a graph that indicated by August 2002 an average residential power bill in Las Vegas would be $275.  He believed there would be a number of low-income families that could be living in a residence without efficient appliances that could pay far in excess of the average.  He believed that the state needed to be pro-active because the energy rates, particularly in Las Vegas with the summer peak, were going to be exceptionally burdensome, not only on low-income Nevadans, but on all residential consumers of electricity.

 

Mr. Hay wanted to mention the bill pending in the Senate (S.B. 526) that would allow the PUC to institute a rate design change.  The basic tier of energy costs would be billed at a lower rate and that would benefit not only low-income consumers but also all consumers.  He believed the proposed Senate bill to be a logical companion to Assemblyman Goldwater’s bill.  Obviously the state was not going to have enough assistance funds to cover every Nevada family that would need assistance and there were people above the poverty level that would be burdened.  The rate design program would help ameliorate some of the problems. 

 

Ms. Buckley asked Mr. Hay if he was aware of how many other states utilized the Mill assessment device to help achieve energy goals.  Mr. Hay stated, subject to checking, he believed about 30 other states.  Some states called the assessment by another name and he would make sure to give Ms. Buckley an accurate report.  Ms. Buckley had noted Mr. Fend’s comments about the balance between helping right away with their energy bills and the weatherization program.  She said the balance had to be created so the money would not be “thrown out the window” by not having the home weatherized.  Mr. Hay acknowledged Mr. Fend’s comment and reiterated Mr. Horsey’s comments in regard to 128,000 dwellings in the state needing weatherization.  At the current levels, the state was only able to weatherize fewer than 200 of those units.  Even if the state extrapolated a much larger funding level, it would take decades to insure the potentially qualifying residents were actually weatherized.  He believed over the next two to four year period the state was going to have consumers that were exceptionally disadvantaged that may not even qualify for low-income energy assistance.  There needed to be a better mechanism in place to address those needs.  In a state with such population growth, as shown in southern Nevada with over a 100 percent increase in the last decade, there was a benefit of a large quantity of newer houses with proper weatherization.  The backlog of the weatherization program was so extreme he felt the priority should be the health and safety of those Nevadans that were vulnerable for one reason or another.  The elderly population in Las Vegas could not live without air conditioning in the summer months.  It would be ideal to state there was a funding source that could weatherize many of those 100,000 units in need; however, realistically it was simply not possible.  He commented the state should carefully set the priorities and the 25 percent that was allocated towards weatherization was an appropriate one with some flexibility toward the funding structure.  He stated the funds should have the flexibility in case there was a tremendous need due to perhaps an unbearably hot summer or other conditions that might exist in a particular year.  The funds for weatherization could be released in that case to help with direct assistance.

 

Ms. Buckley asked if there were any resources a legislator might suggest to a low-income or middle-income constituent who might call for relief from high energy prices.  She asked if there was a list of companies the constituent could call to have their homes weatherized.  Mr. Hay believed the rate design proposal would help some of those consumers and he did believe there was a market for companies that would weatherize homes.  His office was fearful there could be companies that would be promoting energy-efficient products or services that should be scrutinized.  His Deceptive Trade Unit (DTU) would be looking for those types of fraudulent companies.  Assuming an average consumer had the resources to either upgrade their appliances or their insulation or do other energy-saving mechanisms, there were reliable companies to help.  He stated his office certainly could do better public education on those issues.

 

Ms. Von Tobel asked if there was any concern the state was setting up a landlord-subsidized program.  Mr. Hay did not understand Ms. Von Tobel’s question.  Ms. Von Tobel stated the question had been asked if the weatherization program benefited owner-occupied houses or some tenants.  Fifteen of the homes that had been weatherized had been for tenants, and that indicated a possible landlord-subsidized program.  Mr. Hay stated the state would of course want to avoid that situation; however, the number of units was so small that it would not be relevant in this case.  Mr. Horsey or others could address the issue more appropriately than he.  He stated his office needed to be concerned with the direct assistance to those residents that lived in rental apartments.  He did not believe the weatherization portion amounted to landlord subsidization.

 

Ms. Leslie stated she approved of the amendments Mr. Goldwater had submitted for A.B. 349, especially the weatherization.  She had worked for a community service agency that administered the weatherization program in Reno.  She did not have the concern Ms. Von Tobel had because the dwellings that were owner-occupied the agency was weatherizing were very low-income and if a tenant that paid the utility bill benefited from the weatherization and then moved on to another residence, the next tenant would still benefit.  She had no concern at all.

 

Mr. Goldwater stated the term weatherization should be changed to conservation.  If the state was concerned with conserving energy, the goal of weatherization, it did not matter what the program was called. 

 

Michael D. Hillerby, Office of the Governor, State of Nevada, stated the bill was a high priority for the Governor.  The Governor had included $5 million dollars in the budget for the LIHEAP program mentioned in the State of the State address.  His office looked forward to having the opportunity of working with Mr. Goldwater on the plan.  The amendment made substantial changes to the bill and his office needed an opportunity to read those over.  The Governor was very committed to helping low-income residents pay for their heating bills. 

 

John Sasser, for Ernie Nielsen, Washoe County Senior Law Project, Washoe County Senior Services, had submitted to the committee Exhibit L, which addressed some of the questions raised by Assemblywoman Buckley.  Exhibit L outlined the systems benefit programs in 25 other states.  The chart outlined the ones that had been created by statute and the ones that had not.  Mr. Nielsen was a member of the Governor’s Task Force that had made recommendations surrounding energy policy and he believed A.B. 349, as revised, was consistent with those recommendations.  He was very supportive of the bill, especially the concept that looked at a low-income person’s energy burden and used the funds to bring the burden in line with everyone.  Energy was a necessity of life and the program was fair in its equal representation of burden.  Mr. Nielsen applauded the Governor for budgeting $5 million for energy assistance; however, the statistics indicated that specific funding would not be enough either for the crisis this summer or in the longer run.  He understood only 14 percent of the people statewide that qualified for the LIHEAP program were actually getting that assistance at the 150 percent of poverty figure.  The state was effectively only helping less than one in five people that were in need and even though A.B. 349 would help, it would not fill the gap. He urged the committee’s support.

 

Mr. Goldwater stated his presentation was concluded and wanted to state for the record that he had received only fair treatment and expressions of interest and a desire to work toward solving the problem of the state’s most vulnerable populations from all of the state’s utilities, Southwest Gas and Sierra Pacific. 

 

Ms. Von Tobel asked why the vote on the bill required two-thirds.  Mr. Bache stated because of the Mill assessment it was considered a tax even though it was something not in the General Fund area that a budget committee would consider. 

 

Thomas Wilson, Representative, Nevada Utility Reform Alliance, submitted he had spent a number of hours with the state agency that handled the LIHEAP program.  He stated the agency was very well run and very responsive to a senior citizen that might have problems with their heating or cooling bills.  The agency processed the citizen through with a three-week processing time from time of application and was able to get every county and local assistance available to the person so their power was not cut off.  He submitted Exhibit M and spoke on the federal part of the program.  Nevada received less than any other state except Hawaii.  He stated there were administrative guidelines in Washington, DC, that set the guidelines stating Nevada had weather like Hawaii.  Arizona received substantially more federal funding per capita and had weather similar to Las Vegas.  The only money spent, up until this year, was federal money and it was unclear what the current administration in Washington would do.  The administration had indicated there would be no increases and no decreases.  It would be beneficial if citizens would write to the office of the President and our Congressmen to influence the guidelines currently being examined.  The Governor of Nevada had done an admirable thing by including $5 million in the budget and his group supported Assemblyman Goldwater’s bill.  There were only one out of six people applying for the LIHEAP monies that actually received it.  He believed the number could radically change this year as power bills increased.  He stressed Nevada needed fair representation. 

 

Chairman Bache stated the Senate Minority Whip would be a person to speak to about this particular issue.  Mr. Wilson stated phone calls to the Senators and the northern Nevada Congressman would be appropriate.

 

Douglas Ponn, Vice President, Governmental and Regulatory Affairs, Nevada Power and Sierra Pacific Power, stated that the concept of A.B. 349 and reiterated the company was concerned about the rising energy prices for their customers.  He stated the company had programs, small by comparison, in place for a long time.  This bill and others would raise the level of concern and would be appropriate considering the environment.  He pointed out the Governor proposed $5 million for the project and he did not know if it was well known the company had proposed for PUC’s approval in their Comprehensive Energy Plan (CEP) the use of $5 million to be collected in rates and used for conservation and low-income assistance.  The concept was universally agreed to in regard to the necessity of helping with the assistance required.  There was one concern and he believed it was addressed in the amendment.  The company would request that the charge be shown as a separate item on the bill, and they would start collecting it on the bill immediately upon passage and approval of A.B. 349, and thus the charge would not be added to the rate-making process.  He had spoken with Assemblyman Goldwater who had agreed with that proposed change.

 

Ms. Buckley noted the utility and the gas company had also supported a bill in the previous session to use money from the unclaimed property, utility deposits, to try to fund low-income people that had needs.  The companies were on record trying to pass the bill at a time before there was an energy crisis.

 

Mike Willden, Administrator, Department of Human Resource, Welfare Division, State of Nevada, stated his office was in charge of the administration of the current low-income energy assistance program.  He had submitted his testimony (Exhibit N) and stated the testimony had been directed toward the original version of A.B. 349.  His department’s original concerns had been handled in the revised version of the bill.  He appreciated the opportunity to work with the bill drafter and he would continue to lend his support.

 

Ms. Leslie thanked Mr. Willden for submitting the chart that showed the demographic detail of low-income home energy assistance (LIHEAP).  The chart showed the percentages of Social Security Income (SSI) recipients that were currently served by the program at 31.8 percent.  The other portion of the chart showed that some of the poorest citizens (AFDC/TANF), only 5.9 percent, currently received assistance.  The committee could see very clearly by the chart the current program was not addressing the needs sufficiently.  Mr. Willden stated there was much more need in the state than his department had funding.  The LIHEAP program received approximately 10,000 applications per year and currently they served approximately 8,500.  His information from the Census Bureau indicated there were approximately 147,000 households in Nevada under the 150 percent of poverty guideline.  His agency realistically was probably serving only 7 to 8 percent of eligible households. 

 

Chairman Bache asked for questions from the committee or others wishing to testify.  Seeing none he closed the hearing on A.B. 349.  Chairman Bache adjourned the meeting at 5:26 pm.

 

RESPECTFULLY SUBMITTED:

 

 

 

Cheryl Meyers

Committee Secretary

 

 

APPROVED BY:

 

 

 

                       

Assemblyman Douglas Bache, Chairman

 

 

DATE: