MINUTES OF THE meeting

of the

ASSEMBLY sELECT Committee on Energy

 

Seventy-First Session

April 5, 2001

 

 

The Select Committee on Energy was called to order at 2:04 p.m., on Thursday, April 5, 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.

Mr.                      David Humke

Ms.                     Sheila Leslie

Mr.                     Roy Neighbors

Mr.                     David Parks

Ms.                     Debbie Smith

Ms.                     Kathy Von Tobel

Ms.                     Sandra Tiffany

 

COMMITTEE MEMBERS EXCUSED:

 

Mr.                     Lynn Hettrick

 

STAFF MEMBERS PRESENT:

 

Kevin C. Powers, Committee Counsel

David S. Ziegler, Committee Policy Analyst

Cheryl Meyers, Committee Secretary

 

OTHERS PRESENT:

 

Timothy Hay, Chief Deputy Attorney General and Consumer Advocate, Bureau of Consumer Protection, Attorney General’s Office, Carson City, Nevada

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

Alfredo T. Alonso, Representative, British Petroleum Gas Company, Carson City, Nevada

Rose McKinney-James, Representative, Landwell, Las Vegas, Nevada

Scott M. Craigie, President, Stirling Energy Systems

Richard Harjo, Executive Vice President, Alrus Consulting, Reno, Nevada

Hugh Ricci, P.E, State Engineer, Division of Water Resources, State of Nevada, Carson City, Nevada

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

 

 

Assembly Bill 661:  Revises and repeals various provisions concerning utilities and energy. (BDR 58-1128)

 

 

Chairman Bache stated the committee would be working on the sections of the bill concerned with renewable energy.  Mr. Bache and Ms. Leslie would be presenting that portion of the bill and Assemblyman Parks would be the Chairman.

 

Assemblyman Bache, Clark County, District 11, stated he wanted to give the committee a definition of net-metering.  Net-metering was the placement of electric meters that could measure the flow of electricity in both directions at the sites of customer generators that used renewable energy sources to meet part or all of their electricity requirements and return some of the electricity back to the utility.  The law currently in NRS 704.766 through 704.775 stated the utilities were required to offer net-metering to up to 100 customer generators in their service areas in order to encourage private investment in renewable energy, stimulate economic growth and diversify energy resources.  At present the law limited net-metering to those customers that used wind or solar energy up to a limit of 10-kilowatt hours in generating capacity.  The provision was geared toward the large single-family home.  A.B. 661 would expand the use of net-metering to more types of energy and more customers.  Specifically, Sections 42 and 43 expanded the applicability of net-metering to all types of renewable energy.  The limit was raised on net-metered generation capacity to 20-kilowatts, removed the 100-customer per service area limit and required time-of-use metering.  A.B. 418, Ms. de Braga’s bill, had a suggested amendment to the provisions of NRS 704.771 to delete any kind of cap on the kilowatt-hours.  The committee could decide to amend that provision into A.B. 661 or make a decision somewhere in the middle on the issue.  A.B. 661 was successful in promoting net-metering in small-scale alternative energy production, and could assist Nevada’s electric utilities during periods of peak demand as well as giving consumers additional choices for handling their energy needs.  Mr. Bache stated if the caps were removed from the metering and the bill further expanded the cap on the kilowatt-hours, there would be large businesses such as hotel/casinos, with new technologies available on solar generation, taking advantage of the new choices.  The new solar panels were made out of glass and could be worked into the décor, as opposed to being an unsightly panel stuck on someone’s roof, and would be able to take care of the energy needs of a home.  The importance of a hotel/casino in Las Vegas using solar energy was for every amount of energy not removed from the grid for use there was that much more energy for the state’s residential and small business customers. 

 

Assemblywoman Sheila Leslie, Reno, District 27, concentrated on some of the other sections in A.B. 661 that focused on renewable energy.  There was recognition, in the midst of the energy crisis, the state needed to do more to encourage conservation and the use of renewable resources.  While there was no doubt the state needed additional power sources, the state needed to recognize the impact fossil fuel plants had on the state’s air, water and land.  By promoting renewable energy sources, the need for fossil fuel plants may decrease and the energy policy goals could still be met for reliable and affordable power. 

 

Ms. Leslie directed the committee’s attention to Section 83 which defined the meaning of renewable energy; electricity sources that were regenerated naturally including biomass, fuel cells, geothermal energy, solar energy and wind.  Section 85 created the trust fund for renewable energy in the state treasury.  The fund would be established through a one-time assessment levied on electric generating plants, defined as a facility that generated electricity through the combustion of a fossil fuel.  The formula for the assessment was in Section 27, subsection 2.  The assessment formula was obtained by multiplying the maximum generating capacity of the electric generating plant by $1000.  A typical fossil fuel plant might generate 500 to 750 megawatts and therefore the assessment would raise approximately $500,000 per plant.  There were three or four plants in the planning stages at this point so the fund could receive between $2 to $3 million as a base.  Ms. Leslie stated the fee could be considered a permitting fee that was often assessed in other states.  Nevada’s fees for a fossil fuel plant were only 25 percent of what Arizona charged. 

 

Ms. Leslie stated there were a few amendments the committee might want to consider for Section 27.  One suggested amendment was to exclude any facility that generated 10-megawatts or below.  If this amendment was added to the bill most emergency standby or distributed generation would be excluded.  Another suggestion was to add clarifying language in Section 27 to ensure the ability to collect the assessment during each phase of development since many of the plants were built in phases.  It had also been pointed out the Public Utilities Commission (PUC) did not necessarily know about all of the independent plants there were coming on-line right away because these types of plants were not regulated.  The bill could specify by statute or regulation that every new generating facility over 10-megawatts had a duty to notify the PUC of their intent to provide service. 

 

The renewable conservation energy fund could provide funding for the establishment and updating a database of wind, geothermal, solar and biomass resources in the state that would assist developers with economical renewable energy development.  Such a database would promote renewable energy investment in Nevada by increasing the certainty of the return on the investment. 

 

Ms. Leslie stated the fund could also provide start-up funding for promotion of conservation education involving K-12 students, the universities and cooperative extension in developing a curriculum and outreach effort on energy conservation.  The fund could also create a zero interest loan fund that could be used for a variety of purposes.  The zero interest loan fund could provide start-up funds for public facilities to net-meter, obtain energy audits and weatherize and could provide affordable access to renewable energy technologies for alfalfa farmers and other entities that were at risk of going out of business from electricity rate hikes.  The loan fund could be repaid quickly with the energy savings from modest improvements in state buildings or deployment of renewable energy technologies that were eligible for net-metering and real time pricing.  The fund would help the state identify energy funding from foundations and the federal government and act as a source of matching funds for grants that frequently require those types of funds.

 

Ms. Leslie remarked the fund could also provide vocational training for the variety of new energy that would be needed if the state was going to avoid the problems facing California.  For example, the state needed to train more weatherization inspectors and solar equipment installers and the training was not generally available in Nevada.  The weatherization trainees were sent to Stockton, California, for multiple weeks of training.  There could be other sources of job training funds that could be leveraged through the seed money provided by the energy conservation fund. 

 

Section 86 created a task force for renewable energy.  The section outlined the appointment process for membership, the terms of the appointments, the filling of vacancies and details about state employees who were appointed.  The section was modeled after the Task Force For the Fund For a Healthy Nevada, which managed a portion of the tobacco settlement funds. 

 

In Section 87 there was an outline of how the chairman of the task force was to be selected, the term of office [one year], how the task force would fill vacancies, what quorum requirements were, and what compensation and per diem costs per state employee.  Staffing for the task force was to be provided by the Consumer Advocate’s office.  The private sector members of the task force would be expected to fund their own participation costs.  There was a provision that appointed a member of a nonprofit organization dedicated to the protection of the environment.  Because she was familiar with the nonprofit sector she was aware there was a lack of travel funds in some nonprofit budgets.  She submitted the committee might want to amend the bill to provide for the per diem and travel of the nonprofit member. 

 

Ms. Leslie looked at Section 88 that outlined the duties of the task force.  The task force would meet at least four times per year and establish an energy plan for renewable energy and conservation as set forth in the subsections:  conservation, efficiency, education, grants, oversight, building codes and miscellaneous matters.  The task force would also coordinate the renewable energy conservation fund, help identify and apply for grants, oversee the creation and maintenance of the database, oversee the education function and the loan fund.  The task force would also evaluate the benefits of a distributed generation program.  A number of states, including California and Minnesota, were examining distributive generation statutes and a task force could devote more time to the technical issues.  The task force would also evaluate the benefits of blending renewables and fossil fuels, including hedging and full switching capabilities as well as base load and peaking compatibilities.  The task force would act as an information clearing house and advocate for Nevada’s burgeoning renewable industry.  The task force would act as a renewable energy and energy conservation resource for the Legislature and the Governor.

 

Section 89 reflected the policy statements about the state’s view in regard to the importance of development of renewable energy sources and the need to encourage public and private participation and cooperation.  Most of the legislative intent was already in the statutes except for the update of the term “alternative energy” changed to “renewable energy.”  Sections 90 to 99 moved the state Energy Office from the Department of Business and Industry to the Consumer Advocate’s office.  There appeared to be widespread agreement the state Energy Office needed to be revamped and refocused.  For example, there were federal resources the state Energy Office had not aggressively pursued and hence were lost to the state.  The state needed to step up public education efforts related to energy and principles of supply and demand and conservation.  There was a need for better coordination and less duplication of effort in a number of areas including energy planning. 

 

Section 100 allowed for a portion of any increase in the tax that was already allocated to the Agriculture Extension Department of the University to be used for weatherization programs through the housing division.  The section did not change the current tax nor did it reallocate existing dollars.  It provided for an extra revenue source to help the state address the large demand for weatherization services.

 

Chairman Bache addressed the sections of A.B. 661, 50 through 74, which dealt with bonding.  The bonding program would stimulate the development of a variety of renewable energy resources to the direct benefit of the public health, safety and welfare.  The program was modeled after an existing successful program in NRS 349.935 through 349.961 that provided for the issuance of bonds for construction, operation and maintenance of water projects.  Mr. Bache stated in his ten years as Chairman of Government of Affairs he had dealt with the issues of bonding for water projects quite often.  He had requested the language for the particular sections of the bill dealing with bonding.  The purpose of the water projects bonds was to assist entities with their efforts to comply with state and federal drinking water standards.  The purpose of the program in A.B. 661 would be to stimulate the development of energy resources, help diversify Nevada’s energy supplies, and provide opportunities for economic development and growth throughout the state.  The state would have their energy needs taken care of and also have further economic diversification.  The measure had the potential to grow alternative energy generation as a viable sector of Nevada’s industrial economy.  Mr. Bache stated the bonds would be paid back from the revenues generated from the projects.  A.B. 661 would reduce the front-end costs of development of alternative energy projects.  Because interest on state bonds was tax deductible the program would lower the cost of private sector borrowing and provide an additional source of capital for renewable energy.

 

A.B. 661 created a program for renewable energy generation projects, either public or private, because of the anti-donation clause in the Nevada State Constitution, only revenue bonds, and not state securities, could be issued if the contract was not with a governmental entity.  Mr. Bache reminded the committee of the constitutional amendment on the last ballot that allowed for public/private partnerships that failed to be adopted.  The bill could not use general obligation bonds, but only revenue bonds for this type of project.  The renewable energy task force would participate in the approval of renewable energy projects and the definitions specifically excluded projects that generated electricity by combusting fossil fuel or by a nuclear reaction.  Sections 50-61 covered the various definitions and Section 62 granted the authority to the director of the Department of Business and Industry to carry out these sections and adopt all necessary regulations.  Section 63 made a legal point regarding the rule construction of the law.  Section 64 established criteria for financing a renewable energy generation project.  Section 65 established the requirements for the bonds and Section 66 authorized the director to issue state securities on revenue bonds to pay the cost of renewable energy generation projects to an aggregate amount of $300 million.  Mr. Bache stated Section 67 provided for the application fee and Section 68 identified how the revenues received from the obligators, the parties to the agreement, would be handled.  Section 69 addressed refunding of bonds and Section 70 provided for a thirty-day statute of limitations on complaints regarding the projects.  Section 71 pledged the faith of the state that bonds and revenues will not be impaired.  Section 72 waived requirements that could be imposed and Section 73 directed the State Engineer to advise the task force, upon request, in regard to water rights for the projects and Section 74 authorized preliminary review and approval of plans for renewable energy generation projects.

 

Assemblywoman Tiffany needed clarification on the makeup of the task force.  One of the main changes was the transfer physically and the transfer of authority of the Department of Energy out of Business and Industry and into the Consumer Advocate’s office.  She queried if anyone had asked the Governor how he felt about the transfer because it did involve the Executive Branch of government.

 

Ms. Leslie stated the transfer of the Department of Energy and the task force were two separate items.  She had not had any conversation with the Governor about the state Energy Office moving.  Ms. Tiffany stated she had experience with bills involving the Executive Branch and the Governor was not pleased when not informed.  Ms. Leslie stated in the Ways and Means subcommittee she was a part of there were people trying to get rid of the state Energy Office altogether.  There was a general feeling, she believed, there was a need to do something with the Energy Office.

 

Ms. Tiffany asked if the task force was a binding task force or an advisory one.  Ms. Leslie stated the task force oversaw the fund and thought Ms. Tiffany wanted to know if legally they could spend the money.  Ms. Tiffany stated it looked as if the bill gave them authority to write legislation, grant money, etc., with quite a bit of authority.  She added there seemed to be a crossover of responsibilities.  She asked again if the task force was advisory or binding.  Ms. Buckley asked Mr. Powers, Legal Counsel, to interpret the function of the task force.

 

Kevin C. Powers, Committee Counsel, stated the task force created in A.B. 661 would be a non-advisory task force.  The task force would have legal duties.  It would perform some advisory capacities to the Bureau of Consumer Protection and to the Director of Department of Business and Industry to carry out the bonding sections in the bill.  As far as some of the other duties—prescribing grant money, developing pilot programs, etc.—the task force would act as an authoritative committee and hold the power.  Ms. Tiffany stated the task force in effect sounded as if it had binding power.  She asked why state bonds were chosen for funding instead of traditional funding like a private sector company would do.  Mr. Bache stated the bill could not use normal state bonding, and these were revenue bonds as opposed to general obligation bonds.  The revenue from the facilities would pay off the bonds.  In the start-up costs of a facility, for example in a geothermal facility, most of the costs incurred were in building one of the plants with the initial construction and afterwards there would not be a great deal of ongoing expenses.  The bill would encourage companies to build alternative energy plants by issuing the bonds.  The encouragement would help provide economic diversification for mostly rural communities and diversity in the state’s energy resources.  Ms. Tiffany remembered Mr. Wellinghoff’s testimony in which he stated if he could get a contract, he could get the financing to have the plant built without state revenue bonds.  She was curious how the bill allowed state revenue bonds to be used whereas the testimony had shown the need would not be there if contracts were issued.

 

Mr. Bache indicated the section of the bill gave the state the option to use these revenue bonds and, of course, the state would have control over whom the bonds were issued to.  There was also the ability for the state, in case of a political subdivision of the state, to partner in a revenue bond situation. 

 

Ms. Von Tobel commented her understanding was a net-metered customer did not have an obligation to serve.  The customer was not like the regular utility company.  The customer, however, could pass on costs to the utility company and the utility company did not have any way of absorbing the costs except to pass it on to the ratepayers.  If she decided against net-metering on her house she would in effect be paying that subsidy for the net-metered customer.  Ms. Von Tobel asked if the bill asked for a subsidy plan.  Mr. Bache stated the customer would be generating energy that would go onto the grid and they would be net-metered for what they produced and sent out to the grid.  He did not consider it to be subsidization.  He believed the term would not be appropriate for the situation.  There was a problem in the current law that the utility company had mentioned, that if a net-metered customer produced more energy than they could use and reduced their bill down to nothing, they were not paying their share of the wires and transmission.  He did not have a problem addressing that issue when the committee dealt with net-metering.  Everyone that net-metered should be paying for the transmission; however, if they were sending more energy back to the grid than what they used he could not see how the state would be subsidizing their energy.  Ms. Buckley stated she would ask Timothy Hay when he testified to go through the net-metering concept, as she did not understand it as well as she should.  Ms. Von Tobel stated her concern would be the other ratepayers would end up subsidizing.  If there was a guarantee the net-metering customers had to provide a certain amount to the grid she would be interested in hearing the amount because the utility would end up paying certain costs and expenses related to net-metering. 

 

Chairman Bache stated one of the purposes of net-metering, which was mostly solar power, was to utilize the ability of solar power to flatten out the peak times.  The time of use that was heaviest was during the daylight hours, especially during the summer with air conditioning, and the solar power would round out the peak and helped keep the cost of energy down during those periods.

 

Assemblyman Parks remarked there were many planned unit developments with covenants, conditions and restrictions (CC&Rs), as well as zoning restrictions for any type of a renewable power source.  He wondered if any thought had been given to that type of concern in regard to a restriction to use renewable resources.  Mr. Bache stated there was some concern in regard to the products that had been out for a while such as the ugly solar panels placed on the roof of a home.  He stated there were now new technologies that made solar panels as a piece of glass that could be worked into the décor of the home or business.  He indicated he had listened to many bills concerning CC&Rs and with the new technologies he did not feel there would be many conflicts with CC&Rs.

 

Mr. Parks asked if there was need for an additional area mentioned in the bill indicating state statute superceded CC&Rs and/or local government zoning regulations with regard to renewable resources used in this manner.  Mr. Bache thought it would be appropriate to have an amendment stating the CC&Rs could not prohibit the various types of renewable resource products within reason.  Assemblywoman Leslie stated in Section 88 under the outline of the task force duties some of the problems were anticipated.  The issue raised by Mr. Parks was the type of issue a task force could sort through and perhaps make recommendations for future legislation.

 

Mr. Humke asked if the transfer of the Department of Energy ignored some of the positive things the Governor had done in his tenure with that office.  Ms. Leslie stated the bill was not ignoring anything that had been done; however, the general consensus was the state had not been using the Energy Office as effectively as the state needed to.  She reminded the committee the Department of Energy was not the Energy Assistance Office.  The Department of Energy had not performed as effectively as it should have and the bill sponsors hoped if the office was moved to the Consumer Advocate’s office it could be utilized more efficiently.  Some had advocated there should be an independent state Energy Office at the cabinet level to give the department more prominence.  Mr. Humke stated in past administrations the Department of Energy was not adequately funded and asked if it deserved a chance under the current administration to have its funding bolstered so it could function as it should.  Ms. Leslie stated she served on the Ways and Means Committee and she knew that some members of the Legislature wanted to disband the department altogether because of lack of performance.  There was no appetite to give the department more funding at this point because of its long history of under performing.  Mr. Humke stated perhaps this was not the session to do that with all state dollars. 

 

Assemblywoman Smith referred to Section 43 on page 19, line 16, in regard to net-metering and allowing the price to remain the same when the power was fed back into the grid.  She believed she had heard in previous testimony there was no ability to know the exact time the power was given to the grid.  She wanted to make sure the committee heard further testimony on the issue from the utility.  Mr. Bache indicated there were technologies currently for net-metering time-of-day.  The bill needed to make sure the customer generator would not be discriminated against as to the amount they were paid for generation or the cost associated with the energy compared to the utility purchasing the power from some company outside of the area. 

 

Ms. Buckley stated for the record she had received e-mail from Jon Wellinghoff stating he supported all sections of A.B. 661 that dealt with renewable energy and the authority transfer to the Consumer Advocate. 

 

Ms. Tiffany remarked on the trust fund the bill created from the permitting fee and asked if the fee was on the renewable energy resources that were being built or on fossil fuels companies.  Ms. Leslie stated the fee was assessed on fossil fuel plants only.  Ms. Tiffany stated Ms. Leslie indicated the assessment could be to assist development or zero percent interest loans for public facilities to be built and she asked if the bill would take the money from the fossil fuel was the money then given to renewable energy.  Ms. Leslie stated that was correct.  Ms. Tiffany asked if the fossil fuel plants were not already paying some amount on a permit fee basis.  Ms. Leslie stated the fossil fuel plants had a large impact on the air, water, and environment and the assessment fee was in return for the environmental impact in Nevada.  The money would be then used to promote the underdeveloped renewable energy resources in the state.  Other states had been assessing this type of fee for a long time and Nevada was behind.  Nevada only assessed about 25 percent of the types of permitting fees that Arizona did.  The point was the state could assess more and it would not stop the building of fossil fuel plants in the state.  Ms. Tiffany asked if there was a formula for assessment.  She was aware the utilities paid a fee at this point and wondered if the assessment on top of the current fee was prohibitive to the utilities.  Ms. Leslie stated she had asked that question herself and was convinced it was not.  The formula for the assessment was located in Section 27, subsection 2. 

 

Timothy Hay, Chief Deputy Attorney General and Consumer Advocate, Bureau of Consumer Protection, Attorney General’s Office, indicated his office’s strong support of the proactive approach the committee had taken on the issue of renewable resources for Nevada.  Nevada was replete with indigenous renewable sources of energy that were valuable to develop.  In the decade of the 1990s when there were low prices on fossil fuels, the state had neglected the development of renewable energy sources that were environmentally clean. 

 

Ms. Buckley asked Mr. Hay to give a very basic net-metering definition.  Mr. Hay stated his office could provide more concrete statistics; however, he recalled 25 to 30 states had established net-metering by legislative authority.  Nevada had the lowest participation rate of any of the states that employed net-metering. 

 

Mr. Hay stated at this time there were only seven customers in Nevada that were currently benefiting from the net-metering statute.  The concept was to allow a customer that was willing and able to feed energy resources, generated on their premises, into the utility grid during the time the customer was not consuming excess energy and when they were utilizing energy the demand on the system was reduced.  The customers who participated in net-metering still paid the fixed stand-by charge that all utility customers paid, and constituted the amount that deferred the system-wide charges all customers paid whether they were using energy or not.  In answer to the subsidy question, Mr. Hay stated the net-metered customers were not treated differently than any other customer.  Because of the prevalence of solar resources in Nevada the generation of net-metered energy occurred somewhat coincidently with the peak energy needs of the state.  If a utility was relieved of buying the last kilowatt or last 10 or 20 kilowatts of energy it was an important economic advantage because that energy was the most expensive for the system.

 

Since there were solar resources that could be developed, particularly in southern Nevada, that energy was in a sense more valuable than energy generated during other times of the day.  Assemblyman Bache made an important point, Mr. Hay stated, when he mentioned the customer generating the energy should be paid at the higher rate for energy that was generated on peak.  Currently Nevada did not discourage consumption during the peak by the established rate design and the bill would enable the state to start moving in the direction of conservation during the peak times and generation of energy during the peak times, thereby reducing the overall peak energy needs from the system.  Every kilowatt saved during the high times of consumption was the most valuable to lower the total overall average cost of energy.

 

Marion I. Barritt, Director, Sunrise, Sustainable Resources Group, stated her group mailed out approximately 700 newsletters to the public interested in renewable energy in the northern Nevada area.  She brought a sun slate for the committee to see the new technology of solar panels.  The solar company provided the roofing material or they could be retrofitted to meet the roof standards.  There was also a new type of solar material called “thin-film” solar that could be used on larger areas.  There were many schools in the Sacramento, California, area that were using the “thin-film” solar system to provide more energy than they used and therefore put energy back into the system of the Sacramento Municipal Utility District (SMUD). 

 

She mentioned the question Assemblyman Parks had asked in regard to the CC&Rs.  She stated in 1995 the CC&Rs in the state of Nevada were changed to allow renewable installations on homes.  In her case, she was the first net-metered customer in the state of Nevada in October 1997.  She lived in a tract development and if people could have complained they would have; however, the sun slates looked so good there had been no complaints.  

 

Ms. Barritt stated there were only seven people in the state that were net-metered.  The key reason, she believed, was there had been no publicity promoting net-metering.  After a recent article describing her home, Sierra Pacific had received 75 requests for information in regard to net-metering in one week.  The interest was now getting larger because of the crisis in California.  She mentioned there was a television show on Friday night on Public Broadcasting System (PBS) that would show the filming of her house.  She produced power during the peak hours with her solar panels and did not feel she cost the power companies anything.  She was, in fact, giving them electricity at a time when it costs them more to buy it anywhere.  She received the electricity back from the utility in the evenings when the electricity was cheaper.  She paid a $3.00 charge on her bill every month.  She produced a total of 50 to 60 percent of her total electric needs depending on the month.  Some of the local businesses, such as Wells Fargo, had realized there was a benefit to the state in the production of renewable energy.  Wells Fargo was offering a .5 percent lower mortgage rate if a person utilized renewable energy in their home. 

 

Ms. Barritt indicated she approved of the combining of the office of the Consumer Advocate and the state Department of Energy.  She stated the Department of Energy had very limited resources.  Currently they received some funding from the U.S. Department of Energy and some from a prior oil fund set up in the state.  She had attended many national and international energy meetings.  In the national meetings, Nevada’s Energy Department was not represented as most states were.  She felt the melding of the Energy Department with the Consumer Advocate’s office would provide the Energy Department with the necessary resources.  The Consumer Advocate’s office was currently involved with many energy issues and over the past year the current Consumer Advocate, Mr. Hay, had become a visionary in the field of renewable resources.  She believed there were federal funds in the past earmarked for Nevada that had not been applied for.  There would be a more simplified, direct approach for the ratepayers in combining the two offices. 

 

Ms. Barritt stated Ernie Nielsen would be offering an amendment to the bill in regard to conservation and energy efficiency that gave those areas similar status to the renewable energy focus with the proposed task force.  Whenever there was conversation about renewable energy there needed to be awareness about conservation and energy efficiency.  Her home, she stated, used approximately one-third of the energy that her neighbor’s home used.  The home next-door was approximately the same size and had not used the energy efficiency programs she completed.  The cost up-front was more; however, she knew the costs were basically stabilized and for someone living on a fixed income, like a senior citizen, that was important. 

 

Chairman Bache asked Ms. Barritt if she felt in addition to the lack of publicity regarding net-metering, the up-front costs of installing and time required to recover the costs could be one of the reasons why more individuals had not taken the opportunity to install renewable energy systems.  He also felt the “cap” inhibited the growth of renewables in commercial properties.  Ms. Barritt stated those reasons were correct.  As far as she was aware, Patagonia was the only commercial business that had installed solar.  They were now adding an additional eight panels to the eight they started out with.  The up-front costs were definitely a consideration.  In California there was a very extensive rebate system based on a systems benefit charge.  There were hundreds of people installing solar in California.  If Nevada could put together a systems benefit charge she believed there would be a large number of Nevadans that would install renewable energy system.  The cost of renewable energy systems was coming down and the more people that installed the systems, the lower the cost would go. 

 

Assemblywoman Von Tobel commented she had seen Ms. Barritt’s home on television approximately a year ago and was excited there was something that innovative happening in Nevada.  She asked Ms. Barritt if the meter was provided to her home by the power company when she installed her system.  Ms. Barritt stated the power company not only provided one meter, which was all that was really necessary, they installed three meters on her house.  It was unnecessary; however, her home was the first one.  She admitted it was fun to watch the meter labeled "customer to power company" going backwards at times.  The normal meter would be sufficient.  Ms. Von Tobel asked what the expense was for the meters.  Ms. Barritt stated she was not charged because it was a pilot program for the power company as well.  Ms. Barritt stated she was very appreciative of the straightforward comments Ms. Von Tobel had made in past committee meetings.  Ms. Von Tobel suggested the committee would want to hear at some point the cost of the meters because A.B. 661 called for the cost to be covered by the utility company.  Ms. Barritt stated any net-metering customer would be providing electricity to the power company at the peak hours and that would more than offset the cost of the meter.

 

Assemblyman Humke asked what the total cost was of the difference in the energy devices Ms. Barritt had incorporated into her home.  Ms. Barritt indicated there should be a division between the cost of the solar panels and the energy-efficient items she employed.  The cost of the solar system included one inverter and 60 sun slates.  The total cost was approximately $4800.  Once the inverter was purchased a resident could add more sun slates and the cost would be lower.  When she advised someone in regard to net-metering or adding solar on their roof she told them to start out with the one inverter and two panels.  The energy-efficient items included a front-loading washing machine that used 39 percent less water and less electricity.  The refrigerator had cost an extra $100, the radiant barrier in the attic cost $350, and the total was approximately $3000 to $4000 for all of the extra installations and insulations.  With the extra insulation she did not have to install an air conditioning unit and saved on the size of the furnace using a smaller very energy-efficient one.  Mr. Humke asked if Ms. Barritt had estimated the monthly cost in electrical bills.  Ms. Barritt stated her electricity bill for the year was approximately $85 to $116.  Her gas bill for the year was approximately $300. 

 

Assemblywoman Tiffany asked Mr. Hay to explain how the utility could buy back energy at a higher cost than generated at peak.  Mr. Hay stated when a state like Nevada used a solar resource, production of energy would be mostly during the peak times for the incumbent utility.  The energy may not be adequate to go back into the grid because a customer may be using all of the energy produced in his or her own residence.  However, the energy produced by the solar would reduce the amount of electricity the utility needed to buy at the peak prices to sell to another customer, hence bringing down the peak need, the most expensive part of the energy, especially in the West.  Under current law a customer such as Ms. Barritt, even though generating energy during peak times, in essence her meter only ran backwards if she was not consuming as much as she was using.  Even though the energy should be priced at whatever the utility’s peak cost was, she was being paid back at essentially the lowest rate any residential customer would pay.  A.B. 661‘s language moved the state closer to real-time pricing for both energy produced through a net-metering system or energy consumed during the peak periods, a strategy employed in other states experiencing the same types of shortages Nevada was experiencing.  From a functional standpoint, the issue would be more important for commercial and large customers because of the load-shed they could put back into the system. 

 

Ms. Tiffany asked if the utility had to buy back the energy and would it be bought back at a cost higher than they would be paying if purchased from another source at peak.  Mr. Hay stated no, they would not be paying more.  The net-metering allowed for energy a consumer produced, which was more inherently valuable at peak times, to be appropriately valued. 

 

Ms. Buckley mentioned Mr. Hay had heard of some concerns involved in the transfer of the Department of Energy to his office and whether the timing was right or wrong for the move.  Mr. Hay acknowledged his office was very willing to take on the challenge of administering the existing and potential future functions of the state Energy Office.  He stated everyone realized regardless of his or her particular roles in the energy area, the state was facing a crisis that was driven by some factors outside of the control of the state; however, there were factors within the state’s control that could be used to address the crisis.  He suggested during this period of time of state budget constraints, as well as an energy crisis, his office could use some of their existing administrative support as well as functions carried out by statute voluntarily, such as participation in regional and national energy, conservation, renewables and other strategy groups.  The state would have more of a focused effort if the functions were consolidated.  Mr. Hay stated many years ago he was in Governor Bryan’s administration and there was a concern at that time as to whether the state Energy Office was in an appropriate agency since it was an appendage.  At one point there had been discussions of moving the functions to the PUC and there was some belief there were not adequate resources for it to be effective and perhaps the best thing to do would be to eliminate it.  He suggested during the next two years there would be many issues relating to energy and it would be more administratively efficient for his office to provide the support and strategic guidance that the Energy Office could benefit from. 

 

Assemblywoman Von Tobel asked Mr. Hay, as Consumer Advocate, what he felt his role should be—as a neutral party in these matters, support for the consumers—and how did his role fit in with the utilities.  Mr. Hay stated the office of the Consumer Advocate was created in 1981 during a time of similar volatility in the energy markets largely because there was a public perception the voice of the small residential and commercial consumer was not heard in front of the PUC as they processed multiple rate applications per year.  There had been extensive discussions in the 1981 Legislative Session as to where the office should be placed once it was created.  The role of the Consumer Advocate with the utilities was to primarily represent the small customer, residential and commercial, in front of the PUC as an advocate.  At the time the office was created, the statutory charge for the staff of the PUC was to balance the interest of the utility company and the ratepayer.  His office was charged with advocacy on the part of the ratepayers, although by statute they could represent any group they chose to within their discretion.  The effectiveness of the office traditionally had been to concentrate on smaller ratepayer issues.  If there was a rate application filed with the PUC, the Consumer Advocate would represent small consumers and would usually be the only party doing so.  The larger companies could represent their interest in a PUC hearing with the luxury of hiring attorneys, which would be prohibitive to the small consumer.  His office had also acted on behalf of developing a state energy strategy including the development of renewable resources and therefore their advocacy role extended into energy policy apart from the regulatory proceedings.  When the office was restructured in 1997 the statutory responsibilities were also expanded to include deceptive trade practices, anti-trust and other items somewhat outside the utility advocacy. 

 

Ms. Von Tobel asked where Nevada Power was in the new makeup of energy strategy.  Mr. Hay stated he did not believe the Energy Department had a direct role in the past with the incumbent utilities.  Obviously in the regulatory arena Sierra Pacific Power and Nevada Power (the company) presented their arguments in front of the PUC and if necessary in the courts.  He saw the Energy Office function as more of a strategic planning department.  He believed the office would be involved in concepts such as net-metering and, when necessary, interface with the utilities to see if there were functional and technical problems that had prevented issues from going forward.  Mr. Hay stated the Energy Office did not get involved customarily in any type of regulatory role or proceedings.  Ms. Von Tobel stated her concern was not having the Governor involved and not allowing him to be able to appoint anyone to the task force.  The Governor was the one that stopped deregulation, not once, but three times, which directly affected Nevada Power.  She was curious why the Legislature would go so far from the Governor’s involvement to a task force that would not even allow him the opportunity to appoint anybody. 

 

Chairman Bache asked Mr. Hay if the PUC, during his tenure as a Consumer Advocate, had any hearings related to consumer-type issues that the general public attended and was involved in.  Mr. Hay stated in his experience as a Commissioner and as the Consumer Advocate for the last year, it was rare to see a member of the general public participate in any proceeding.  There were four senior citizens that had testified in a procedural hearing on the Sierra Pacific Power and Nevada Power Comprehensive Energy Plan (CEP) a couple of weeks ago.  However, it was not customary to see members of the general public watching or representing themselves in a general hearing.

 

Alfredo T. Alonso, Representative, British Petroleum Gas Company (BP), and Rose McKinney-James, Representative, Landwell, wanted to address some issues in A.B. 661.  In regard to the issue of net-metering, BP would advocate removal of the cap altogether.  There was no reason to have such a cap if the state was trying to create a market.  Mr. Alonso could think of no place better to create a solar market nor a better vehicle than net-metering to encourage large businesses to switch to solar generation.  The issue had come up with respect to connection charges and BP agreed the power company should not have to pay the cost for many of the charges.  BP would agree to work with “the company” to find a way, especially for the large customers, to address the connection charges.  Mr. Alonso stated the issues discussed in regard to the amount of energy going back into the grid had to be resolved.  In many cases the large net-metering customers would be exporting the power.  The theory would be the power going back into the grid would more than pay for some of the connection charges. 

 

Mr. Alonso referred to the brief amendment he had submitted to the committee (Exhibit C).  The proposed amendment would remove subsection 2 of Section 42 and remove the cap for net-metering.  The cap, he believed, prevented the state from receiving more net-metered customers.  The cap removal would allow small businesses to get involved in solar and other renewables and in the long-run there could be a large market in the state. 

 

The other proposed amendment was a customer rebate program that other states had initiated.  Mr. Alonso stated that coupled with net-metering there was a need to create an incentive for the demand to grow and therefore create the market.  As an example of creating growth, he indicated, when the first computers were marketed in personal computer form they were very expensive and the first customers paid an exorbitant amount of money.  Those people were the people that made computers so affordable now.  He believed this was the same type of situation with solar.  Solar was expensive because the demand was not there.  Once the demand was there the technology would improve.  The new solar panels could look like glass, cement shingles on a roof, etc.  The customer rebate program would involve a fee that would be collected by the power company and there would be a cost associated with the collection.  The fee charged would create the rebate program and would assist people in purchasing and setting up the solar systems.  The rural areas of Nevada were very interested in setting up solar systems because the power bills for some of the farms had increased tremendously.  The customer rebate system and the help in purchasing of equipment could alleviate the farmers concerns because solar was power at the source.  Nothing could match solar in regard to the environmental benefits, the public benefits and, especially in the rural areas, the ability to go off the grid and not be dependent on the grid. 

 

Ms. McKinney-James believed most of the committee was aware she had served as a member of the Public Service Commission, had been the Director of the Department of Business and Industry and was the former President and CEO of SeaStar, the corporation for solar technology and renewable resources.  She commented on the work undertaken by SeaStar particularly in the 1997 Legislative Session that resulted in the original portfolio standard for Nevada.  She reflected on the work SeaStar had accomplished with respect to net-metering.  She was grateful to the committee, as an advocate of renewable resources, solar in particular, to read A.B. 661.

 

During her tenure as a member of the Public Service Commission the legislative body approved a measure that identified renewable resources as indigenous and established a preference, because of the economic development potential, and the need for efforts to diversify the economy.  The framework was established for supporting renewables in the 1980s.  During the tenure of SeaStar the market was different, she stated.  SeaStar was promoting a product with environmental and economic benefits in an environment where electrical prices were very low and they could not compete.  Ms. McKinney-James reflected how times had changed and the principles promoted then were viable today with commercial entities looking to Nevada to pursue development of solar technology and renewables.  It was the role of SeaStar to try to promote commercial applications of the new technologies.  The provisions set forth in A.B. 661 were consistent with those efforts.  The bill took a dramatic step forward in the promotion of Nevada.  She stated in other presentations the committee had probably seen maps that illustrated and demonstrated quite clearly the remarkable amount of renewable resources available in Nevada. 

 

What Nevada had lacked in the past, she indicated, was a comprehensive energy policy.  There had been a lot of discussions; however, there was no policy and no central place in which to house the policy.  As a past director of Business and Industry she was consistently faced with the threat of the loss of the Office of Energy.  The Office of Energy had a tremendous capacity and potential to do very well for the state and in the absence of any other entity devoted to energy issues, she believed it very important that the office be maintained.  She was most supportive of the transfer of the Office of Energy to the Bureau of Consumer Protection.  She believed the Consumer Advocate’s office had the resources and the wherewithal to take advantage of the potential. 

 

She was also very supportive of the amendments set forth by BP Solar.  BP had established itself as a very strong commercial entity in the West.  The products were most viable and had the potential for turning around many projects that had difficulty going forward, in particular the customer rebate project.  The reality was, she indicated, solar products had difficulty competing in the market and it was because of an economy of scale.  The state needed to find a way to generate enough activity within the market to allow solar products the ability to get into the market.  The products were expensive up front, but the fuel was free. 

 

Ms. McKinney-James stated Nevada had not had an infrastructure to support renewables.  Geothermal had done a remarkable job over the years, she remarked, being in the ground and in the grid.  She was dismayed to learn, however, that much of the power generated in Nevada was going on to California, but geothermal had a solid reputation.  She was delighted to hear Mr. Ponn state in testimony a few weeks ago that geothermal was a reliable source and had provided a great value to Sierra Pacific Power.  She believed the cap should be removed from net-metering.  SeaStar had tried within the bounds of its resources to promote the availability of net-metering.  Essentially the concept was a homeowner, generally using an average of ten kilowatts, siting a system on a home and maintaining their connection to the grid.  In terms of building excess power, SeaStar was not able in 1997 to create any value for the excess.  Sierra Pacific Power had independently created a system of credits for the excess power.  She thought it would be valuable for the state to move the concept to the next step in this new market and new market condition to take full advantage of the fact that net-metering was generating a power going forward into the grid.  Marion Barritt had already corrected the record with respect to the 1993 law that ensured renewable systems were not allowed to be prohibited as a result of CC&Rs. 

 

Ms. McKinney-James stated her final comments would be with respect to the proposed trust fund.  Establishment in a competitive way of some resource that would support and promote renewables in the state was a positive move.  It was very difficult for the state to compete with California and Arizona, both of whom had taken the time to identify a funding mechanism that would enhance efforts undertaken by each state.  She was fully supportive of the measures and appreciated the opportunity to offer some observations and comments.

 

Ms. Tiffany asked if there was a task force that had the responsibility for granting money from the trust fund, for example $2 million, how would Ms. McKinney-James see the money being used.  Ms. McKinney-James stated there were a variety of opportunities.  The most significant issue would be to provide incentives to businesses that would move to Nevada and either establish a manufacturing facility or build a plant.  There was a real economic opportunity present with that idea.  The state then had the ability to participate in the idea of the facility using renewable energy.  The state did not have to fully pay for the set up, but could make a contribution that would encourage matching funds from the Department of Energy or other federal entities.  It would put the state in the “mix” and allowed some innovative transactions that would serve as incentives.

 

Ms. Leslie commented to Mr. Alonso she was very interested in the rebate idea and went on to explain why she believed it would work.  She stated it would be a systems benefit charge so everyone would pay for it on the ratepayer’s bill; however, in return everyone had a chance to apply for the rebate if solar power was used in the home.  The more people that used solar power meant less power drawn down from the grid which meant the power company had to buy less power at the expensive peak times so then all would benefit.  Mr. Alonso stated that was correct and the theory behind solar energy use was long-term, not short-term.  Ultimately with the added use of solar, the best peak shaver available, even in areas that are cloudy such as Germany, the benefits included the personal good, saving money because the home was independent of the grid, and the common good, mainly the environmental benefits [peak shaver] and the rates decreased.  Ms. Leslie stated it gave incentives to people such as herself to get going and do something.  She asked Mr. Alonso about the mathematics mentioned in his amendment that indicated the system benefit charges would be .0028586 per kilowatt-hour of electricity on a monthly basis.  She asked if he could tell the committee what that would translate into as an extra charge per customer per month.  Mr. Alonso stated his company looked and compared the state of Nevada with states such as New Jersey, Idaho, and California and ultimately came up with the charge in terms of fully funding the program at approximately $10 million per year.  In those terms the cost would be $.50 to $.80 per month per customer.  Ultimately, as the amendment stated, the cost phased out.  The theory was a jumpstart for the solar program and ultimately the prices would go down and it would fund itself.  Ms. Leslie clarified it would be $5 in 2002 and then by 2008 the monthly surcharge would disappear from her bill.  Mr. Alonso stated that was the theory.

 

Mr. Humke liked the amendment for the rebate program and Mr. Alonso had explained it well.  He asked if the amendment would include deletion of the bond program.  He stated it seemed the rebate program replaced the need for the bonds.  Ms. McKinney-James responded the state needed a variety of tools in the arsenal.  While the bond program would address a series of uses especially for the larger projects, the rebate program could be used for a host of opportunities for residential and small business customers.  As an advocate of renewables she would not turn away any tool that would be available to enhance the presence of these technologies in the state.  Mr. Alonso stated he agreed and the amendment was something to discuss and debate.  The numbers, depending on how large or small the state wanted the program to be, could be worked out.  As Ms. McKinney-James had stated, it depended on the project and each one would fit somehow with a different suggested program.  He believed the rebate program was geared to attract the small business and residential customer.  Mr. Humke stated the rebate program was self-actualizing.  He stated it appeared there would not really be an application system but rather a customer would prove they had the device, show the purchase order and be eligible for the rebate.  The bond program, however, brought to mind a lot of bureaucracy, competition and perhaps bad public policy.  Mr. Alonso stated with respect to the different programs he envisioned the PUC would have some role in writing the regulations and would probably be the best way to ensure the programs were set in good policy. 

 

Ms. Von Tobel asked if all of the proposed small power producers would have an obligation to serve and fall under the same regulations as the state’s utility.  She had asked this of Mr. Wellinghoff because she had received the impression Nevada could be a wonderful power producer to serve other states.  The state needed to be cautious, especially when the state was actually setting up a subsidy of all ratepayers, to pay for these programs.  Mr. Alonso stated there was some confusion because this program was located at the very local level and the power would be going right back into the grid.  The customers would not have any obligation, obviously, because it was the individual or the individual business that was simply peak shaving.  That was all they were doing and the power was going back into the grid to fuel local needs.  Ms. McKinney-James stated the issue was a two-edged sword.  If the state was going forward with deregulation, there would be a level playing field and any alternative seller would have to adhere to the same requirements that “the company” did now.  Because deregulation had been placed on hold, an independent power producer (IPP) had to adhere to the current statutory structure for IPPs and they would have to find a means of getting that power to the grid and go through the investor-owned utility.  The portfolio standard established a market for renewables and required the power be produced indigenously in Nevada and the cost increased exponentially when the power had to be transferred outside of the state.  It would make sense economically initially for that power to be used within the state.  If there were additional requirements, it would negatively impact the natural flow of the market.  She stated it might be valuable for the committee to have a discussion with an economist to examine if there might be a range whereby there was avoidance of affecting the market and avoidance of running into the constitutional issue of interstate commerce in terms of placing limitations.  She was concerned in drafting the original language for the portfolio standards, which stated the power had to be produced within the state, there would be a challenge.  Because of the size of the portfolio standard at that point she felt it could be avoided.  Ms. Von Tobel stated the answer helped; however, there was still no obligation to serve and Ms. McKinney-James said there was no obligation unless it was created.  Ms. Von Tobel stated exactly and that was why she felt the obligation should be part of the bill.

 

Alfredo Alonso stated he believed there were two different entities being discussed.  There was a group that would be producing with respect to generation into the grid as opposed to those who were net-metering and keeping the power on a local level such as their homes, businesses and the excess going into the grid.  Those customers would not be able to control where that power went, but he did understand what Ms. Von Tobel meant in respect to the generation producing group.  Ms. Von Tobel indicated the state would not have any control over how much those producers would generate.  They could end up getting a portion of the bond and then not generate their minimum of power production.  Mr. Alonso stated if he went to net-metering and took advantage of the project and changed his roof, put solar panels throughout, that power created during the day as a homeowner was going back into the grid.  At night he would be drawing off of the grid.  The grid would be his battery, in effect.  There was no way to control that because it depended on the sun and how much was being put into the grid.  The homeowner was exporting to some degree during sun times of the day and at other times the homeowner was an importer in a very small way.

 

Ms. Buckley asked Mr. Powers what the committee could write in statute and in terms of the Commerce Clause to require energy to benefit Nevadans, how far the laws could go to protect the customers.  She asked if using the state’s bonding capability perhaps allowed the state to include more assurances of serving Nevadans without violating the Commerce Clause.  Mr. Powers stated the question raised a host of interesting issues.  The first issue was to answer Ms. Von Tobel’s concern about the obligation to serve.  If there was an obligation to serve there would be an obligation to be paid.  The net-metering customer generator would be feeding the electricity back into the system but would not be paid for that power.  If the law opposed an obligation to serve then there would be an obligation to provide just and reasonable compensation that would drastically change the concept of net-metering. 

 

Mr. Powers stated in relation to the Commerce Clause there was very little that a state could do to require private producers of electricity to keep their generation in the state.  He would agree with the statement that the renewable energy statute now, NRS 704.989, which required the utilities to buy their renewable energy from renewable energy sources located in the state, would, in fact, violate the Commerce Clause.  There was no exception to the Commerce Clause and it had not been challenged because of the low requirement to buy renewable in the state; however, the statute, on face, most likely violated the Commerce Clause.

 

Mr. Powers stated as far as the bonding program there was an exception in the Commerce Clause for state subsidization.  The bonding program, the private/public partnership, would be a form of state subsidy to encourage the development of domestic renewable energy resources.  There were enough dictums in United States Supreme Court cases to indicate that state subsidies did not violate the Commerce Clause. 

 

Ms. Buckley commented that if the state was trying in a time of an energy crisis to utilize all of the tools that the state could to ensure energy stayed with Nevada, considering a bonding provision would be one way the state could accomplish that goal.  Mr. Powers stated that was correct for two reasons.  First, state subsidies did not generally violate the Commerce Clause.  Second, part of the bonding provisions allowed governmental entities to operate the renewable energy resources.  A governmental entity, when acting as a market participant and operating its own energy source, could restrict the sale of energy to in-state. 

 

Ms. Buckley reiterated the statement Mr. Powers made in respect to requiring the purchase of renewables as possible violation of the Commerce Clause and asked if that was a correct statement.  She commented that if the statement were true then all of the existing statutes, as well as other states that required a portfolio standard, were in violation of the Commerce Clause.  Mr. Powers stated the Nevada statute specifically provided that the portfolio standard as currently written indicated .01 percent must be purchased from renewable energy sources in this state.  It was therefore most likely to violate the Commerce Clause and the reason for that was the Wyoming v. Oklahoma case [502 U.S. 437, 112 S.Ct. 789 (1992)].  In that case, Oklahoma enacted a statute requiring its electric generating plants to burn 10 percent Oklahoma-mined coal.  The court struck that down easily as economic discrimination because it favored in-state coal production.  Other state’s statutes, which he had just begun to investigate, included Maine’s.  Maine had a 30 percent requirement of renewable energy by 2000 and had no restriction limiting the production to in-state.  He had not canvassed all of the states that had statutes relating to renewable energy and would provide the answers to the committee as soon as possible.  However, he stated, a Commerce Clause violation would only occur if someone brought a lawsuit and if there was growing competition among renewable energy producers in other states, eventually one of those renewable energy producers in another state was going to want to come into a state that had the in-state restriction and therefore could challenge the Commerce Clause.  At that point, the out-of-state producer, he believed, would be successful in its challenge. 

 

Ms. Buckley stated then the only provision that was at issue was the “in-state” portion, not the standards themselves.  It was only when one state gave preference to their own “in-state” at the expense of another state that the Commerce Clause was violated.  Mr. Powers stated that was correct, there was nothing inherently unconstitutional about portfolio standards. 

 

Scott M. Craigie, President, Stirling Energy Systems, had spent a significant amount of time researching the issue of the Commerce Clause to try to find ways to help leverage some of the things that would benefit his company and other renewable energy sources.  He did not have a definitive answer but did want to add some thoughts that could be examined as the committee moved forward.  Anytime a state established incentive programs that were designed to increase investment or increase activity in a specific area, such as the buy-down or the portfolio standards or a production credit, there was encouragement for investment in energy sources that were having a difficult time entering into the mainstream of use and getting their companies started in any state.  To the extent that a state created programs that helped or assisted the renewable companies in the start-up, he believed there was a good argument that could be made that monies were spent and the state should benefit.  He would suggest that the state would need to do some research and perhaps the argument could be developed in such a way that the state would not violate the Commerce Clause. 

 

Ms. Tiffany asked Mr. Powers if the bonding was inside or outside of the cap.  Mr. Powers assumed Ms. Tiffany was referring to the constitutional debt limit.  Ms. Tiffany stated that was correct.  Mr. Powers believed that these types of bonds, because they were promoting the use of renewable energy resources, fell under the exception in Article 9, Section 3 of the State of Nevada Constitution for bonds that preserve, protect or bring about the benefits of natural resources.  That was the basis for the water project bonds and that basis had been held up by the Nevada Supreme Court and it was the opinion of the Legislative Counsel Bureau (LCB) that the exception to the state’s debt limit would also apply to these renewable energy bonds.  Mr. Bache stated that was one of the reasons why he requested the bonding be done in the way it was done, because it did fall outside of the debt limit.

 

Ms. Rose McKinney-James stated in response to Ms. Buckley’s inquiry regarding the in-state language for the original portfolio standard, part of the language came from the fact California had placed within their standard a requirement, through the California Energy Commission, that projects only took place in California.  Some of the policy makers in Nevada felt that the state needed to have a similar provision but she concurred with Mr. Craigie.  Ms. Buckley asked if the reasoning was because California started it first.  Ms. McKinney-James stated it was a political comeback to the state of California.  The policy was consistent, however, with the policy of this state that indigenous resources be given a preference and that was something certain members of the Legislature wanted to continue.

 

Briefly she addressed Ms. Von Tobel’s inquiries.  When companies such as BP and Stirling were talked about, the reference was to distributed generation, on the rooftop of a consumer, or a building integrated into a building using some of the new technologies.  When there was distributed generation the power was put into the distribution system, not necessarily the grid.  With respect to that, the Federal Energy Regulatory Commission (FERC) allowed distributed generation to take place below the amount of 50-megawatts. 

 

Scott Craigie, President, Stirling Energy Systems, was before the committee to speak in favor of A.B. 661 and stated it was a very progressive bill.  He referred the committee to page 32 in regard to the Energy Office in the state.  From his past experience as chairman of the PUC from 1983 until 1989 and his work in the Governor’s Office, the Office of Energy had been like a “poor stepchild” for a long time, never finding the right home.  Actually, at one point in time he had proposed the step the committee was recommending in A.B. 661.  In many ways the Energy Office helped individual consumer groups with programs such as weatherization.  In the Consumer Advocate’s office there was visibility with consumers and there was an easy contact point.  The energy office had contacts and reached into a number of networks that needed to have a place in Nevada where there were energy users and generators for the state.  He believed there was an atmosphere that could be developed where the issues from the Energy Office, generally more long-term ideas, could merge with the Consumer Advocate issues that were generally more rushed.  The realities of the marketplace were present with the Consumer Advocate and some of the trends occurring were present in the Energy Office.  The merge would create a natural blend.  He strongly encouraged the transfer to the Consumer Advocate’s office.

 

Mr. Craigie commented on starting a new technology and introducing the business to the state.  In 1983 geothermal was discussed as a new technology that would bring a renewable source to Nevada.  Many viewed the technology as something that could not work in Nevada.  He and Fred Schmidt, the Commissioner of the PUC at that time, worked to get the Steamboat geothermal plant running.  The Steamboat plant did open the industry in northern Nevada and although it had not advanced as aggressively as he had hoped, it had become a mainstay in power production.  He believed the state could be on the same kind of threshold with the breakthroughs in solar technology.

 

Mr. Craigie stated Stirling Energy Systems (SES) wanted to build on the enterprise zones that SeaStar had put into effect and the target area was El Dorado Valley.  The SES people wanted to use mass production so they could produce a large number of generators and place them in groups.  Their focus was to develop a 100-megawatt generating station out of a very large number of dish systems that concentrated the light and used the heat instead of the photovoltaics.  The hope of the large number of generators was to decrease the price to $.12 per kilowatt-hour on peak.  That was in market and did not require subsidies from the state.  The cost of construction would drop to the level where the next 20 megawatts were possible and the project could be what Steamboat was to the northern part of the state.  He referred to page 23, Section 64, subsection 4(a), (b) and (c) relating to bonds that were backed by the public sector.  The bonds were state bonds but became the full responsibility of the entity that used them.  In his last few years as the chairman of the PUC he had been directly involved in the process of using these types of bonds as a low-cost bonding program to help build facilities that were necessary inside some of the utilities.  The theory was the usage of the bonds would issue a savings and the savings were passed directly through to the consumers.  The bonds benefited a large number of consumers and the bonds used had not been committed to other projects.  The bonds were very effective money-saving tools to use.

 

He suggested subsection (b) did not fit the purpose of the use of the bonds for these technologies.  The reason was the application required a five-year operating history from the contemplated lessee.  There would not be a five-year record of experience with most of the technologies.  Obviously, he stated, there would be reluctance to issue bonds to a new company.  He indicated, however, the bonds would only be a very small share of the capital for the new technologies.  There would have to be a financial entity that would back the programs because of the expense of building these types of generators.  The companies would have to prove themselves through the different processes in order to obtain the finances.  He suggested the committee remove subsection (b) and allow these somewhat reduced interest level bonds to be applied in the instances stated.  The bonds would have an effect on the project mentioned by lowering the costs, allowing the power to be closer to the market price, and helped to get the mass production cycle going so the cost of the production of the facilities would be decreased. 

 

Mr. Humke posed a question to the drafter of the bill about the language on page 23, subsection 4(b), lines 8 through 11.  He asked if the language was general bond language and could be found elsewhere in statute.  Mr. Powers stated those provisions were modeled after the existing provisions for the water projects in NRS Chapter 349 and were a statutory requirement that did not have to be imposed but could be removed by the will of the committee without affecting the bonding provisions.  Mr. Humke asked if the five-year operating history referred to indicated the history had to be in Nevada.  Mr. Power stated it did not indicate the in-state requirement.  He pointed out the requirement was a five-year operating history of the contemplated lessee or a parent or other guarantor.  It could be a financing company that would back the contemplated lessee. 

 

Mr. Craigie referred Mr. Humke to subsection (c) that gave the public sector some assurances that there would not be some disadvantage to the state. 

 

Richard Harjo, Executive Vice President, Alrus Consulting, commented on the Native American tribes in the state of Nevada.  Currently more than half of the tribes were being examined for energy production.  There were two tribes interested in solar, five for geothermal, two for fossil fuel, two for wind, and two for biomass.  The amount was almost half of the federally recognized tribes in the state. 

 

Chairman Bache stated the committee would be losing members to other committees because of the timeframes.  He wondered if some of the guests would be willing to carry over testimony until the next meeting.

 

Hugh Ricci, State Engineer, Division of Water Resources, State of Nevada, commented he had no position on the bill itself, however, wanted to comment on two sections of the bill.  Section 73 stated the state engineer should upon the request of the task force indicate what water rights existed for a particular project.  Section 64, in regard to the financing of the project, stated the task force should give its recommendation or approve a project to the director before any financing occurs.  Obviously the only thing he was concerned about, he stated, was the larger commercial operations that could require a water right that was associated with the production of any energy.  He wanted to mention to the committee that sometimes there was a problem when an application was filed with his office and could be protested by one or any number of people and that could become a roadblock to any project.  He wanted to make sure that the financing portion of the project checked to see if the water right was in place prior to any financing.  He mentioned under NRS Chapter 533.370, subsection 1(c)(2), the state engineer was allowed to review the financial ability of any person making an application for water to determine if they did have the financial capability to put the water to use for the intended purpose upon the application. 

 

Donald Soderberg, Chairman, Public Utilities Commission (PUC), State of Nevada, stated many of the technical comments were alleviated by Assemblywoman Leslie’s presentation.  He wanted to focus attention on Section 43, which purported to expand the existing net-metering program.  His office had a number of concerns that the proposed language could cause regulatory confusion with the statute in the future.  The first issue was how the PUC was going to handle costs associated with net-metering if the utility had to subsidize the customer of net-metering.  When net-metering was limited to only 100 people and was focused on residential users, there was no real quest to discover what the costs could be and to account for those costs.  In the new bill, there was no cap on the number of net-metering customers and it appeared to be moving toward for-profit businesses as well.  The concern was raised, and the PUC would like to see some level of guidance in a statute so they could handle the costs if they surfaced in a rate case.  Mr. Soderberg asked if the costs were something to be borne by the customer-generator, or passed on to all ratepayers, because on public policy there was some benefit to all ratepayers.

 

Mr. Soderberg stated the second area of concern was in Section 43, subsection 2(d), which purported the utility pay the customer-generator its costs the utility would have had to pay on the open market for the electricity.  He thought from the Chairman’s testimony that was the intent.  He did not feel the language in the section followed the intent.  He felt the section required the utility to pay the customer-generator at the same rate as they would be charged.  If a customer-generator was on a blended rate and not on a time-of-use rate they would still be in the same situation they were today.  The confusion was there was a trend now to move toward inverted block rates.  The PUC had observed the trend in the CEP filing and the advocating by the Consumer Advocate’s office.  If there were block rates, he was not sure at what price the customer-generator would be compensated.  What the customer would pay the utility changed with the level of usage, for example, the top third, middle third or lower third.  The PUC would like guidance because they would have to implement the policy.  There did not seem to be a problem with regard to the suggestions of no cap on net-metering today; however, the PUC wanted the ability to put in some safeguards to ensure people did not use the customer-generator concept as a way to essentially be a wholesaler of power on any level.  If the program was looked at to its logical extension to create the economies of scale, and a larger number of consumers focused on the issue, there could be a problem in the future. 

 

Mr. Soderberg commented on how the net-metering type of program interfaced with a portfolio standard.  It appeared to him the committee was hoping parallel generation using renewables was an idea they wanted to catch on with mass appeal.  If that was the case, Mr. Soderberg asked, would the utility purchasing renewables from customer-generators be calculated against the portfolio standard?  The PUC would have to administer the portfolio standard as it was now or as it expanded in other bills and his office would like some guidance in one of the statutes to tell them how they would apply or not apply the purchase of renewables. 

 

Mr. Soderberg also pointed out the issue of net-metering had expanded over the last couple of years, and especially since the West had experienced the energy crisis, to more of a concept called parallel generation.  Parallel generation was supported by the Western Governor’s Association at the February 2 meeting in Portland, Oregon, and was something an informal work group formed under the auspices of the PUC’s reliability docket had been working on.  He had been informed the PUC should expect to see a tariff from the utility that embodied the collective thinking of this work group at the end of April.  Parallel generation encompassed most of the ideas the committee was trying to accomplish with the net-metering program; however, it expanded it out to all sorts of customer-generation beyond renewables that would encompass some of the new technologies and fuel cells, efficient diesel generators and micro-turbines. 

 

Ms. Buckley stated since time was rather short she wondered if Mr. Hay, Mr. Lampley, Assemblywoman Leslie and Mr. Soderberg could get together to work out some of the language changes and work to make the improvements that needed to be made.

 

Chairman Bache mentioned Sierra Pacific would probably want to be involved in the meeting as well.  Mr. Bache asked if Mr. Nielsen and Ms. Stockey could wait until Tuesday for their testimony and seeing no further business before the committee adjourned the meeting at 4:24 p.m.

 

RESPECTFULLY SUBMITTED:

 

 

 

Cheryl Meyers

Committee Secretary

 

 

APPROVED BY:

 

 

 

                       

Assemblyman Douglas Bache, Chairman

 

 

DATE: