MINUTES OF THE

SENATE Committee on Commerce and Labor

 

Seventy-First Session

May 18, 2001

 

The Senate Committee on Commerce and Laborwas called to order by Chairman Randolph J. Townsend, at 7:07 a.m., on Friday, May 18, 2001, in Room 2135 of the Legislative Building, Carson City, Nevada.  The meeting was videoconferenced to the Grant Sawyer Office Building, Room 4401, Las Vegas, Nevada.  Exhibit A is the Agenda.  Exhibit B is the Attendance Roster.  All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

COMMITTEE MEMBERS PRESENT:

 

Senator Randolph J. Townsend, Chairman

Senator Ann O’Connell, Vice Chairman

Senator Dean A. Rhoads

Senator Mark Amodei

Senator Raymond C. Shaffer

Senator Michael A. (Mike) Schneider

Senator Maggie Carlton

 

GUEST LEGISLATORS PRESENT:

 

Assemblyman David E. Goldwater, Clark County Assembly District No. 10

 

STAFF MEMBERS PRESENT:

 

Scott Young, Committee Policy Analyst

Lydia Lee, Committee Secretary

 

OTHERS PRESENT:

 

Harvey Whittemore, Lobbyist, Lionel Sawyer & Collins, and Nevada Resort             Association

Douglas R. Ponn, Lobbyist, Sierra Pacific Power Company, and Sierra Pacific             Resources

Rose E. McKinney-James, Lobbyist, Clark County School District

Russ Fields, Lobbyist, Nevada Mining Association

Ernest Adler, Lobbyist, Nevada Housing Coalition

Ernest K. Nielsen, Lobbyist, Washoe County Senior Law Project

Kevin C. Powers, Senior Deputy Legislative Counsel, Legal Division, Legislative             Counsel Bureau

Clay R. Fitch, Lobbyist, Nevada Rural Electric Association, and Wells Rural             Electric Association

Terry K. Graves, Lobbyist, Nevada Independent Electric Coalition

Crystal M. McGee, Senior Research Analyst, Workers’ Compensation, Research             Division, Legislative Counsel Bureau

Samuel P. McMullen, Lobbyist

Robert Barengo, Lobbyist, Nevada Consumer Finance Association

James L. Wadhams, Lobbyist, Nevada Mortgage Bankers

Alfredo Alonso, Lobbyist, Citibank (Nevada) NA, and Pacific Gas and Electric             National Energy Group

John P. Sande III, Lobbyist, Nevada Bankers Association

Brian Krolicki, State Treasurer, Office of the State Treasurer

Donald Jayne, Lobbytist, Nevada Self-Insured Association No. 200

Jim Fry, Workers’ Compensation Analyst, Risk Management Division,             Department of Administration

Sue Dunt, Risk Manager, Risk Management Division, Department of             Administration

Jack Kim, Lobbyist, Health Plan of Nevada

Judy L. Stokey, Lobbyist, Nevada Power Company, and Sierra Pacific Power             Company

Kathleen Drakulich, Lobbyist, Sierra Pacific Power Company, and Nevada Power             Company

Raymond Bacon, Lobbyist, Nevada Manufacturers Association

Michael Smart, Vice President, Resource Management, Nevada Power             Company, and Sierra Pacific Power Company

Timothy Hay, Consumer Advocate, Bureau of Consumer Protection, Office of             the Attorney General

William S. Davidson, Lobbyist

Tim Carlson, Lobbyist, NTS Development Corporation, MNS Wind

Alan D. Caldwell, Green Energy Business Council of Nevada

 

Chairman Townsend opened the meeting at 7:07 a.m. stating:

 

We have with us today the individuals who have worked diligently in the Assembly finding ways for the larger users to leave        
the system and what benefits would be provided to                   the remaining customers.  This is the proposed concept of                     Assembly Bill (A.B.) 661.

 

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

 

Although the bill [A.B. 661] has been voted on by the Assembly committee, the language has not been drafted for anyone to see.  They will be amending the bill and then it will be sent to us.  The legal division is not certain when the amendment will be drafted, so, I have not set a time for the bill to be heard.  I thought it best for the committee to be apprised.  The key portion of the bill is a familiar issue to this committee. 

 

Harvey Whittemore, Lobbyist, Nevada Resort Association, testified:

 

We have handed the committee a multi-page document titled, “Small Customer Alternatives” [Exhibit C].  On page 3, we will start at the basics with what we have named “Re-power Nevada.” This proposed amendment concerning providers of new electric resource, as the chairman indicated, and the first two pages of this attachment [Exhibit C] were adopted by the select committee.  It is my understanding what you have asked us to do is simply provide you with an update on what was passed out of the committee, walk you through the proposed language, explaining the proposal in some detail, and then respond to any questions. 

 

Understanding the Assembly has yet to act on this amendment, or are we assured minor changes or substantive changes will not be offered on the floor, I would like to proceed with an explanation of these amendments. 

 

The “Re-power Nevada” amendment is designed to create a category of large industrial and commercial users to define the company as an eligible customer if they have an annual average load of 1 megawatt or more, in the service territory of an electric utility.  On page 3 of the “Re-power Nevada” proposal [page 5, Exhibit C], section 6 has been defined in such a way as to allow commercial or industrial end-user customers having 1 megawatt, or more, as customers eligible to acquire their energy and other ancillary services from competitive new resources.  In addition, eligible customers include: governmental, educational or health care entities, which are publicly funded and perform those functions using one or more facilities under a common budget and common control.  This will allow institutions such as Rose [Rose E. McKinney-James, Lobbyist, Clark County School District] represents to be eligible. 

 

Mr. Whittemore continued:

 

The concept being presented requires these energy resources be purchased from new electric resources.  We felt it was appropriate, as did the participants in the discussions we had with members of the select committee.  Before Nevadans can get any benefit from this proposal, one of two things needs to happen:  reduce demand or increase supply, which is exactly what this committee has said is the problem with respect to the energy crisis.  We approached this in two ways: number one, it would have to be a new electric resource; therefore, section 8, of the proposed amendment on page 3 [page 5, [Exhibit C], defines “new electric resource,” which are generation assets not owned by the electric utility or not subject to contractual commitments; i.e., they are not things Doug [Douglas R. Ponn, Lobbyist, Sierra Pacific Power Company, Sierra Pacific Resources] and Sierra [Sierra Pacific Resources] are looking to provide their existing load to the customers in the State of Nevada, and more importantly, [number two] the energy needs to be delivered.  It does not make sense to have energy in Utah if it is not hooked up and delivered to the mines in Senator Rhoads’ district [Northern Nevada Senatorial District consisting of Elko, Humboldt, Pershing and parts of Eureka and Lander Counties].  Those issues were resolved.  There is going to be a new supply. 

 

There are a number of definitional sections which should not cause any controversy, for example: “time-of-use meter” in section 11, is a meter which records electric demand, energy and power factors on a 15-minute interval.  Why is it important?  Because, without a definition of a “time-of-use” meter, you can’t say eligible customers having 1 megawatt, but with a “time-of-use” meter are the types of customers eligible to purchase their load. 

 

The crucial component of this plan is the remaining customers on either the Sierra Pacific system or the Nevada Power system will not be harmed.  Therefore, in the text of section 12, on pages 4 and 5 [pages 6 and 7, [Exhibit C], this “energy acquisition plan,” and “create additional resource plan,” must be designed not to impair the system, cause liability or prohibit the ability of the electric utilities to provide service to the customers.  It also provides specific dates on which this can take place.   The Public Utility Commission of Nevada (PUCN) will review any application made by an eligible customer, the requirements are contained in section 14, on pages 6 and 7 [pages 8 and 9, [Exhibit C].  Then the PUCN reviews the list of information the customers must provide to determine whether this is a new resource and meets the public interest standards which are being proposed in this bill.

 

The commission must approve these applications, unless it has shown the proposed transaction will be contrary to the public interest.  In determining whether it is in the public interest, turn to the substance of the bill on page 7 [page 9, [Exhibit C], lines 21 and 22; and on page 8 [page 9, [Exhibit C], lines 1 through 6.  The standard is:  whether the electric utility providing electric service to the eligible customer will be burdened by increased costs as a result of the proposed transaction, or whether any remaining customer of the electric utility will pay increased costs for the electric service. 

 

Mr. Whittemore continued:

 

Your directions to us were: “Do not come back with anything which will cause any remaining customer an increase in cost.”  The standard has been articulated by the Assembly select committee. In addition, “Don’t come back to this committee with something which will impair system reliability from the utilities’ perspective.”  And finally, “Will this create additional energy capacity or ancillary services to the state?” i.e., “Don’t just tell us you are going to buy energy somewhere else; we must increase supply in this state.” Therefore, the most important factor is, Will it create additional resources? The timing and phasing mechanism which is being proposed will be impacted by what was adopted by the committee. 

 

Mr. Chairman and committee, turn to the first sheet titled “Small Customer Alternatives,” [Exhibit C].  As a result of negotiations, which took place between all the various parties and was recommended to the entire legislative body on the Assembly side, we came up with a program we are entitling “Share the Benefits,” for Nevada Power customers in the service territory of Nevada Power.  As a result of going through this process of acquiring power, for example, if customer A has 100 megawatts of power they are trying to acquire from a new resource, this bill will mandate they buy 110 megawatts of power before they are allowed to leave, with a process which will “cede” or transfer     10 percent of the load; i.e., the extra 10 megawatts to the utility, and the utility will then deliver it to the smallest residential customers, if it is beneficial for those customers. 

 

Let me explain the process; customer A believes he can buy energy at a price below the utility’s average cost; for example, the company believes it can get power at 7.6 percent [sic]; they present the information to the PUCN and they are buying 100 megawatts of energy.  The company is required under this bill to give the benefit of 10 percent of the contract to the small residential users, which does those customers no harm, but provides a tangible, real benefit to the remaining customers on the load.  It compels the large users to use their resources, their negotiating skills, and their abilities to try to capture new contracts.  If the PUCN determines it would be in the public interest to have 10 percent of the load administered by the company, then the 10 percent portion of the contract would be assigned for the benefit of the company to be delivered to those customers.  This, in effect, creates tangible benefits to customers who are remaining with the system. 

 

The energy would be administered like the Hoover Power B contract is presently administered.  In other words, anything on the market of lower cost acquired by the large users for there own benefit would be shared and then administered by Nevada Power. 

 

This will create two separate types of energy markets.  The two energy markets which would be created would be: one, Sierra Pacific’s energy market, and two, Nevada Power’s energy market.  Why is it important?  Because, the rules under which the large users can leave are different, based upon the evidence and testimony which was presented to both this committee and the select committee.  It was clear the resolution of the mining issue in the Sierra Pacific market was the most important component we needed to resolve and the quickest one, because the market is so constrained.  As this committee has heard, many times there are two customers in that market who need 20 to 25 percent of the entire power in that particular area.  This proposal says the large users in Sierra Pacific’s territory can leave April 1, 2002, and the large users in southern Nevada would be deferred until June 1, 2002.

 

Mr. Whittemore continued:

 

We created a response in the legislation allowing Sierra Pacific’s large customers to go out earlier than those in the Nevada Power area.  In addition to those limitations, it was felt by the committee, based on Chairman Higgins’ [Walter M. Higgins, Chairman, President and Chief Executive Officer, Sierra Pacific Resources] testimony; there should be some upper limit on the amount of power which can be acquired on the open market by the large users. 

 

On page 2 of the document [Exhibit C], there were conceptual changes, which have not returned from the Legislative Counsel Bureau.  Those constraints are as follows:  Taking the demand at 4800 megawatts and the supply at 2700 megawatts, there is a difference of 2100 megawatts.  What is being suggested by       the select committee is the difference is determined and then           50 percent is taken, which would be the cap large users could acquire on the open market.  In this example the difference would be 1050; therefore, the total megawatts the large industrial users would be attempting to acquire from new resources would be 1050 during the next 2-year period.  As the demand changes, the numbers would be adjusted and would go up or down depending upon how much native resource was built in this state versus the native demand.  In addition, to ensure all large industrial users were able to participate in the process, no single large user would be able to purchase more than 80 percent of their particular power needs from new resources.  In other words, we couldn’t have one person engaging in the process early, depriving those who come later to participate.  It is a mechanism to spread out the ability of all large users to participate in the process. 

 

Senator O’Connell asked, ”Were there any specifications about using renewables from larger customers who are opting out?”

 

Mr. Whittemore answered:

 

Whatever standards are applicable to customers departing the system are the standards the legislature sets and will be applicable to both the company, all customers, and those individuals providing resources into the state.  The rules will be the same.  Large customers will not be able to avoid any responsibility to use renewables.  Whatever standards you set will be for all people.

 

Senator Shaffer inquired, “Who are the members of the select committee?”

 

Mr. Whittemore responded, “The select committee on energy.”

 

Senator Shaffer questioned, “What are their names?”

 

Mr. Whittemore replied:

 

There are 11 people, chaired by Assemblyman Bache [Douglas (Doug) A. Bache, Clark County Assembly District No. 11].  It is an Assembly committee.  Rather than have a traditional committee deal with the energy issues, the Assembly created the select committee on energy, which is processing all energy matters.  Do you want a list of names?

 

Senator Shaffer said, “You don’t have to give them now.”

 

Mr. Whittemore replied, “I will provide you with the list.”

Senator Carlton commented:

 

Mr. Whittemore, you are using some new vocabulary and I want to understand.  You have been using the term “new resources.”  Are these resources what you call “native resources,” and could they be in neighboring states?

 

Mr. Whittemore responded, “Absolutely.”

 

Senator Carlton continued:

 

Tell me why this is different from the things we have talked about in the past, about opening the market and people leaving.  How is this proposal different from the other proposals which have not come to fruition in the last couple of legislative sessions?

 

Mr. Whittemore answered:

 

It is a fair question and one relatively easy to answer.  In the past, when we were “de-regulating the market” or having discussions, there was a system created which attempted to provide a competitive market with respect to all aspects of delivery of energy to users.  It covered things, such as, metering, billing, and ancillary services, not only energy.  This proposal only covers the acquisition of energy and its demand, because you need capacity and ancillary services associated with those two things.  It does not cover metering, billing, or open a competitive environment to those aspects.  Why is this different?  Because, nobody can leave this system unless they show the PUCN they are bringing in a new resource and there is no damage to the remaining customers; i.e., the public interest standard is met on an individual case-by-case basis pursuant to applications, which the eligible customer is compelled to present to the PUCN.  Under the competitive environment, none of those standards were set out and it was simply; you made your choice.  You could opt in, or opt out, based
upon the standards which were set forth in chapters 366, and 438 of the NRS [Nevada Revised Statutes]; this is the very huge difference. 

 

This proposal is designed to say to everyone, “You may leave only if you are large enough to make a difference on the demand side and you are large enough to make a difference on supply side.”       So, if we can create less demand, reducing the incumbent utilities’ problems in providing energy to those customers, and at the same time increase supply in the state, we will have performed a service, because by increasing supply, the macro-economic issue is you will create a market which will ultimately reduce the average cost to the utility of power they purchase on the open market.  Again, it is a very limited opportunity to make the case:  what you are doing is beneficial to both the state and the remaining customers, with the public interest standard and the work which has been done to ensure there is no harm to the remaining customers. 

 

Chairman Townsend and I have had this discussion for many years. He has directed, “Harvey, [Mr. Whittemore] you must come up with a plan where you can show concrete benefits to the remaining customers.”  All of us have had those discussions over the years, which say, “Listen, I want something tangible.”  Well, this program, where the customers leaving are giving the benefit of their ability to capture lower priced markets to the remaining customers, is exactly what everyone is seeking. 

 

Mr. Whittemore continued:

 

There are three very significant differences:  One, it doesn’t cover all competitive services.  It’s not an automatic choice to go.  You simply opt in or opt out; two, you have to meet a strict public interest standard to leave; and three, you have to be able to show there is a real tangible benefit through the share-the-benefit program.  So, it’s a very different program, one which took a long time . . . to come up with a plan which met the needs of the large users in the northern part of the state and met the needs of the large users in the southern part of the state, properly allocated resources, which the company and the PUCN had in respect to the timing of who gets to go first.  It is not just a gaming issue; I want to make this very clear.  While we participated in this, we are not the first ones able to have a choice.  The first people to have a choice would be those individuals who are constrained to the greatest degree, as well as those governmental entities like       Ms. McKinney-James [Rose E. McKinney-James, Lobbyist, Clark County School District] represents, which would be eligible to go earlier than the other large, industrial or commercial users.  They would be able to go April 1, 2002.  So the balance the Assembly committee achieved was to address all the issues you have been struggling with over the past 100 days.

 

Senator Rhoads asked, “What happens 5 years from now if these companies want to get back in?”

 

Mr. Whittemore answered:

 

Fair question.  This bill provides a very strict standard.  If customers decide to come back in, they pay the incremental cost.  So, whatever happens, if you make a decision you can handle your energy needs and all of a sudden you find out you can’t, then you’re going to pay the incremental cost.  Because, whatever the company’s average cost is, let’s say its 7 cents, and all of a sudden their incremental cost to provide you power after you opt back in is 9 cents, then you pay 9 cents.  You do not get to burden the remaining customers who did not leave with the cost of you choosing to come back in.  So, this does a lot of good things.  And as a further response to Senator Carlton, if I may, Mr. Chairman, we hope this very tangible act will afford people to see a very tangible result of the company not having to purchase as much on-the-spot market as they would otherwise have to do.  And, as you know, that is where the very significant cost is, compared to their average cost. 

 

Senator Carlton commented:

 

What you just said, Mr. Whittemore, is the company purchasing on-the-spot market will be working in two different sections, north and south, and will be competing on the market for the electricity.  Because these are not necessarily native resources, it’s outside the state resources.  They’re going to sell it to the person who they can sell the most to.  So, essentially Doug [Douglas R. Ponn, Lobbyist, Sierra Pacific Resources] and Russ [Russ Fields, Lobbyist, Nevada Mining Association] may be competing for the same power out of the same plant in southern California. 

 

Mr. Whittemore responded:

 

Not quite, if I can be direct.  What we are talking about is “new resource.”  If the company has a contractual commitment or is native and own the load, it is not eligible to be [considered] a new resource.  So, Russ would not be seeking anything the company [Sierra Pacific Resources] has already locked up. 

Senator Carlton stated:

 

It is on-the-spot market time we have problems with.  So when he [Douglas R. Ponn, Lobbyist, Sierra Pacific Resources] needs it in July and Russ [Russ Fields, Lobbyist, Nevada Mining Association] has already purchased it for 5 years, although he may need more power in July, they are going to be competing with each other from those plants to get the extra electricity on that market.

 

Douglas R. Ponn, Lobbyist, Sierra Pacific Power Company, Sierra Pacific Resources, responded:

 

I think mathematically you could look at it that way.  Let us say, on peak at sometime in the future, a large customer and a company are looking for resources, and it happens they are talking to the same producer of a resource to meet their demands.  The hope of this program is, at the beginning, it will stimulate the development of new resources; therefore, it will mitigate the impact of those circumstances.  Secondly, the magnitude of the loads of these large customers is probably not going to move the market, especially the on-the-spot market, in the scenario you are describing, to the extent it would hurt us in our behavior in the market.  I think you have a valid point; but, it is our opinion, the impact is not enough to be negative.

Chairman Townsend addressed the committee stating:

 

It will be our intention next week to hold a full hearing when we actually get the bill.  I am trying to allow them to present the concept, and give us the weekend to think it through. Then, we will have more than our share of questions.  Is that fair?

 

Mr. Whittemore said, “I would be happy to respond to other questions . . . .”

 

Chairman Townsend responded, “Certainly, let Ms. McKinney-James go first because she probably has other responsibilities this morning.”

 

Rose E.  McKinney-James, Lobbyist, Clark County School District, testified:

 

Mr. Chairman and members of the committee, I appreciate the opportunity to offer some observations regarding the amendment Mr. Whittemore has outlined for you this morning.  I have come before you on a variety of other bills, and I have made it a strong point the Clark County School District is one of the largest school districts in the nation.  We are the sixth largest, and, a point of fact, we are probably in the top five when it comes to customers for Nevada Power.  This concept seemed to flow into discussions undertaken by the state superintendent a few weeks ago, in which they outlined their priorities with respect to future funding.  The top three [priorities] included their ability to deal with increasing utility costs in the future.  The attractive components to us, with respect to this measure, are as follows:  The school district has a requirement of planning and our ability to plan for rates and to negotiate something which gives us a firm understanding of what those costs are going to be over time.  It is a very attractive option.  The ability to do this is something the facilities division of the school district is very supportive of.  They also believe this is an opportunity to dovetail a very aggressive conservation and energy efficiency program, which was introduced to the ward a few weeks ago. 

 

 

 

 

Senator O’Connell asked, “Are you going to be able to protect those funds from contract negotiations?”

 

Ms. McKinney-James questioned, ”When you say ‘protect funds’?”

 

Senator O’Connell clarified:

 

When you have extra money set aside for a purpose such as the higher cost in electrical energy or power, can you protect those funds?  Can you have them in a separate account?  This has been one of the concerns I have had as legislator.  When giving additional money to the school districts for a specific purpose, because the money is available when you are negotiating contracts for teachers, I want to know if the school district has come up with an ability to set those funds aside to be used for this purpose, specifically. 

 

Ms McKinney-James replied:

 

Senator O’Connell, the process, as I understand it, with respect to negotiations, and when you say contract negotiations, you’re speaking in terms of labor negotiations, is one where the district must abide by binding arbitration.  I do not believe the district has the ability to protect any of its revenues from the process once the arbitrator makes his or her award.  I would, however, much prefer to defer the question to someone who is more experienced in this arena and [could] provide you with a detailed answer that is direct. 

 

Senator O’Connell commented, “I would really appreciate it,                        Ms. McKinney-James.  We’re talking about an additional $16 million to your school district for this purpose, and I would be very interested in knowing how they are going to protect it.”

 

Ms. McKinney-James responded:

 

Senator O’Connell I will do my best to get an answer to you.  I can give you an interesting example, because I am aware of efforts which have been undertaken to try to roll into the distributive school account adequate funds, for the school district to deal with these escalating costs, and we are faced with a rather stunning reality.  In fiscal year 1995-1996, the school district had approximately 196 schools and our annual electrical cost was about $11.5 million.  For the fiscal year 2001-2002, we are looking at 269 schools and an electrical cost of $35.9 million.  We have a huge increase and we are delighted there is recognition of those costs.  But, I would have to defer to Dr. Rulffes               [Dr. Walt Rulffes, Deputy Superintendent/Chief Financial Officer, Clark County School District], with respect to how the district deals with these allocations from the DSA [Distributive School Account], which are basically line-item issues and how it affects negotiations.  But, I do know, based on testimony the superintendent has offered to your committee and others, we are faced with this challenge of dealing with an arbitrator’s award. 

 

I want to point to a couple of aspects of this I think makes some sense.  I had the opportunity to see a presentation, which I thought was really compelling given by Mr. Walt Higgins                   [Walter M. Higgins, Chairman, President and Chief Executive Officer, Sierra Pacific Resources] as this concept was initially outlined.  The emphasis seems to be on ensuring we have a mechanism focused on the notion of capacity.  We have a substantial load; the utility has been faced with this double-digit, low growth for a period of time, and as I look back in history to my own experience as a regulator, this seems to be an opportunity, which is substantially different from discussions we have had regarding deregulation.  This is something that will allow us to deal with the capacity issue. 

 

Ms. McKinney-James concluded her remarks:

 

The final point is, the amendment, as it is structured, allows for ongoing regulatory intervention.  This entire process must be vetted through the public utility commission and the determination must be made with respect to eligibility.  The notion of a large user moving away from the system is something that will be done in a balanced way.  I think I have covered all my points.  You should know the school district is engaged in a variety of activities directed toward reducing our load.  We have done a mechanical retrofit, a substantial amount of weather-stripping, and we have a pilot program with one of our replacement schools dealing with day lighting, thermal storage, and some solar.  In addition, they have finished a complete overhaul of what we call energy design guidelines.  So again, this will complement an effort of conservation, energy efficiency, and some ability then to have an option, which we could consider to further give us some stability with respect to future rates. 

 

Chairman Townsend asked, “Are there any more questions of                      Ms. McKinney-James?  Thank you, it is good to see you.  One more question from Senator O’Connell.”

 

Senator O’Connell inquired:

 

Ms. McKinney-James, while you are getting this other information for me, please find out if there has been any consideration of curtailing the year-round schools in order to save the cost of the high electricity during the summer months.  Will you see if they have had any discussions on this issue at all? 

 

Ms. McKinney-James replied, “I will look into those issues Senator.”

 

Russ Fields, Lobbyist, Nevada Mining Association, began his testimony:

 

Good morning, Chairman Townsend and members of the committee.  I am here today to hopefully add to your consideration these concepts regarding bringing more supply to the state of Nevada and protecting consumers who are left behind on the system if large customers are allowed to leave the system.        Mr. Whittemore has described the key elements we have worked so hard on in the Assembly.  When I say we, I mean the coalition of our mining industry, Clark County School District, as represented by Ms. McKinney-James, the university system, the utilities and, of course, the gaming industry.  The coalition has worked hard to build a consensus on these solutions for Nevada’s energy future.  Solutions we believe assist with the economic development in the rural communities and will increase the state’s energy supply, therefore, benefit all Nevadans.  You heard Mr. Whittemore refer to our plan as “Re-power Nevada.”  It is the term we’ve coined to describe what we’re talking about here.  I won’t address the particulars of the plan.  The concepts were very well laid out by   Mr. Whittemore.  You’ve read them, you’re familiar with them; but,   I want to add, mining constitutes probably 25 percent of Sierra Pacific’s load in northern Nevada.  The concepts you are discussing today, allowing large customers to find and purchase new energy supplies and encouraging partnerships to increase efficiency, would allow us, the mining industry, to free up a significant portion of Sierra Pacific’s capacity for residential and small business consumers at a time when, clearly, the western United States and Nevada, in particular, are faced with significant supply need.  When I say supply, this committee is very sophisticated, you understand I also mean transmission.  I’m not just talking about generating capacity, I mean transmission as well. 

 

Mr. Fields continued:

 

The proposal addresses the possible future shortage of electric supply, the resulting high cost of energy and the stability of prices in four ways, remobilize private capital and credit to facilitate the construction of new generating and transmission facilities.  We encourage consumers with the capability, such as many of Nevada’s mines, to utilize their credit to bring new supply to Nevada.  And, we allow for the future possibility of consumers to build their own generating, some of which could be available to all Nevadans.  Mining companies have developed the expertise to do these things in other countries throughout the world.  It is part of the normal course of doing the business of building a mine in a very remote region, to supply all of your power needs, including transmission and generating facilities.  So, we do have the expertise to do those kinds of things. 

 

Finally, the proposal re-powers Nevada by encouraging investment in expansion, in re-engineering of existing power plants.  And, all this would be done in a way, which protects consumers who are left on the system, because of the requirements Mr. Whittemore has outlined, to make clear demonstrations there would not be harm to the consumers.  It is done in a way not to compete with the utilities, but would rather complement their abilities to     provide supply.  I might add, Mr. Chairman, responding to                Senator Carlton’s question regarding competition.  If a large mine is looking for additional supply out in the marketplace, it would be for supply of long-term energy.  One of our great hopes about this proposal is we can stabilize our costs and stabilize our reliability through long-term contracts.  So, I would not expect us to be in the on-spot market very often. 

 

Another aspect, mines are a very steady load as contrasted with residential load, where it is very “peaky” and “spiky.”  Our load and very high load factors are 24 hours a day, 365 days a year, a very steady load.  Our operations are really well suited to long-term contracts, not spiky.  We need it tomorrow because we are going to do something different.  The suggested changes, we think, will stimulate infrastructure development in Nevada.  We think it will increase the opportunity for economic diversification in the northern part of the state and this committee knows how important economic diversification is for Nevada, especially now.  Let me be clear.  The proposal will definitely benefit mines in a couple of ways.  First, it will create some certainty in our cost structure, and it will ensure reliability of supply.  These are things we need at a time when mining is severely challenged with low-commodity prices.  This will help us maintain the employment we have as well as the economic contributions we make in the northern part of the state.  So, Mr. Chairman and members of the committee I urge your favorable consideration, when this matter formally comes before you, of the provisions contained in A.B. 661, and we look forward to working with you through this difficult but very important matter.

 

Senator Rhoads asked, “Are you looking for supplies outside of the state or building generation plants within the state?” 

 

Mr. Fields responded:

 

The answer is, both.  One of the important aspects of our proposal is it provides many options, and two of the options for supplies are those you just mentioned:  construction of new generating capacity, as well as, the possibility of bringing in supply over transmission lines into the area of the mines.  You well know, Senator Rhoads, your district and our operations are in an area referred to as transmission constrained.  Whatever we do will probably involve some considerable investment in transmission. 

 

Chairman Townsend commented, “Mr. Ponn, I know you have been asked a question, but I wanted to give you an opportunity to add anything you wanted.”

 

Mr. Ponn replied:

 

Thank you, Mr. Chairman.  Without repeating what has been said by others here, the company [Sierra Pacific Resources] agrees with and supports this proposal because of its effect on creating new supply, potentially decreasing demand, which is expensive to serve, and because of the safeguards we think have been included in the proposal.  However, the company supports this particular proposal because of its simplicity and because we think it’s a way to capture the benefits of the competitive market without a lot of the disruptions, which might occur from a more complicated proposal.  This is a simple way to go forward one incremental step.  It involves a small number of customers; therefore, our systems will be able to handle the change without a lot of expense and disruption.  Those customers have a steady, predictable, clean demand on the system, so we will be able to predict what our load will be with and without those customers, depending upon how many leave. 

 

Finally, it’s energy only; therefore, we ‘re not going through the process of unbundling, metering, billing, customer service, ancillary services, and those things, which have made some of the other proposals somewhat challenging.  We do not think this proposal will be a diversion from some of the challenges we face right now, which is a major benefit of this versus the others.  I agree with the statements made by the other members of this panel. 

 

 

 

 

Senator Carlton asked:

 

Ms. McKinney-James, this is for you.  I was going through my notes while Mr. Ponn was speaking and I was looking at one of the safeguards, the 10 percent.  I would like to know if you could have someone do the math for us.  I would appreciate it.  We’re the funding mechanism for you.  If you leave, you have to purchase an extra 10 percent and give it back.  I would like to know how this would impact the state.  Mr. Whittemore is shaking his head no, so it may not be a question you need to answer. 

 

M. Whittemore replied, “No.  The only requirement for you to give back would come from the commercial and industrial users, not the governmental entities and healthcare facilities.” 

 

Senator Carlton thanked Mr. Whittemore.

 

Chairman Townsend commented:

 

Thank you, and thanks to all the parties who have worked so diligently.  We will have an official hearing on this next week, once we know when it will be processed.  The current datelines are to have it through the Assembly today, which may not physically be possible, so there will have to be an accommodation made.  We will close the hearing on the discussion and we will open our work session. 

 

Mr. Goldwater [Assemblyman David E. Goldwater, Clark County Assembly District No. 10] you have been kind enough to sit through this.  Committee, A.B. 349, is the second bill in our books, [work session information folder] and we have in your books Chairman Soderberg’s [Don Soderberg, Chairman, PUCN], proposed amendment, which is on yellow paper [Exhibit D].  Mr. Nielsen [Ernie Nielsen, Lobbyist, Washoe County Senior Law Project] proposed an amendment, which is on green paper [Exhibit E].  Mr. Fitch [Clay Fitch, Lobbyist, Wells Rural Electric Cooperative] discussed something Mr. Powers [Kevin Powers, Senior Deputy Legislative Counsel, Legal Division, Legislative Counsel Bureau] [Exhibit F], and Ernest Adler [Ernest Adler, Lobbyist, Nevada Housing Coalition] suggested using the term “rate player” or “end user” instead of the term “each energy provider” throughout the bill.  Assemblyman Goldwater, welcome, and let’s find out what has occurred, where we are, and how we can work on this.  Are there other people involved in this, or just the three of you? 

 

ASSEMBLY BILL 349:  Establishes universal energy charge to fund low-income energy assistance and conservation. (BDR 58-1264)

 

Ernest Adler, Lobbyist, Nevada Housing Coalition, responded, “I believe some of the people from the mining industry and the electrical coops [cooperatives] are here.”

 

Assemblyman David E. Goldwater, Clark County Assembly District No. 10, began his testimony:

 

All amendments improve the bill materially.  The first is concerning administrative costs.  Let me start from the beginning.  The logic, heavier users should pay more based on their consumption, is sound, up to a point.  There comes a time when it becomes incredibly excessive, where the very large users pay far too much.  We have an amendment to impose a cap of $25,000 per quarter for any power consumer.  It doesn’t change the rate of the assessment, but it does cap what any individual power user has to pay to $25,000 per quarter.  Since this will raise less money than the original proposal, we also would like to suggest increasing the administrative costs for the division of housing, since it is less money and they’re getting a percentage of less money.  They wouldn’t raise enough funds at 3 percent to do the job they need to do.  So, we are going to suggest raising it, since they are       25 percent of the entire pot, and raise it to 6 per cent, which is fair and quite a bit less than most other administrative caps.  We reduced the amount for the commission from 4 to 3 percent . . . we amended out the co-ops already, doing the things Mr. Fitch from the Wells Rural Electric [Cooperative] suggested we do.  Additionally, the third item is we make sure the Welfare Division and the Housing Division coordinate the regulatory job they’re supposed to do, so there will be non-duplicative efforts and they run a very efficient program. 

Assemblyman Goldwater continued his testimony:

 

Next is the evaluation and reporting.  We definitely want a detailed report.  Even though I’m sure we will get one, we want as much enumerated, statutory detail as possible:  the amount of money we receive from the assessment; the detailed description of the use these monies, which is incumbent upon them.  Even though we handle the budgets of these agencies, we want to be able to see a very detailed report and know the people are getting what they are supposed to be getting. 

 

Lastly, is the co-op issue.  The suggestion is, if the rural electric    co-ops, as defined by United States code, are providing a program, then we don’t want to include them, or burden them with increased costs.  Those are the suggestions, Mr. Chairman, that      I think all improve the bill, and I would be happy to answer questions. 

 

Mr. Adler testified:

 

Essentially what it does is cap at $25,000 per quarter.  There may be a situation of an overpayment and it allows the power provider to deduct any overpayment from their next quarterly payment.        I talked with Mr. Powers and we need to make the adjustment because of the way it’s paid.  This is a fairly simple amendment. 

 

In terms of the electrical co-op situation Mr. Nielsen [Ernest K. Nielsen, Lobbyist, Washoe County Senior Law Project] drafted, we do have a split of authority here in two different opinions.  The Legislative Counsel Bureau has a very strict interpretation; they need to charge the same rate.  We have received legal opinions from people associated with the electric co-op who think they can charge what they’re charging now; therefore, we need to have a reference in the statute, which will cover those service areas for weatherization, energy assistance, and so forth, and let them run their own programs.  That would be my preference. 

 

Currently, it is very difficult for the state to serve some of these areas.  They are managing their own programs, and are trying to do the best for their consumers.  It would be simpler just to say, “As long as you run an equivalent program, you’re fine.”  And just have them file some sort of report to the PUCN, Housing Division, or Department of Human Resources, just so they [those agencies] know these areas are being served.  I think it is the appropriate way to handle the situation for policy reasons and handling it locally makes more sense. 

 

Mr. Adler continued his testimony:

 

There are a number of safeguards Mr. Nielsen has put into the other proposed amendment.  Some of them involved such things as trying to involve non-profits, apprenticeship programs, and doing weatherization, not just using taxpayer dollars wildly to do conservation and weatherization programs.  He will address those.

 

Chairman Townsend interjected:

 

Do you want to differentiate between these [four amendments submitted by Ernest Nielsen, Lobbyist, Washoe County Senior Law Project]?  One is concerning administrative costs, [Exhibit G], and that‘s the one which changes the percentage.  Then the next one is concerning co-ops, [Exhibit H].  Is it your reference to cooperative in the state, and do you think the co-op language is defendable constitutionally? 

 

Mr. Nielsen responded, “Yes, it is appropriate.  Mr. Adler explained that amendment.” 

 

Chairman Townsend asked, ”Have you seen this amendment, Mr. Powers?  We have brought our constitutional expert here.” 

 

Kevin C. Powers, Senior Deputy Legislative Counsel, Legal Division, Legislative Counsel Bureau, began his testimony:

 

Mr. Chairman, on page 3, section 15, beginning on line 8 of      A.B. 349.  The concern for this office [Legal Division], is always to draft . . . constitutional statutes or are, more likely than not, constitutional.  What section 15 does is create two different types of taxes.  Paragraphs (a) and (b), essentially, cover the generation of electricity from a facility within this state.  It becomes a tax on generation.  Paragraph (b) changes who actually collects the generation tax under one specific circumstance, but paragraphs (a) and (b) create the tax on the generation of electricity.  Paragraph (c), beginning on line 19, is a separate kind of tax, and it taxes electricity, which is generated out of state and sold at retail in the state.  This office doesn’t have concerns with exempting anyone from paragraph (c).  It is the tax in paragraphs (a) and (b), the tax on generation, which raises the concerns.  There is a federal statute, 15 United States Code (USC), section 391, and it prohibits discriminatory state taxation of the generation and transmission of electricity.  For the purpose of this section, a tax is discriminatory if it results either directly, or indirectly, in a greater tax burden on electricity which is generated and transmitted in interstate commerce than on electricity which is generated and transmitted intrastate commerce. 

 

Our concern is simply this, if the taxes are imposed on generators who sell all their electricity out of state, the tax burden will essentially fall on out-of-state consumers.  That’s appropriate under the federal statue, because electricity generated instate, but only if all generation is generated in the state and sold only within the state, is given the same tax burden.  If we exempt the rural co-ops this is what would happen, and this is just a fictional scenario:  If a company like ENRON Corporation had, or built, a power generation plant in Nevada and sold all of its electricity out of state, it [the corporation] would have to pay this tax under A.B. 349. 

 

If a rural electric co-op were exempt, built a plant right next door to the ENRON plant, and sold all of its electricity in-state, it would be exempt from paying the tax; therefore, out-of-state consumers would be burdened with the tax on electricity from ENRON, but the rural electric customers in this state would not be burdened with the same tax.  That’s the essential discriminatory nature of the generation tax and it would violate the federal statute. 

 

 

 

Mr. Powers continued:

 

There’s one United States Supreme Court case on this issue, from New Mexico.  New Mexico imposed a tax on all electricity generated in the state, except they created tax credits and exemptions for electricity generated in the state and consumed in the state.  The end result was the tax only applied to the electricity sent out of state.  The United States Supreme Court struck down the statute.  Then, there is also a Nevada Supreme Court case, which interpreted the federal statute and applied it to different types of Nevada tax statute, but the Nevada Supreme Court struck down the Nevada tax statutes.  The important part of the case is it held any exemption for an in-state entity from a tax that is subject to a federal statute makes the state tax invalid.  In the Nevada Supreme Court case, certain political subdivisions in the state were exempt from the tax on generation and electricity, and the Nevada Supreme Court struck it down.  So, based on those authorities, the federal statute, the United States Supreme Court case, and the Nevada Supreme Court case, the opinion of this office with regard to the generation pacts is everyone who generates in the state and sells electricity commercially must be subject to the generation tax.  So again, paragraphs (a) and (b) are our concern.  If rural co-ops, or any other entity, were exempt from paragraph (c), this office would not have a problem.

 

Assemblyman Goldwater responded to Mr. Powers’ testimony:

 

A lot of people who have read Kevin’s [Mr. Powers’] opinion, while I respect everything he says, disagree with the logic.  We’re offering an exemption based on entity, rather than where they get the power or where it comes from, which would violate all those things.  The opinion of some people is when you craft the exemption for an organization you are not violating Title 15, Chapter 10 B, subsection II, section 391 of USC or State v. City of Burbank, 100 Nev. 598 (1984). 

 

Chairman Townsend cautioned, “Let’s not debate the constitutionality, because we could all be here forever.”

 

Clay R. Fitch, Lobbyist, Nevada Rural Electric Association, and Wells Rural Electric Association began his testimony stating:

 

What we are looking for is the exemption in paragraph (c), as the category you stated.  We are distribution cooperatives, not generating cooperatives.  We purchase all of our power outside of the state and we distribute it to our customers.  Looking into the future, if there is a cooperative interested in getting into the generation business, it would have to be a different form of cooperative, usually a generation and transmission (G&T) cooperative.  At that time, if there was a problem inside the state, the state could look at those special cooperatives under the same light as what is under paragraph (a).  We are looking at the exemption just as distributors, under paragraph (c), because we are not in the generation business and have no plans on being in the generation business.

 

Ernest K. Nielsen, Lobbyist, Washoe County Senior Law Project, began his testimony:

 

With respect to the co-op amendment [Exhibit H], on the second page, the new section 15.1 may address the issue Mr. Powers raised with you.  The regulation [Exhibit I] simply “hardwires” some requirements you wish the Housing Division and the Welfare Division to address in their regulations and guarantees they will have an annual planning process not in concert with their evaluation report to the Interim Finance Committee and the legislative commission.  This amendment simply details the types of things found in planning process, and the amendment of the regulations. 

 

The only other submission [Exhibit J] has to do with the amendment I gave you last Tuesday and is modified slightly to address the chairman’s concerns and address others who felt it should be more rigorous.  Basically, there are the four suggestions.
 

 

 

 

Chairman Townsend asked Mr. Graves, [Terry K. Graves, Lobbyist, Nevada Independent Electric Coalition]:

 

You gave us a handout [Exhibit K] regarding your company’s overview of its impact, and your feelings.  Did everyone get       Mr. Graves handout?  It’s a 1-pager.  My suggestion is, because Mr. Powers is here, and is the sponsor of the bill, for the committee’s benefit, I would like to find out if any of this proposed language, which covers the rural electrics, can be designed in a manner which would meet the constitutional test.  The other is fairly clear to understand.  You did a nice job in outlining the regulations, the mill tax and all those things.  The concern is, Can we put something in there, which is constitutional with regard to this group? 

 

Mr. Adler responded to Chairman Townsend’s remarks:

 

I believe we can draft it [the amendment] so it is left alone and just serve those particular areas.  Mr. Powers would have to comment on the issue.  I really think, since they are under paragraph (c) and they are not generators, we can fashion it accordingly.

 

Chairman Townsend commented:

 

We already assess mill tax for the purpose of regulation, which are [overseen by] the PUCN and the OCA [Office of the Consumer Advocate, Bureau of Consumer Protection].  The reason we do it in this manner is people paying the tax are the ones receiving a commodity from the regulated entity.  So, there is a direct relationship between the services provided, the commodity provided and the persons paying for both.  This took a different tact in terms of capturing other people.  Since we already know a mill assessment, for purposes of regulating the entity, provides the commodity.  Wouldn’t that capture the essence of what Assemblyman Goldwater has proposed here, without stretching the constitutional issue? 

 

Mr. Powers responded, “The mill tax you are talking about is essentially a consumption tax on someone who consumes the product, the electricity, and it doesn’t implicate the federal statute, because you are not taxing generation leaving the state.”

 

Chairman Townsend said:

 

Okay, I’m offering it, because it is a mechanism already in place and doesn’t impact these folks.  It still impacts Mr. Graves because he doesn’t believe in the tax, period.  But, you attempted to cap people at $25,000 a quarter, no matter how much they use.          I think, since the three attorneys are here, they can sort out the issue.  So, Monday we will have a sense of what direction we can go, constitutionally, what the numbers are, and whether it changes the mill number for purposes of administration.  Then we will have a sense of what kind of “pot” it creates and have it cleanly laid out for us.  Once Mr. Powers has given you his legal insight,           Mr. Young [Scott Young, Committee Policy Analyst] can help to prepare an overview, which could be used by the committee on Monday.  On Monday we will take up A.B. 133, which is the construction bill of Speaker Emeritus Dini [Joseph (Joe) E. Dini, Jr., Lyon, Storey, Carson City (part), Assembly District No. 38]; so,      I want something clean for the committee to use. 

 

ASSEMBLY BILL 133:  Makes various changes concerning construction,             constructional defects and common-interest communities. (BDR 3-667)

 

Senator O’Connell asked, “Are we to do away with the amendments presented to us, when we heard the bill initially by Mr. Adler and Mr. Nielsen.” 

 

Mr. Adler replied: “Some of those [amendments] we’ve kept, using and user along with retail customer.  We kept that amendment.  I believe the chairman commented on it earlier.”

 

Mr. Nielsen interjected, “Senator O’Connell, the amendment I presented Tuesday would be replaced by the evaluation and reporting amendment     [Exhibit J] I gave you today.”

 

Senator O’Connell commented, “So, those all go away.”

 

 

Mr. Graves stated:

 

Mr. Chairman, I’m hearing about a cap.  It turns out a cap doesn’t work for my client because of the relative size of the company.  That’s about where there maximum would be, so relatively speaking, we are the most abused entity in this proposal.

 

Chairman Townsend told the committee, “We will take this up on Monday,    May 21, 2001, at 9:30 a.m.  Committee, if you could go to your bill books,         Mrs. McGee [Crystal M. McGee, Senior Research Analyst, Workers’ Compensation, Research Division, Legislative Counsel Bureau] is here, on A.B. 289.”

 

ASSEMBLY BILL 289:  Expands definition of “police officer” for various purposes relating to industrial injuries, occupational diseases and programs for public employees. (BDR 53-393)

 

Chairman Townsend continued:

 

This was a bill on behalf of the Department of Administration, Risk Management [Division].  This is a simple bill, which received a great deal of attention, because the whole world came and wanted to attach themselves to it.  Risk management and Speaker Emeritus Dini had proposed this bill, which adds the state fire marshal, his assistants, and his deputy to the definition of, “officer” for purposes of coverage under Nevada Revised Statute 617.135.  Is that a fair assessment of the bill, Ms. McGee?

 

Crystal M. McGee, Senior Research Analyst, Workers’ Compensation, Research Division, Legislative Counsel Bureau, replied, “Yes, Mr. Chairman.” 

 

Chairman Townsend continued his remarks:

 

As you remember, Mrs. Dunt [Sue Dunt, Risk Manager, Risk Management Division, Department of Administration] came forward and presented the case.  The fire marshal was there and then, all of a sudden, there were people in uniforms and badges who came out of nowhere, and departments we didn’t know existed.  Suddenly, it overwhelmed us.  But, out of respect for Speaker Emeritus Dini, as well as our Risk Management Division, I just wanted to bring this up and see if we can deal with it on its merits, as the bill was presented.  It is entirely up to the committee but
   

I didn’t want to bog it down once everybody decided they wanted to get involved.  I just want to leave it as it is and whatever is your pleasure. 

 

Chairman Townsend said, “Let’s go to a conflict amendment for the Assembly on Senate Bill (S.B.) 91.”

 

SENATE BILL 91:  Makes various changes to provisions governing practice of             medicine and respiratory care. (BDR 54-290)

 

Chairman Townsend continued:

 

Senate Bill 91 has been returned with Amendment No. 699, and it is the bill “which makes various changes to provisions governing practice of medicine and respiratory care,” and in the headline of the amendment it says, “amendment resolves conflicts with   S.B.52, S.B. 271, and S.B. 300, with no substantive changes.”

 

SENATE BILL 52:  Authorizes advanced practitioner of nursing to prescribe             controlled substances under certain circumstances. (BDR 54-291)

 

SENATE BILL 271:  Provides for issuance of special volunteer medical license to             retired physician to treat indigent persons. (BDR 54-884)

 

SENATE BILL 300:  Abolishes bureau of alcohol and drug abuse of department             of human resources and transfers powers and duties of bureau to health             division of department of human resources. (BDR 40-538)

 

            SENATOR O’CONNELL MOVED TO CONCUR WITH AMENDMENT          NO. 669 TO S.B. 91.

 

            SENATOR SHAFFER SECONDED THE MOTION.

 

 

 

            THE MOTION CARRIED.  (SENATORS SCHNEIDER AND CARLTON WERE             ABSENT FOR THE VOTE.)

 

*****

 

Chairman Townsend asked,  “Is there anyone to testify on A.B. 447?

 

ASSEMBLY BILL 447:  Prohibits unfair lending practices for home loans.              (BDR 52-440)

 

Chairman Townsend commented:

 

I believe, in our packet, we have a proposed amendment, on yellow paper by the sponsor of the bill [Exhibit L].  We attempted to address the concerns in section 15, which occurred on the floor and there wasn’t a problem with its removal.  As I remember, Mr. Scruggs [Kenneth T. Scruggs, Lobbyist, Household Financial Corporation], [proposed amendments] [Exhibit M] and Mr. McMullen [Samuel P. McMullen, Lobbyist, on behalf of the Assurant Group], proposed amendments [Exhibit N], which takes out the cost of this insurance without financing, and takes out the entire cost with financing.  So, it is just the cost of the insurance.

 

Samuel P. McMullen, Lobbyist, on behalf of the Assurant Group, responded, “Correct.”

 

Chairman Townsend stated:

 

Mr. Wadhams [James L. Wadhams, Lobbyist, American Insurance Association], I believe we did not have a proposal from you.       Mr. Barengo [Robert Barengo, Lobbyist, Nevada Consumer Finance Association] we’ve tried to walk through what has been proposed    I don’t believe Mr. Sande [John P. Sande III, Lobbyist, Nevada Bankers Association] was here on behalf of the banks.

 

Robert Barengo, Lobbyist, Nevada Consumer Finance Association, clarified:

 

Mr. Sande, Alfredo Alonso [Lobbyist, Citibank (Nevada) NA], and    I were downstairs, and I was just faxing the minutes they gave me.  All of the amendments that have been proposed, the amendments Ms. Buckley has proposed and other language Mr. Sande has drafted, were put all together.

 

Chairman Townsend asked, “Is Mr. Scruggs’ [Kenneth T. Scruggs, Lobbyist, Household Financial Group Limited] amendment in it?”  Mr. Barengo replied, “Mr. Scruggs’ amendment [Exhibit M] deals with . . . the notice portion on the insurance portion, and is not in there.” 

 

Chairman Townsend asked, “Mr. McMullen and Mr. Wadhams have you seen it [the new amendment] now?”

 

James L. Wadhams, Lobbyist, Nevada Mortgage Bankers, replied, “I have seen the composite amendment, and my organization has no problem with it.” 

 

Mr. McMullen answered:

 

My key amendment [Exhibit N] is on page 2 of the bill, deleting lines 42 and 43, not because I’m trying to delete any disclosure to anyone.  Beginning on lines 44, the lines were meant to replace and make it more definable as to what exactly is supposed to be disclosed, so people can actually tell what the difference in their cost will be for a regular mortgage or a mortgage with the credit insurance financed into the mortgage.  The language was proposed in the Assembly and added to replace lines 40 through 43.  I am not concerned with lines 40 and 41.  The cost of this insurance with financing is a very vague disclosure, in the sense, What is the cost of insurance with financing?  Is it APR [annual percentage rate] over the life of the loan, or is it over the life of the insurance portion of the loan?  This was to try and make sure there was a very understandable and accurate definition of what exactly the additional cost would be.  Remember, this is a disclosure notice to people who are sub-prime borrowers.  They are not going to be the most sophisticated [borrowers] and we were looking for language to make it very clear.

 

Chairman Townsend asked, “You are saying the Assembly did not remove the language, although it should have been removed in their first reprint.” 

 

Mr. McMullen replied:

 

I am saying I would have liked to have it removed.  I think they wanted more disclosure, but, without additional statutory language defining what the “cost with financing” means, we can have a number of different disclosures made.  We looked for language from line 44 on.  Assemblywoman Barbara Buckley just didn’t want the language out.  So, I want to say it was a mistake. 

 

Chairman Townsend commented, “If the mortgage is X, then the cost of insurance is Y, plus whatever it cost to finance it over the period.”

 

Mr. McMullen explained:

 

Line 44 says, regular mortgage payment is X; your mortgage payment with the insurance financed in is Y; and then if you follow through to the end of the paragraph it explains there is a difference and actually subtracts it and shows exactly what the difference is in their monthly payment. 

 

Chairman Townsend exclaimed, “That’s per month.” 

 

Mr. McMullen interjected:

 

It would give you the definition of the single premium.  This is a single premium insurance policy.  You will know exactly what you are paying for all the insurance.  What lines from 44 on say is, when financed into your loan, this is how it will change your payment.

 

Chairman Townsend declared, “I understand what it says, but why don’t you want this . . . the cost of the insurance is X . . . ?”

 

Mr. Mc Mullen said, “Correct.  I don’t have a problem with lines 40 and 41.” 

 

Chairman Townsend responded:

 

You’re going to disclose it [the cost], and the good news is the borrower has an opportunity to think about it and ask somebody, because they’re probably not going understand what it means in the total picture of things, how you roll it in.  This was a huge issue in our industry [automobile industry] for a long time.

 

Mr. McMullen responded, “Correct.  It is the same concept.” 

 

Chairman Townsend commented:

 

In many cases, I’m not sure anyone in the sub-prime market qualifies for a loan without some kind of credit insurance on it.  The folks at the upper end of the market are an entirely different story; they could care less about it.

 

Mr. McMullen said, “The person may not have the cash to buy right then, so they, basically, need to finance it into the loan.  It is one of the cheaper interest rates they will have.  Thank you.”

 

Chairman Townsend asked, “Mr. Alonso, are you in concert with the proposed amendment?”

 

Alfredo Alonso, Lobbyist, Citibank (Nevada) NA, replied:

 

Yes.  We have taken Mrs. Buckley’s amendments, tweaked them in a couple of places, and there are a couple of additions, which include: a new definition of “home loan,” which is more specific.     I have submitted it to Mrs. Buckley but have not spoken to her since, but, know she is looking at it.  I know the Nevada Bankers Association has approved these as well .

 

John P. Sande III, Lobbyist, Nevada Bankers Association spoke on the issue,         “ I should point out I have given Assemblywoman Buckley Amendment No. 5.  She reviewed it last night and is comfortable with the language.” 

 

Chairman Townsend mentioned:

 

Senator O’Connell’s question has to do with Mr. Scruggs and he has faxed to us, through Pat F. Zenzola [Lobbyist, Household International Incorporated] [Exhibit M]. This has to do with covered loans and limitations on prepayment fees.  Do any of your amendments affect that issue?

 

Mr. Barengo commented:

 

I haven’t seen what you are referring to.  You might want to look at the attachment in the package under A.B. 447, which is what     I gave to you yesterday.  The covered loan in there is number 1 of the suggested amendments defining home loans.  We have          re-termed it to conform to the bill.

 

Chairman Townsend asked:

 

Is there anyone else who would like to address this amendment?     I don’t want you have to represent anything Mr. Scruggs wants, but covered loans are addressed in the first part of your amendment.  The other issues such as insurance to borrower, and all of that.

 

Mr. Barengo added, “Some of this is an industry bill which was supported by Mr. Scruggs, and some of the language we have changed to meet their concerns.  I’m waiting to hear back, because I just faxed it to them.” 

 

Chairman Townsend commented:

 

Committee, what I would suggest is we have LCB [Legislative Counsel Bureau] draft this amendment over the weekend.  Then we will have it in front of us for Monday and [by] then you            [Mr. Barengo] will have an answer from Mr. Scruggs.  We will also be able to “walk” through the bill and find out the implications based on what was originally presented to us.  Would that be fair?

 

Mr. Wadhams responded:

 

Mr. Chairman, if I might make a comment, it is not the area I am representing today.  As you and the other members of this committee will recall, your committee did a comprehensive overhaul of the credit insurance law several sessions ago.  It was the basis we tried to use with Mr. McMullen’s amendment [Exhibit N], so it applies to the mortgage area just as it does cars, refrigerators and the like.  There is a parallel to your prior efforts.

 

Chairman Townsend stated:

 

What we will try to do is be consistent using those amendments so whatever applies in the other areas of the market will be consistent.  I don’t know what the committee will do once it sees the total implication of this, but it’s easier to deal with if we have an amendment on which we can track and ask questions.  So,     Mr. Young, submit the amendments to legal [Legal Division, Legislative Counsel Bureau] for us and see if they can get it back by Monday, so we can act on it. 

 

Mr. Young asked, “Just for clarification, it’s going to be the composite amendment Mr. Barengo presented this morning [Exhibit L]?”

 

Chairman Townsend replied, “Yes.  It should also include Mr. McMullen’s amendment [Exhibit N].”

 

Mr. McMullen added, “Basically, it is the deletion of lines 42 and 43 on page 2 [of A.B. 447].”

 

Mr. Young clarified, “ Also, striking section 15 [of A.B. 447]?”

 

Chairman Townsend answered, “Yes.  Committee, if you will look at A.B. 123.  It is not in your packet.”

 

ASSEMBLY BILL 123:  Revises provisions relating to health insurance provided by public employees’ benefits program. (BDR 57-603)

 

Chairman Townsend continued:

 

But Mr. Krolicki [Brian Krolicki, State Treasurer, Office of the State Treasurer] is here, per my request.  We tried to deal with the health insurance benefits issue for public employees in this bill.  It came here as a result of its intent to have the commissioner of insurance have greater legal authority over the plan, because it is an insurance plan for the benefit of our employees.  The Governor, the Attorney General and everyone felt if we treated it like a plan, maybe it would not have gone into receivership and all the other problems associated with it. 

 

There is something I mentioned the other day regarding how this fund is administered.  One of the problems has always been you do not have a technical committee, which would know how to invest and be provided with the information from the investment groups about their portfolio.  In addition, what it would generate in terms of revenue for the overall benefits committee to actually say, “This is how much money we have.  Now we can decide on benefits and how they are going to be done.”  What we have is coming to us in a mixed fashion, meaning the Committee on Benefits is also the portfolio manager, as well as the generator of the revenue, and there is more of a driver from the benefits side than there is from the actual income side, which means many times you end upside down, because you’re spending money you are not going to have.

 

I had Mr. Krolicki come here because there are other jurisdictions dealing with the management of these plans in a different manner.  The individual jurisdictions do it in different ways.  In many cases the State Treasurer is on these committees, in many cases there are bifurcated boards.  One actually does the investments, oversees the investments, hires the investment portfolio managers, hires the fund managers, and then, at the end, they give a number to the committee and the committee on benefits deals with it separately.  Sometimes the Governor is on those boards; sometimes, the treasurer; sometimes the various groups are those boards in which there is a better control of what is occurring with regard to the money.  Mr. Krolicki, welcome.

 

Brian Krolicki, State Treasurer, Office of the State Treasurer, began his testimony:

 

There are across the country many different ways these investment boards are overseen.  Being a very active member of the National Association of State Treasurers, I get to see very closely what my colleagues throughout the country do, and what responsibilities and “hats” they wear.  One of the “hats” at the core of the state treasury business around the country is indeed being not only a member of the retirement boards, but often the ex-officio chairman.  Nevada, I think, is one of the minority states in terms of the state treasurer office or any of the fiscal officers not having any participation.  In fact, members of the system are from different groups and no member of the board can be an elected official.  I think it is important to state, I have the highest regard for PERS [Public Employees Retirement System] and what they do; but certainly, on the investment side, it relates to the capabilities or the skill sets of members on the board, versus what is assigned to the executive.

 

Senator O’Connell stated, “Mr. Krolicki, this isn’t PERS.  This is the Employee Health Benefit Program.”

 

Mr. Krolicki responded, “I’m sorry.  It was my understanding I was here for . . .”

 

Chairman Townsend interjected:

 

I apologize because the issues are actually bifurcated.  It was the only opportunity to have this discussion, which would also include your [Mr. Krolicki’s] philosophy on what is going on in this country on the health benefits plans.  The issue is independent from PERS but is the same philosophy.  What we had was the same problem you have articulated was going on in other jurisdictions with regard to control and expertise.  The same thing occurs here.  You have the same board overseeing the benefits plan and also the investment portion of it, which makes absolutely no sense whatsoever. 

 

Mr. Krolicki replied:

 

I apologize for my misunderstanding.  The point is, the state treasurer’s offices, or people in their office, have responsibilities for oversight of direct investment of most, if not all, these kinds of funds around the country.  I mentioned the retirement system, and will use it as an example of the participation outside the immediate cash-management arena that all state treasurers share.

 

Chairman Townsend interrupted:

 

Let me put this in context for the committee.  SIIS [State Industrial Insurance System], the same group handing out benefits, was also making the investments.  It happened because they weren’t experts, just great people, deeply concerned about the investment portfolio, about injured workers and what could be provided for them.  The problem was, when they were given the information by their investment group, it [the information] was faulty.  They had no expertise to be able to counteract and say perhaps it was an inaccurate number.  At one time, based on our own insurance commissioners review, it was a $600 million mistake!  Well, of course, people who are well intended but have a limited expertise in this, extracted those numbers and we went $2.2 billion upside down, based on the miscalculation.  This committee dealt with it and has been to war over it.  The same situation occurred in the health benefits plan and it’s the same thing that potentially faces PERS if we do not have appropriate expertise.  The three areas are identical.  No matter where the benefits go, the whole mechanism of the investment side is identical. 

 

Senator O’Connell stated:

 

Mr. Chairman, I should update the committee on some action, which has been taken in order to try and help the system out.        I visited with the Governor’s office on this issue, and I have met with insurance folks who, hopefully, by Monday are going to present to us some different, varying ideas as to what approach we can take.  I also visited with one of the people who came in to testify on this, Assemblywoman Giunchigliani [Christina R. Giunchigliani, Clark County Assembly District No 9], and I asked her if she would please ask the sponsor, Assemblywoman de Braga [Marcia de Braga, Churchhill, White Pine, Eureka (part) Lander (part), Assembly District No. 35], if there would be a problem with an amendment addressing the concerns laid before this committee.  The commission has been working on this and the committee on government affairs worked on it last session.  I certainly do appreciate the fact Mr. Krolicki is here, but I do need to tell you there are some other things in the works as well, just to try and get a “leg up” on this situation right now, which everyone has some very justifiable concerns over. 

 

Mr. Krolicki said:

 

Mr. Chairman, if I may, obviously I am behind the information curve on the things going on in this building and those processes.  But, germane to my presence today is the fact, as state treasurer, my job is to watch and manage investments, to always match up the liquidity needs and the proper portfolio, structure time line security aspects, and balance the portfolio, certainly, if we are in a fixed income; but, if there is an equity component, that is what we do every day.  My peer group does inform me every day just to make sure I’m on the cutting edge of these issues.  I do not profess to have any skill sets beyond being a member of a system getting benefits or someday retirement benefits, but, certainly, when it comes to the managing of cash and the investments in a security portfolio, I would be delighted to participate in any manner the legislature saw fit. 

 

Chairman Townsend stated:

 

Mr. Krolicki, we appreciate your insight.  This is not something new to you.  You and I have had this conversation for years.          I would recommend to this committee since we have experience and all the “war wounds” to show for it, in the area of what occurred in work comp [workmen’s compensation], we recommend to Senator O’Connell’s committee [Senate Committee on Government Affairs] an interim look at placing a more appropriate mechanism on the state benefits plan as well as PERS. 

 

In the interim we will put together a small working group, which Senator O’Connell has been very adept at providing for many other groups; and, ultimately, we have a thing now commonly known as the “253 technical committee.”  We put together a working group to bring to the next legislative session the answer to this problem, because it has such a severe potential downside and it’s a slippery slope, which is very steep.  It‘s not as if you can catch it if somebody says, “Oh by the way.”  No.  You’ve started down a path which is very serious.  I would recommend we put together a group working with the chairman of the committee on government affairs because that is where the bill would go.  Then have it readied in the interim for introduction at the first of the next session.  I don’t think, at this point, we could adjust this bill without checking with the Governor, or the Assembly; and I think we can build support for it in the next session. 

 

Mr. Krolicki stated:

 

Mr. Chairman, if I may, this is a long-term proposition.  The Public Employees Retirement system has 20 to 50 years of money; so, any solution in your wisdom you decide on, it needs to be excruciatingly well thought out.  Whether it’s me, or a future state treasurer, just the fact you have somebody with those skill sets I think is appropriate, and I welcome the recommendation. 

 

Chairman Townsend said:

 

I would like to deal with A.B. 338, A.B. 289, and A.B. 628.  You were going to represent A.B. 338, Mr. Jayne [Donald Jayne, Lobbyist, Nevada Self-Insured association #200]?  This is the one [bill], committee, on which we adopted the proposed consensus language between Mr. Thompson [Danny L. Thompson, Lobbyist, Nevada State American Federation of Labor-Congress of Industrial Organizations (AFL-CIO)] and Mr. Ostrovsky [Robert A. Ostrovsky, Lobbyist, Nevada Resort Association], and then we left the bill alone. 

 

ASSEMBLY BILL 338:  Makes various changes concerning workers’             compensation. (BDR 53-711)

 

ASSEMBLY BILL 289:  Expands definition of “police officer” for various             purposes relating to industrial injuries, occupational diseases and             programs for public employees. (BDR 53-393)

 

ASSEMBLY BILL 628:  Revises provisions governing benefits for industrial             insurance for certain police officers and firemen. (BDR 53-625)

 

Donald Jayne, Lobbyist, Nevada Self-Insured Association (NSIA) No. 200, stated, “Bob Ostrovsky had worked with Senator Carlton on some revised language and I have copies.” 

 

Senator O’Connell said:

 

Mr. Chairman, I had requested Ms. McGee ask for an update on the cost, because I asked the question, “Does this include the projected increase in medical costs?”  The answer given to me was, “No,” so we asked them to do a projection with the increase.

 

Chairman Townsend responded; “The projection is on what language we adopted yesterday to change the bill.  What is the fiscal note?”

 

Ms. McGee responded to the question:

 

In a brief conversation I had with Maggie Karpuk, representative of NCCI [National Council on Compensation Insurance], the advisory organization for Nevada’s industrial insurance market, she indicated, based on the proposal of Bob Ostrovsky and           Danny Thompson, the yellow sheets in your workbook [work session document tab A.B. 338], there is no fiscal impact.  You eliminated the $36 million price tag previously on the bill. 

 

Chairman Townsend commented:

 

That is encouraging, since I didn’t think there was a lot of support for the bill or the amendment if a fiscal note was going to remain.  We are very sensitive to the system’s viability the first couple of years in the competitive market.  Once they have “their feet under them,” and we are thinking, by the year 2003, they will be stable and be as competitive as possible.  Then they will be in a position to do more things.  The real concern was the bill was not going to go anywhere with a $36 million fiscal note, and it was only on EICON [Employers Insurance Company of Nevada] and wasn’t on self-insured groups.  For the vast majority of self-insured or self-insured groups, add another 40 percent.  It was a $65 million total.

 

Mr. Jayne stated, “When we ran the math, it was just slightly over a           $65 million overall impact to the employers of Nevada.”

 

Senator O’Connell asked, “Did the amendment also include the dates, because it seemed to me we didn’t have a starting date.”  Mr. Jayne replied, “As I recall, the very last item in the compromise language was the effective date.”

 

Ms. McGee clarified, “Mr. Chairman, that’s correct.  The proposed amendment changes the effective date to July 1, 2202.”

Chairman Townsend verified:

 

It moved the date from October to July.  We bought                    8 or 9 month’s time.  I think it also helped with the impact, because it takes awhile to get “geared up” for these things.  The handout we just received, do you [Senator Carlton], have a different one than we do?

 

Senator Carlton responded, “Yes.  I have one extra sentence to clarify something, but I did talk to Mr. Ostrovsky about it last night.”

 

Chairman Townsend said:

 

Committee we have a bill amended with the compromise language which in essence takes everything out of this bill, except the compromise language.  Now, Senator Carlton has this amendment plus clarifying language.

 

Senator Carlton stated:

 

The amendment you have before you addresses a concern I have   . . . the claimant does not have a seat at the table to discuss any undue hardship put upon their families.  The language before you clarifies the issue and is clearer than the language yesterday.  At the end of the language, “unless such a deduction results in an undue hardship to the claimant,” I would add, “at which time a claimant may appeal the decision.”  It is not a mandate; it is their choice to decide if it has impacted them greatly. 

 

I discussed this with Ms. McGee.  There is no definition of hardship; so, it would be left to the appeals officer to evaluate the family situation and the amount of money that would be taken and would achieve the goal to have a seat at the table for the claimant who is being impacted by this procedure.  Right now, if it happens to them, they have no resource.

 

I will repeat it again for the committee.  After claimant, it would state “at which time a claimant may appeal the decision.”  Also, the committee will remember when this was discussed yesterday, Ms. Batjer [Marybel Batjer, Chief of Staff, Office of the Governor] represented this would not impact a lot of people, but I believe for the people it does impact, it impacts them greatly as far as their family security is concerned. 

 

Mr. Jayne said:

 

In my conversations with Mr. Ostrovsky, he identified the compromise language as an improvement from the original draft and it ultimately held a bit of concern for him [Mr. Ostrovsky], as well as us; for the self-insured associations it will require litigation to put it into the hearings and appeals process to determine those terms we don’t have a definition for today.  I don’t know a good way to define those terms in statute.  Our concern would still be for the cases where it does happen.  Senator Carlton is correct. I don’t believe there is a large, numeric count; but for the cases it would affect, many would end in litigation to determine the meaning of “reasonableness.” 

 

Senator Carlton responded to Mr. Jayne:

 

It is my understanding it would go before a workers’ compensation appeals officer who understands the system and how it works, and he would be able to evaluate exactly how this would impact both sides, the family and the insured.

 

Mr. Jayne commented, “It would go into the normal workers’ compensation appeals process, starting with a hearing and moving into the appeals [process], as necessary.” 

Chairman Townsend asked, “Senator Carlton, is your motion to adopt your proposed language to A.B. 338 as amended?”

 

Senator Carlton replied:

 

Yes, Mr. Chairman, but without the presence of Senator Schneider, I would be more than happy to wait, if you would be more comfortable, so there would be a full committee.  I wouldn’t want to misrepresent the committee’s vote by having a member absent, if it would be a problem.

 

Chairman Townsend responded:

 

We will hold on the motion until his return.  Let us revisit A.B. 289, the risk management bill.  This is Speaker Emeritus Dini’s bill, which he introduced on behalf of risk management.  It adds the state fire marshal, his assistants, his deputy, and then the “whole world” came in.  I wanted to know the pleasure of the committee.  As you remember, they [state fire marshal, his assistants, and deputy] offered this [bill] for reasons articulated, and then everyone in the world came in.  When I spoke to risk management they were concerned about adding people, and Speaker Emeritus Dini was concerned. . . .  Whatever the committee’s pleasure is.

 

Senator O’Connell commented, “Senator Carlton, you had wanted to add the construction workers to this bill.  John E. Jeffrey [Lobbyist, Southern Nevada Building and Construction Trades Council] had come forward and testified.”

 

Senator Carlton clarified:

 

Madam Vice-Chairman, this bill originally would have limited these benefits to only certain officers, and then it was amended by the Speaker Emeritus to remove the “only,” so anyone who would be considered an officer would be included.

 

Senator O’Connell interjected, “They wanted to add all the P.O.S.T. people [people certified by Peace Officers’ Standards and Training Commission (P.O.S.T.)].”

 

Senator Carlton continued:

 

The reason was, it was going to have the word “only” in it and everyone wanted to make sure they would be “a piece of the pie.”  Without the word “only,” it is left to their discretion to prove they are officers, which I think can be proven.  This way we would not eliminate anyone by exclusion, using the word “only.”  This week having the Officers Memorial here and going outside and seeing all the different types of officers we have in this state, if we had put “only” in, then someone in the group of officers might have been excluded.  I don’t think it would be the intention of this body to ever deny an officer a right, and I believe it’s easier to exclude the word “only.”

 

Senator Townsend addressed Ms. McGee

 

As I remember, when Mrs. Dunt [Sue Dunt, Risk Manager, Risk Management Division, Department of Administration] testified on the issue, she said it would be left up to the court to differentiate.  Is that why she made the proposal?

 

Ms. McGee replied:

 

Yes.  During her testimony she indicated there were a number of individuals currently pursuing litigation and who are peace officers, when, in fact, they are not under the definition, so they are essentially fighting for those rights at this time.  The bill, as is, would not interfere with the litigation.

 

Chairman Townsend asked the committee, “What is your pleasure?”

 

            SENATOR CARLTON MOVED TO DO PASS A.B. 289.

 

            SENATOR SHAFFER SECONDED THE MOTION.

 

            THE MOTION CARRIED.  (SENATOR SCHNEIDER WAS ABSENT FOR THE             VOTE.)

*****

 

Chairman Townsend stated, “Committee we had planned to take up risk management’s bill, A.B. 628.”

 

ASSEMBLY BILL 628:  Revises provisions governing benefits for industrial insurance for certain police officers and firemen. (BDR 53-625)

 

Chairman Townsend continued:

 

Assembly Bill 628, Assemblyman Oceguera’s [John Oceguera, Clark County Assembly District No. 16] hepatitis bill has been in the committee on ways and means.  It is my understanding it [the bill] has just come out of the committee on ways and means, so will be passed, today or Monday, out of their “house.”  Isn’t there a deadline?

 

Ms. McGee answered, “Mr. Chairman, that bill is ‘exempt.’”

 

Chairman Townsend stated:

 

It is an exempt bill.  Let’s look at this.  There is an amendment in your packet, on yellow paper, under tab A.B. 628 of the work session document [Exhibit O], from Mr. Fry [Jim Fry, Workers’ Compensation Analyst, Risk Management Division, Department of Administration].  It says, “unless proven by the preponderance of evidence that the exposure was non-occupational,” which is a change from, “tests positive for exposure to tuberculosis under the circumstances described in subsection 2 or 3, he shall be deemed to have sustained an injury by accident arising out of . . .“  Are you lowering the standard?

 

Mr. Fry responded:

 

Yes, I am lowering the standard.  It would give the employer or the insurer some room to deny it [the claim] if there was a preponderance of evidence the employee contracted the disease elsewhere, if the person had been out of the country or a member of their family had tuberculosis.  The way the bill was written it was presumptive. 

 

Chairman Townsend suggested:

 

Committee, since we have a exempt bill coming, let’s bring this issue up at that time, and if the committee decides to process the tuberculosis side of this [A.B. 628], we’ll take up your amendment and we’ll place it in the other bill, depending on what the committee does with the other bill.  You can’t keep picking away at these things and adding a little here and there.  You need to have them all at once and see what the implications are.

 

Mr. Fry explained:

 

My intention on tuberculosis was [to be separated], because last legislature all these contagious diseases were lumped together.      I think Senate Bill 132 of the Seventieth Session and all of the other contagious diseases are blood borne. 

 

SENATE BILL 132 OF THE SEVENTIETH SESSION:  Revises provisions             governing benefits for industrial insurance for certain police officers             and firemen. (BDR 53-925)

 

Mr. Fry continued:

 

Tuberculosis is airborne.  The pathology is completely different, so there is no tangible evidence when someone is exposed.  It is very hard to document when you are exposed, especially in the prison system.  My intent was to separate the tuberculosis from the other contagious diseases. 

 

Chairman Townsend asked, “Did you offer this amendment on the other side [Assembly]?”

 

Mr. Fry answered, “No, Mr. Chairman.”

 

Chairman Townsend questioned Mr. Fry, “Since this is your bill, why do you want to change it now as opposed to over there [in the Assembly]?”  Mr. Fry replied, “It was brought to my attention because of the presumptive language
 

 

[in the bill] . . . let’s say someone had a family member who had it [tuberculosis], there would be no way to deny it [the claim], and I understood this concern.”

 

Chairman Townsend stated, “We will take it [the amendment] up at that time,    I don’t know what the hepatitis version of the bill looks like.  Does it have the same kind of presumptive [language]?”  Mr. Fry replied, “Yes.  It has conclusive, presumptive [language].”

 

Chairman Townsend mentioned, “Rather than get into a debate between the two bills, I think if we have both bills, we can decide on what is the right public policy on those two issues and whether they should be separated or not.” 

 

Senator O’Connell asked:

 

How would you do this?  I know if you have been exposed to it [tuberculosis] and as you say, if a family member has it, you will test positive.  I don’t know how, since it’s an airborne disease, but my father died of tuberculosis and I always test positive.  I wonder how it will be determined under the preponderance of evidence.  I’m sure you test someone when they come into the service of the state or county, and you know whether or not they’re going to test positive.  How does the person come to you and say I think I may have this now?

 

Mr. Fry responded to the question:

 

You need to look at the exposure time.  Tuberculosis is not something you get from casual contact.  Someone coughs on you at the grocery store, you’re not going to get tuberculosis.  Usually you are with the person for an elongated period of time in an enclosed area.  This is why it is so predominant within correctional facilities, school dormitories, and those types of situations.  If you were at home with someone, it would be weighted with the exposure potential at work. 

 

Sue Dunt, Risk Manager, Risk Management Division, Department of Administration, began her testimony:

 

The way we have been identifying these issues is through the annual physicals.  We offer the TB [tuberculosis] skin testing and that’s when one year it shows negative and the next year it shows positive, with the police and fire people.

 

Senator O’Connell said, “Then, from the testing, you go back and look at the history of the job, where they have been, and checking on the family?”

 

Ms. Dunt replied:

 

Yes.  Most of those involve a certain amount of investigation to determine.  Our position has been, without a definite potential for an out-of-work exposure, we feel our correctional officers have a high level of potential to have an exposure because of the inmates tested.  We hold federal inmates and have no medical information on them and we feel, without any outside issues, the benefit of the doubt, specifically for our correctional officers, should go in their favor, and we certainly want to provide preventative care to avoid a disease if possible.

 

Senator O’Connell queried Ms. Dunt, “You mean when a person is brought into the prison system there is no testing to find out the quality of their health, or lack thereof?  Do you have any kind of medical history on them?”

 

Ms. Dunt replied:

 

I am not sure how the system works for the in-state prisoners.       I believe there is not a medical testing program for the federal prisoners who come in, but verification should come from the prisons.  This is our understanding.  We have a holding facility.  They come in and whether we rely on the medical data provided from the source from which we receive them or not, we are not sure.  It has just been our understanding, there is no way to go back and confirm whether one of those prisoners did or did not have active TB.  The prisons may have something we are not aware of, but not to our knowledge; it is an area of concern. 

 

Senator O’Connell commented, “I think it would be an area of concern.”

 

Chairman Townsend asked, “Can we get an answer from the Department of Prisons?”  Ms. Dunt answered, “We will contact the medical director and see if they will give us a policy concerning the issue.” 

 

Chairman Townsend commented:

 

The obvious conclusion for this committee would be the “feds” [federal government] are not doing what is necessary to protect our employees, who are trying to deal with the prisoners.  The federal government is putting our employees in a position not only from a human standpoint but from a physical standpoint, that’s absurd.  I hope it’s just that we didn’t know what they do. 

 

Mr. Fry stated:

 

Mr. Chairman, we will go ahead and affirm the policy.  May           I mention that in a recent appeals the associate warden, Benedetti [James Benedetti, Associate Warden, Programs, Nevada State Prison, Department of Prisons] did testify that the INS [Immigration Naturalization Service] inmates are not necessarily tested on their arrival.  This is at NSP [Nevada State Prison].

 

Chairman Townsend asked,” Do we have a fiscal note?”

 

Ms. McGee answered, “Mr. Chairman, it is included in your document         [Exhibit P].”

 

Ms. Dunt stated:

 

Our new workers’ compensation program is requiring any employee who has a transition from a negative to a positive skin test, will be provided with the preventative care while we sort out the potential history.  We have had difficulties with this in the past.

 

Chairman Townsend asked:

 

With Mr. Fry’s proposed amendment, which gives flexibility to the insurer to say, “Okay, this person didn’t have the particular example Senator O’Connell gave.”  Is there a fiscal note attached to this?  There would be one [a fiscal note] if everyone is deemed to have it [TB] or they contracted it while they were working for us [the State].  Does it make the fiscal note negligible, if you add this language?

 

Ms. Dunt replied:

 

Yes, I believe it does.  We don’t have actuarial information concerning the percentage of people who actually get TB from the time they change from negative to positive.  We have not had a TB claim in the state within the last 5 years.  Our primary concern is we get them immediate preventative care, to prevent the likelihood they will get the disease.  The difficulty is when they later get the disease and they didn’t have the documented treatment, or when the issue would come up.  We feel, because of the particular environment, we would prefer to give [the employee] the benefit of the doubt, unless there is an obvious non-occupational exposure.

 

Chairman Townsend said, “You are still comfortable using this proposed language, which gives flexibility to the standard as opposed to deeming it to be acquired during their term of employment.”

 

Ms. Dunt commented:

 

We do not intend for it to be conclusive, presumptive, but we wanted to make sure they get the preventative care up front while we sort out the details of what the exposure could be.  If there were no outside exposure and they tested negative on their skin test for 5 years, then the sixth year they tested positive and there were no other sources, we thought the benefit of the doubt should go to the employee, without any outstanding specific issues.

 

Chairman Townsend stated, “Committee if you are comfortable we can process this amendment with this bill now and still take up hepatitis later . . . .  What is your pleasure?”

 

 

 

 

Senator O’Connell pointed out:

 

Mr. Chairman, we haven’t discussed the Clark County district’s [amendment], [Exhibit Q] but I would move that we adopt the amendment that has been submitted by Mr. Fry, [Exhibit P] as well as the amendment submitted by the Clark County School District, [Exhibit Q] and do pass A.B. 628.

 

Ms. McGee interrupted:

 

Mr. Chairman, excuse me, but the amendment proposed by Mr. Fry and the amendment proposed by Mr. Demaree [Steve Demaree, Assistant General Counsel, Clark County School District] conflict each other; they are mutually exclusive.  It is one or the other, not both.

 

Chairman Townsend acknowledged, “ One is when you report it, and the other is . . .“

 

Senator O’Connell interjected, “It puts the burden on the employee to report.”

 

Ms. McGee replied, ”Correct.  Under Mr. Demaree’s recommendation [Exhibit Q], if it were not a reported exposure, you would not get coverage.  Under Mr. Fry’s recommendation [Exhibit P], it puts the burden of proof on the employer.”

 

Chairman Townsend commented:

 

What they do is deem it to be sustained as long as it’s been reported when they believe it occurred.  Under Mr. Fry’s [amendment, Exhibit P], they are changing it, it is deemed to have been sustained, unless proven by a preponderance of the evidence the exposure was non-occupational.  For instance, were Senator O’Connell to contract this disease [tuberculosis] while she was employed, she would be automatically deemed to have contracted it during her time of employment, unless you went back and found out her father possessed the disease, passed away with the disease and she had always tested for it and had tested positive.  That would be a preponderance, which would perhaps keep her from receiving the benefit.  Is that a fair example?

 

Mr. Fry responded, “Yes, Mr. Chairman.”

 

Senator O’Connell said, “I will restate my motion.”

 

SENATOR O’CONNELL MOVED TO AMEND AND DO PASS A.B. 628 WITH THE PROPOSED AMENDMENT BY MR. FRY.

SENATOR CARLTON SECONDED THE MOTION.

 

THE MOTION CARRIED.  (SENATOR SCHNEIDER WAS ABSENT FOR THE VOTE.)

 

*****

 

Chairman Townsend asked Senator O’Connell, “Could you bring us up to date on how your discussions are going in regard to A.B. 422, as well as your bill, S.B. 320.  They seem to be companions, although there is a slight difference.”

 

ASSEMBLY BILL 422:  Provides for external review of certain determinations          made by managed care organizations and health maintenance             organizations. (BDR 57-1092)

 

SENATE BILL 320:  Provides for external review of certain determinations made             by managed care and health maintenance organizations. (BDR 57-676)

 

Senator O’Connell replied:

 

I know our bill is an exempt bill.  I don’t know what is currently taking place, but we could go ahead and indefinitely           postpone this bill [A.B. 422], because Assemblywoman Buckley                [Barbara E. Buckley, Clark County Assembly District No. 8] has stated she has no problem with using my bill.  If everyone will remember the major concern was, who was going to be making the call for the external review. 

 

 

 

Jack Kim, Lobbyist, Health Plan of Nevada stated:

 

Senate Bill 320 is being heard in the Assembly Commerce and Labor Committee this afternoon at 12:30 p.m.  Fred Hillerby    [Fred L. Hillerby, Lobbyist, Nevada Association of Health Plans] and I will present the bill to the committee.

 

Senator O’Connell said:

 

The major concern I had with Assemblywoman Buckley’s bill is we were going to rely during a weekend or holiday situation upon a beeper.  It was not a satisfactory course of action and the concern was to be able to have someone who is familiar with the issues, and who would be [on call] on a 24-hour basis, which is why         I prefer the language in S.B. 320.  If not, we were looking for a compromise on that specific issue.  Assemblywoman Buckley was going to try and contact the hospital or the division of health in Clark County, because they have people familiar with this.

 

Mr. Kim replied:

 

Senator O’Connell explained it correctly.  The difference is who picks the independent review organizations.  We have not resolved this issue.  We believe the private industries have the procedures and processes in place and have people on-call 24 hours a day, already, to make these types of decisions. We believe it is the appropriate way to do it, but as Senator O’Connell stated correctly, I don’t think there has been an agreement at this point.

 

Chairman Townsend stated, “What we will do, since they are going to have the hearing today, we will just hold this bill.  We have until Monday night.  We’ll find out what went on and go from there.”  

 

Chairman Townsend stated, “Committee, let’s take up A.B. 418.”

 

ASSEMBLY BILL 418:  Revises provisions concerning conservation of energy and use of renewable energy. (BDR 58-1198)

 

 

Chairman Townsend continued:

 

This is Assemblywoman de Braga’s conservation of energy and use of renewables bill.  In your packet [Exhibit Q], the amendment has been drafted as a result of the processing of this committee’s bill S.B. 372, which is the portfolio standard bill.

 

SENATE BILL 372:  Revises provisions concerning conservation of energy and             use of renewable energy. (BDR 58-287)

 

Chairman Townsend stated, “What the amendment does is conform the proposal in the bill to what S.B. 372 was when it left this body [committee].” 

Scott Young, Committee Policy Analyst, explained, “There was also a proposed amendment [Exhibit R] to this bill presented by Sierra Pacific this morning, and each member of the committee has a copy.”

 

Chairman Townsend inquired, “Whoever is involved in this proposed amendment come up . . . .  Please proceed.”

 

Judy L. Stokey, Lobbyist, Nevada Power Company, Sierra Pacific Power Company, said, “We want to go through this amendment [Exhibit R], and I’ll introduce Kathleen Drakulich [Lobbyist, Sierra Pacific Power Company, and Nevada Power Company].”

 

Kathleen Draculich, Lobbyist, Sierra Pacific Power Company, Nevada Power Company, began her testimony:

 

Before you is the proposal titled “Proposed Amendment to          A.B. 418 and Amendment 717 [Exhibit R].”  This document will cover the provisions of the second reprint of A.B. 418, dated March 19, 2001, and will cover the proposed amendment in your packet [Exhibit S] numbered Amendment No. 717.  As an initial matter, the utilities are in favor of the renewable language, which passed out of both the Senate and the Assembly, contained in   A.B. 369. 

 

ASSEMBLY BILL 369:  Revises and repeals various provisions governing the             regulation of public utilities. (BDR 58-1156)

 

Ms. Draculich continued:

 

The current law is [NRS] 704.989 and it is contained in A.B. 369.  It [the bill] had some modifications to the statutory language, but nothing substantively changed.  We support the language and know S.B. 372 and A.B. 418 have been presented to address the renewable issue and, at this time, it is incumbent upon us to come to you and tell you what we would propose as amendments to this bill. 

 

SENATE BILL 372:  Revises provisions concerning conservation of energy and             use of renewable energy. (BDR 58-287)

 

Ms. Draculich continued:

 

Let me walk you through the document [Exhibit R] in front of you.  On page 1, as the amendment indicates, the underscored language we propose for inclusion, and a line through [the language] is a deletion.  The first change we propose is in section 6, of the second reprint of the bill, which is on page 2, line 27:  We propose to include “hydroelectric” as a renewable source.  We have heard some comments concerning “hydroelectric”, and it has environmental detriments with respect to it; however, a lot of the renewable energy resources have environmental complications.  For example, “geothermal,” energy: The wells are drilled; there is a plant; there is a visual impact.  The same with “wind”: there are significant visual impacts.  There are multiple bird collisions in the “wind farm areas.”  While renewables have a definite benefit to them, there are detriments to all of them.  We do think “hydroelectric” is a very inexpensive resource of renewable energy and, for this reason, we propose it for inclusion.  Nevada Power Company is investigating what is called “pump storage,” which would be another form of “hydroelectric” power.  That would be another reason for us to support the inclusion. 

 

Chairman Townsend inquired, “Nevada Power’s current portfolio of renewables is what?”  Ms. Draculich replied, “Nevada Power’s current portfolio is nothing.  There are no renewables in Nevada Power Company’s portfolio.”

 

Chairman Townsend asked, “Sierra Power Company’s portfolio is what?”  Ms. Draculich answered, “It [renewables] is currently 9 percent of our total load.”

 

Chairman Townsend queried, “If you put in the term ‘hydroelectric,’ how does it change the mix, based on what you are currently buying?” 

 

Ms. Draculich responded:

 

For Nevada Power Company it would be 3.8 percent of their total load.  So, in the first time frame, for this bill as proposed, they would have to add something between the years 2003 and 2004 to meet the 4 percent.

 

Chairman Townsend asked, “What would it do to Sierra Pacific?”  Ms. Draculich replied, “For Sierra Pacific it is incremental, maybe half a percent.  It is a very small piece of our total renewable [portfolio], which is substantively   geothermal.”

 

Chairman Townsend questioned, “The traditional ‘hydroelectric’ we would be familiar with, which is different than pumping stations, how much of it is available to us in the state of Nevada?” 

 

Ms. Draculich answered, “Right now, I don’t think there is much of any available to us, presently, in the state of Nevada.”

 

Chairman Townsend asked, “Is it a developable resource?”

 

Ms. Draculich said, “I can comment, from the perspective of pump storage, it is, but, from the perspective of the traditional [Hoover Dam] situation, I don’t know if it is developable.”

 

Chairman Townsend queried:

 

If you add this, we are not adding anything new to the state of Nevada, which I think was the original goal.  In other words, [the original goal was] the development of the “geothermal” resources we have, the sun resources, and the wind resources.  Unless we use pump storage, this becomes a non-starter for the benefits for the state of Nevada.  We would have to buy it [energy] elsewhere. 

 

Ms. Draculich replied:

 

We could buy it elsewhere, but I don’t know that it is necessarily a non-starter.  I think without including “solar” in a bill requiring utilities and other providers of energy to complete a portfolio standard with renewable energy they wouldn’t bring “solar” to Nevada.  By including it, you open the door.

 

Chairman Townsend stated:

 

I believe pump storage . . . is a very important “arrow to the quiver.”  The more arrows in that quiver the better off we are.  But, using the term hydroelectric, to me, is not acceptable, because it absolutely dilutes the whole effort of what we are trying to do in our rural communities.  If electric utilities are allowed to buy something on the open market and next winter we have this wonderful rainfall in the north, and it helps you meet the standard, that is not the goal.  The goal is to develop our indigenous natural resources.  I understand your position; you are worried about whether we need the standard.  I am worried about meeting the standard of developing and controlling our own future, which is why I don’t like the term “hydroelectric.”  I don’t mind the pump storage; I think it has value and is part of what we need to do.  But the term “hydroelectric” defeats what we are trying to do. 

 

Ms. Draculich asked:

 

If we can’t meet the portfolio standard with Nevada resources, would it be incumbent upon the utilities then to try to import them?  In southern Nevada our experience is, while we have had extensive negotiations with perspective developers of “solar” and “wind” regarding contract terms; there are no available resources presently in southern Nevada. 

 

 

 

Chairman Townsend said:

 

If the Governor signs a portfolio standard bill, the next day there will be [available resources].  That’s the issue.  If the goal is to get this off the ground for one major reason, which is protecting the citizens of Nevada from running into what has happened before, being dominated by Texas and Canadian natural gas prices.  So far, they are the only two places you can get it [natural gas].  It’s not your fault; it’s nobody’s fault except the guys producing it and the Middle East.  That’s what drives us.  It’s all about commodity.  The closer we have control of our own commodity, the better off it is for you and our residential customers.  I believe controlling a certain portion of our own portfolio inside the borders has huge value.  It never looks that way when everything is cheap.

 

Ms. Draculich commented:

 

This is making me think of a number of things.  Without “hydroelectric,” some terminology could be included to address pump storage, and whether or not we will need to go back and take a look at this to determine whether A.B. 418 and S.B. 372, in section 9, subsection 6, really addresses unavailability of resources in Nevada.  Otherwise, we’re going to run into this problem you are raising, when we import “wind” and “solar” from another state, maybe California or Arizona.  We need to make sure its not going to happen with this bill. 

 

Chairman Townsend stated, “I think you and I are getting on the same ‘transmission’ line.”

 

Raymond Bacon, Lobbyist, Nevada Manufacturers Association, began his testimony:

 

If I might address the one potential area where you do have hydro potential, it is the irrigation systems found in some places in Douglas County.  There are two or three folks who have Pelton Wheels generating electricity, which is [water] typically being pumped back into the irrigation pumps.  The same thing happens in Senator Rhoads’ district, because of the de-watering operations of the mines.  They have to do the de-watering in order to continue the mining operation.  It is a large volume of water.  This would encourage them to install Pelton Wheel type turbines in those things and generate some power, which would then offset some of their power. 

 

Chairman Townsend stated, “I respectfully agree and disagree.  Because the way it is drafted, you could just go buy it out of state.”

 

Mr. Bacon responded:

 

I understand.  There needs to be a way to craft it to encourage generation, internally, in the state, whether it’s pump storage or the de-watering operations, because they use “pressure snubbers” to reduce the pressure as it comes down the hill.  The best “pressure snubber” in the world is a bunch of Pelton Wheels hooked on to that thing. 

 

Chairman Townsend said:

 

The amount of water that comes out of a mine is overwhelming.  We discussed the issue with an importation project [engineer] working with the mines, about putting it [water] into one of the rivers and bringing it down here and doing it as a re-charge.  I had no idea until it came up how much [water] you have to take out of a mine on a regular basis, which goes back to testimony early this morning, since it takes electricity to pump the water out of the mine.

 

Mr. Bacon commented:

 

It’s part of the issue I am trying to bring up.  There is a potential for them to reduce their electric load and wind up with it being effectively classified as a renewable, which then reduces the load for everybody.

 

 

 

 

Ms. Drakulich resumed her testimony:

 

Section 8 [S.B. 418], suggests a change to the definition of “retail customer” to include “end-use” customer, and this is particularly relevant this morning since we listened to a discussion on        A.B. 661.  If large customers are allowed to go, taking energy directly from a new provider, this would not maintain the classic sale for resale we think of in terms of a retail sale.  This would classify those large customers as “end-use” customers, because they would be purchasing as the user, albeit from a provider without a middleman.  Those providers would be required to comply with the portfolio standard.  I think this addresses a concern Senator O’Connell raised this morning, which is, Will the portfolio standards apply to them?  It was the intent to have it apply to them. 

 

Ms. Drakulich continued her testimony and referred to Exhibit R:

 

Section 9 [S.B. 418], the amendment is to make the percentage requirements more attainable and more reasonable.  They are not significantly pared back; they are pared back by 1 percentage point, per time block.  We went from 5 to 4 percent in the years 2003 to 2004, and made a corresponding 1 percent change right through to the year 2010, capping the total percentage in the    year 2010 and then eliminating subsections (e) and (f).  Section 9 would require the 13 and 15 percent.  The other change we made to section 9 is in subsection 6.

 

Chairman Townsend interrupted Ms. Drakulich’s testimony and said, “Wasn’t it your testimony, Sierra Pacific resources are at 9 percent?”

 

Ms Drakulich responded, “Correct.”

 

Chairman Townsend said, “You are telling me Sierra Pacific has until the year 2010 to get 1 more percent?”

 

 

 

 

Ms. Drakulich explained:

 

In the existing law, I don’t remember whether it was during the 1999 or 1997 [legislative session], the legislature gave Sierra Pacific Power Company an exemption for the renewables they had through the year 2005.  We may have “geothermal” contracts expiring before these dates, which would require us to either renew them or backfill, in order to meet these requirements during the time frame.  I will get you a confirmation. 

 

Chairman Townsend commented, “You still only have to get 1 percent.”  Ms. Drakulich replied, “[1 percent] of additional renewables; that is right.”  Chairman Townsend commented, ”That’s not the biggest challenge in the state.”

 

Ms. Stokey stated:

 

We would have to look at those numbers, but if you look at the company as a whole, Sierra Pacific Resources, we don’t hit           9 percent; Sierra Pacific Power reaches 9 percent.  So, you have to look at the company as a whole.

 

Ms. Drakulich commented:

 

Our load will continue to grow during this 10-year time frame; and, as it continues to grow in northern Nevada, we will need to continue to acquire the renewables in northern Nevada in order to meet the total percentage of the growing load.

 

Chairman Townsend remarked, “You just dropped by 25 percent according to testimony this morning.”

 

Ms. Drakulich replied, “If you change the definition of ‘retail customer’, they are going to have to pick up the ball.”

 

Ms. Drakulich continued her testimony:

 

Section 9, subsection 6, addresses the unavailability of the renewables, which would lead to a finding of infeasibility on behalf of the public utilities commission.  For that period of time when the resource was unavailable, the utility or the energy provider would be exempt from meeting the portfolio standard.  If it is not available, you are not required to put it into your portfolio.  During the course of developing a regulation over the last couple of years, for the existing law, the renewable developers, the utility and the other participant agreed in a regulation, still in draft form, to put a price cap on the price of renewables, which would also equate to infeasibility.  If the price got so high, the utility or the energy provider would not be required, during that time frame, to add it to their portfolio. 

 

I think this is particularly important now that deferred energy is in place, because if the commission determines entering into a renewable contract was prudent, then this will fall on the back of the consumer.  What we are suggesting is language be included saying, “or if the commission determines the contract price for renewable energy required to fulfill the portfolio during the calendar year will be greater than 5 percent above the price of non-renewable contracts of similar availability and terms, which would also be deemed criteria that would amount to infeasibility or unavailability.”  The reason we don’t believe this is very onerous is  we have an agreement at the regulatory level to include this in the regulation, based on the old law.

 

In addition, there are a number of tax benefits presently in legislation, which would inure to the renewables.  We have also heard testimony on behalf of their representatives concerning their numbers over the next period of years that will actually save consumers a few to several million dollars.  If their price is going to be competitive then it should not be onerous to have a price cap and we also, in turn, have an incentive for them to control their prices and be protecting our consumers. 

 

Ms. Draculich completing her testimony stated:

 

The last addition in subsection 6 of section 9 [Exhibit R] is cleanup.  The bill, A.B. 418, has a provision regarding administrative fines.  If there were a determination of infeasibility with this inclusion, then those would not apply.  The last piece is with respect to Amendment No. 717, which was presented to this committee earlier this week and is in your packet of information [Exhibit S].  Page 2 of Amendment No. 717 is important in jurisdictions where there are existing “geothermal” plants and existing renewable facilities.  The amendment language proposes to describe a facility or energy system, which would qualify as a system: (a) Using renewable energy to generate electricity; and (b) Was installed and commenced operations after January 1, 1997.  The problem with (b) is every “geothermal” plant in northern Nevada that we are presently contracting with was installed and commenced operations after January 1, 1997.  After those contracts expire, if this language is in this bill, then those plants are defunct.  The price of the “geothermal” is only this session competitive with the market price, because of what is happening with natural gas.  Traditionally, it is a much more expensive resource.  After the contracts for those existing facilities expire, there will be no incentive for anyone who is economically sound or [economically] minded, to take real interest in those plants and enter into contracts for that energy if they’re not going to help you meet the standard you have to meet by law.  That was a real concern to us.  We have expressed this on the Assembly side as well.

 

In addition, in subsection 2 in the same section [section 7, Amendment No. 717], there is a description of an energy facility which says, “A solar energy system which reduces the consumption of electricity and which was installed and commenced operations after January 1, 1997 . . . .”  If this is really for renewables, then why are we eliminating them by virtue of date?  Shouldn’t they all be included if they exist in the state and have an opportunity to participate and be included in the portfolio standard?  This concludes the proposed amendments we have for this bill.

 

Vice Chairman O’Connell asked, “Committee, questions?”

 

Senator Rhoads stated, “I know you have one hydroelectric plant in Elko.  Do you have any more?”

 

Ms. Drakulich answered, “ I want to provide accurate information.  We do have one in Elko, called ‘Hooper’.”

 

Michael Smart, Vice President, Resource Management, Nevada Power Company, Sierra Pacific Power Company, said, “We also get electrical energy from hydro generation out of the facilities in Fallon and Stampede.”

 

Vice Chairman O’Connell stated:

 

When we initially heard this bill there was some question about the disparity of information we were getting on costs.  Ms. Stokey, you were going to provide me with some backup information.  Do you have those figures?

 

Ms. Stokey answered:

 

Yes, Senator O’Connell.  The numbers we had provided to the committee were extreme, because we wanted people to see what could happen, which could be a good scenario or a bad scenario.  We do have updated information on where prices are today.       Mr. Smart is the person who has been talking to some of these providers and getting quotes from them.   He can talk about those numbers.

 

Vice Chairman O’Connell stated, “My concern is the cost to the customer.  We got such varying information when we first heard this bill; I wonder where we have landed.”

 

Mr. Smart responded:

 

From the calculations I reran from the last time, I did some corrections in the area of “solar thermal.”  I believe Mr. Wellinghoff [Jon B. Wellinghoff, Lobbyist, Vulcan Power] talked about $160 a megawatt-hour, and used his number of $120 a megawatt-hour to close the gap.  When I was doing my comparison to price, I was comparing to the market price, looking at the forward market, where there are willing buyers and sellers in the market who will transact at a cost.  My comparison was based on market prices. 

 

Previous information the company has provided was using a comparison of one technology to another.  The company was using a combustion-turbine-type technology utilizing natural gas.  I prefer to compare to the market price, because the market goes up and down.  There is still a large degree of difference between           Mr. Wellinghoff’s opinion and mine.  I did revise to his [calculations] and I can run through those for you.  This first year cost, taking a look at the portfolio requirement of the 5 percent, if you exclude the existing contracts, and you exclude the existing resources, Sierra Pacific and Nevada Power Companies would have to hurry up, go out, and place new “geothermal”  under contract Just in the “geothermal” area, my calculations are showing about $12 million for the first year, spread over the megawatt hours we would be required to secure. 

 

Going out to the year 2013, in the “geothermal” piece, would be   $46 million for the year.  If you add it all up and look at it, you are in the $300 million range over 10 years.  The portfolio also requires us to take 10 percent of the renewables and go after the “solar” element. 

 

There are two scenarios I ran: one, looking at the “solar thermal” using Mr. Wellinghoff’s numbers of $120 a megawatt-hour; and two, “solar,” which is quite expensive at $300 a megawatt-hour.  Those add significant premiums to it.  Because if you compare to the market price, and the market price I was comparing to starting in the year 2003, there are marketing participants willing to agree to sell energy at $50 a megawatt-hour for 10 years.  I was using that as a comparison.  It is fairly easy calculations.  If “geothermal” is $65 a mega-watt-hour, but the market is at $50, you can see the difference. 

 

Vice Chairman O’Connell said, “I would appreciate a copy of that information.  Committee, questions?”

 

Timothy Hay, Consumer Advocate, Bureau of Consumer Protection, Office of the Attorney General, began his testimony:

 

We are passing out a document [Exhibit T], giving some current costs on specifically “wind” energy and other forms of renewable energy.  There is currently a 300-megawatt wind project in the Washington-Oregon border region delivering power at 2.5 cents per kilowatt-hour.  The Colorado commission has recently adopted, on economic grounds alone, a requirement the Colorado utility build a 162-megawatt wind farm, because it was the cheapest energy resource in the “mix.”  Also, you will recall from the earlier presentations, the renewable energy sources were the only ones with declining cost curves through the “90s” and it is a relevant factor to keep in mind.  On the fourth page of the handout    [Exhibit T], it goes through the tax benefits, the jobs, payments to landowners, stable energy prices, and reduced emissions renewables imply.  It is one of the reasons why this legislature is considering this issue.

 

I would like to respond briefly to the Sierra Pacific amendment, which was proposed yesterday in the Assembly committee and defer to my colleagues.  The hydro addition is very troublesome to us.  Particularly because it would “grandfather in” the Hoover [Dam] resources, which would essentially negate any benefit from the bill before the legislature this session.  Nevada has limited hydro resources, which can be developed at least along our watersheds and the better use of water resources is for agricultural and consumptive purposes.  The main problem is this would “grandfather in” a huge amount of very old resources and, obviously, we are trying to develop new resources. 

 

On the pump storage issue, I would like to point out, the pump storage is not really considered a renewable resource.  Pump storage is using conventional fossil fuels to pump water uphill during off peak periods then have it generate power coming downhill during peak periods.  But you are not using the water to generate the electricity; you are using the fossil fuel source, unless you came up with a pump storage facility that ran off a renewable energy source.

 

 

 

Mr. Hay continued:

 

It also is troublesome in the analysis on why hydro should potentially be included.  We do not believe the percentages should be adjusted downward.  We believe the phase-in, over the period of time specified in the bill, to 15 percent is quite adequate.            I might note, Texas is required to have 2,000 megawatts of renewable resources online by the year 2009.  Although Texas is a larger state, it gives you an example of what other states are contemplating. 

 

The price capping provision in the amendment is very troublesome because the renewable resources all have their own unique characteristics.  “Solar” is the peaking resource, in general; “geothermal” is the base-load resource, and  “wind” is an intermittent resource.  Coming up with a contract comparable to a fossil fuel resource and then applying a cap is a very unworkable mechanism for comparing the prices of those fuel sources.  We oppose exempting the existing resources from the standard, because we are attempting to develop new resources rather than “grandfather in” old resources.

 

Senator Amodei commented:

 

I am encouraged to hear you say the prices for those are going down that are available . . . .  If it is the case, what is the threat from a cap?  If they were getting more competitive, a cap would be inconsequential to some extent, as long as it wasn’t a number which was unrealistic.

 

Mr. Hay responded:

 

The way this [amendment] is drafted, you are comparing resources which are not very easily comparable.  If you have a contract for “solar” power, is it all going to be delivered and produced in the daytime?  It is not clear from this, and we priced on a peaking basis.  The other contracts on the marketplace from conventional fuels, which are confined to daylight hours, in essence the             5 percent, may, or may not, be a workable mechanism in the mix.  When power is intermittent, it is the only resource in the mix, which would be intermittent.  You can’t compare it to a base load contract or even a peaking contract for a conventional mechanism.  We are concerned with the cost elements, as well.  The committee can recall from the testimony, all of these energy sources have decreased in cost during the 1990s, and those trend lines are still going down. 

 

The commission is the ultimate authority to determine whether this is going to be cost-effective or not.  If a renewable contract is presented that appears to be unreasonable on the basis of price, the commission can reject that under the provisions of the statute as it was originally drafted.  They have the ability to waive the utilities’ compliance requirements for that.  Rather than a statutory mechanism, the regulatory mechanism, which was alluded to in the draft regulations that are pending before the PUCN, is a more flexible and appropriate tool. 

 

Senator Amodei said:

 

I understand about peaking, base loads and all of that, although     I haven’t heard of any attempt to try and bring them into play in terms of context for pricing.  I am troubled by the statement about exempting existing folks, because I think they have a part to play in this and, by not letting them count toward it, I wonder if we are driving the production from those facilities out of the state, since it doesn’t count. 

 

Let me give you the bottom line.  I support renewables; I think they are a good idea.  We develop resources we control, and I don’t have a problem with paying more to some extent for local control.  I can also tell you . . . raising corporation filing fees $85 a year is an issue now on everybody’s radar screens, because their bills are going up.  The thought of sending something out of here [the legislature] with absolutely nothing to protect against some sticker shock when they are all looking at us, for what is going on in the electricity market even . . . .  I would like to be able to point to a couple of things to say about price, in some context, just having weathered the last two sessions of all these issues. 

I support the renewables, and I think we need to do something.     . . . if the trend is down and these things are going on, isn’t there something we can find to put in the bill . . . to say, we didn’t limit the price consequences of same?  We’re asking to increase mill assessments for those folks who can’t afford the increase in costs.  It’s not a problem with renewables; but in the context of everything going on, I hope we can come up with something.

 

Mr. Hay stated:

 

My suggestion would be either to establish [a price cap] in the legislative history or revisit the language on the commission’s authority to look at the prices.  It is too uncertain an environment to do a legislative price cap of 5 percent.  Maybe a larger one [price cap] would be more workable.  There have been problems with legislative language imposing price caps.  We don’t cap the price of natural gas or other types of fuel our utilities are using.  This serves as a non-incentive for these renewable companies to come in the state and say, “We want to make an investment in this but now we’ve got this issue.  We are on a year-to-year basis, our product may suddenly fall out of the mix, and it contradicts the intent of the bill.” 

 

Under PURPA (Public Utility Regulatory Policy Act) we are still required to purchase those “geothermal” resources; so, it’s not a question of those disappearing from the mix.  But, the exemption on “geothermal” was due to expire under the existing law, which Sierra Power Company argued, did not apply.  From the consumer’s standpoint, I can definitely assure you we will defend this until my last day in the job. 

 

Mr. Hay concluded his testimony:

 

This is an appropriate public policy.  If you look at the article [Exhibit T], it would indicate, under any reasonable assumptions, this is going to be good for the state, both from an economical and developmental standpoint, as well as lowering and making utility costs more stable.  Because, whatever amount of these resources we put in place, we are, therefore, in perpetuity, insulated or isolated from the volatility of fuel prices, which is our main goal in developing these resources. 

 

William S. Davidson, Lobbyist, began his testimony:

 

I am the managing member of Nevada Wind Power, a limited liability company.  We do consulting work in wind energy development.  Since A.B. 418 and S.B. 372 have made the local news, we have received calls every week from people interested in investing in “wind energy” in the state of Nevada.  To date, I have indications of interest of $38 million dollars worth of investments in Esmeralda County, Elko County, Pershing County, and Humboldt County.  We have four project sites there.  The notion of 5 percent escalating to 15 percent would be onerous and out of the question.  I don’t think it is justified.

 

We have people ready, willing and able to commit their resources to build these facilities.  The notion of a renewable portfolio standard here might better be rephrased as the “rural economic development bill.”  All of these sites I have mentioned are in rural areas.  In broad terms there may be a $200 million investment in terms of wind energy; and for every $1 million, 1 percent would go into the property tax assessment.  There’s about 65 percent of tangible property involved in a wind turbine development.  These are things that point directly to the economic development to sustaining some tax base in these rural areas. 

 

Mr. Davidson continued:

 

If we take the opportunity not to do this, then we are going to deprive our rural counties an opportunity to participate in this energy boom.  Renewable energy in Nevada is an export industry.  We can build this industry and sell energy throughout the west.  Everyone has memorized the Chaney statement on the energy policy.  There is one paragraph devoted to Nevada.  It says, “It is covered largely by federal lands that require federal approval for permitting new transmission and generation facilities.”  Our effort would be greatly assisted by bringing the Bureau of Land Management and the U. S. Forest Service to the table, along with Sierra Power Resources, to discuss how we can develop this industry and export this power to the benefit of our citizens.  We have an opportunity for all this to be part of a solution.  I am not for power and light or those who were here during the earlier testimony; they are here because they are a renewable portfolio standard.  We have the opportunity to be a big-time player and diversify our economy, if we can move forward on this.  I have indications of interest from people who have the money to start right now. 

 

Chairman Townsend stated, ”We are not going to re-try this whole issue; we are just trying to get a sense of acceptability, non-acceptability or new language.”

 

Tim Carlson, Lobbyist, NTS Development Corporation, MNS Wind, began his testimony:

 

We are a division of NEG Micon the second largest manufacturer of wind turbines in the world, with plants in Africa, Spain, the Netherlands, the Pacific Rim, and the United States.  This is the company which places 260 megawatts of wind power at the Nevada test site.  It probably expands to a greater amount, but the “260” [megawatts] is confirmed.  We are also the company building, with the completion of the EIS [Environmental Impact Statement] on Table Mountain, a 100 megawatts generation system.  We are presently in negotiations with Nevada Power Company at a “4.75 cents offering”, and are negotiating as we speak.  They [Nevada Power Company] have been very positive towards the process and have been very helpful in making the process work. 

 

I believe we are waiting for a portfolio standard of some sort.  The amendments offered by the power company trouble me in regard to the hydroelectric, which has been mentioned.  On the end-user issue, I also agree with what Mr. Hay has said.  I don’t believe it would be appropriate to reduce the percentage by 9 percent.         I would support the 15 percent.  I think it is reasonable, and the state of Nevada has always been a trendsetter in these particular areas.  We set it [the trend] a couple of sessions ago with a bill       I worked on when I was with the commission. It created a lot of notoriety.  I think we are a trendsetter.  This is going to be a trend-setting bill throughout the nation and we will receive a lot of interest in relationship to the renewable energy business.

 

Chairman Townsend said:

 

I just want to remind everyone the committee has already had a trend-setting activity.  It is called S.B. 372, and it’s in the other house [Assembly].  I’m offering everyone a courtesy, including the sponsor of this bill [A.B. 418], to be here today.

 

Alan D. Caldwell, Lobbyist, Green Energy Business Council of Nevada, stated:

 

Most of what I was going to say has been more than adequately covered by Mr. Hay, Mr. Davidson, and Mr. Carlson.  I would like to add just a few comments and indicate my support for the       15 percent renewable portfolio standard.  We would like to see this bill passed and [we] would like to get into action as soon as it does pass.  The ultimate issue here is about leadership.  We have the leading resources in the country and we should be the leaders in the development and the deployment of these resources.  We could be the renewable energy capital of the country and should not take the position lightly.  One of the things mentioned is feasibility.       I will refer . . . as Mr. Hay just referred to, a 10-year renewable portfolio standard will be accomplished in 2.5 years; the Bonneville Power Association in the Northwest just put out a RFP for wind power asking for a 1000 megawatts of wind.  They received responses for 2700 megawatts of wind.  This is ready to explode.  All we have to do in this legislature is indicate the state of Nevada will support it and companies will come here in droves.  We will find new economic activity, new jobs, particularly in the rural areas, as well as broaden our tax base, which is a major issue in this legislature.

 

Alfredo Alonso, Lobbyist, PG&E National Energy Group, began his testimony:

 

I just wanted to discuss the amendment with respect to the cap.     I think if you put the cap in, you essentially take “solar” out, completely.  The state of Nevada is trying to jump-start an industry.  If you do this and bring the portfolio standard to bare,      I think you are going to bring this industry into a situation where the prices are going to drop significantly, which they are already doing.  I think it is a significant piece of this amendment and the cap will take out “solar” almost exclusively. 

 

Chairman Townsend stated:

 

Monday, we [4 members of the Senate Committee on Commerce and Labor] will be here at 7:00 a.m. for taxation [meeting].                   Then at 9:30 a.m., this committee reconvenes to finish our work session for the bills which have not been dealt with, as well as   A.B. 133, which will be the prime bill processed by the Assembly on construction defects.  There is no floor session on Monday.  Be prepared to be in this room until 2:00 p.m.

 

The meeting was adjourned at 10:29 a.m.

 

 

RESPECTFULLY SUBMITTED:

 

 

 

Patricia Vardakis,

Committee Secretary

 

 

APPROVED BY:

 

 

 

                       

Senator Randolph J. Townsend, Chairman

 

 

DATE: