MINUTES OF THE
SENATE Committee on Commerce and Labor
Seventy-First Session
March 29, 2001
The Senate Committee on Commerce and Laborwas called to order by Chairman Randolph J. Townsend, at 7:00 a.m., on Thursday, March 29, 2001, in Room 2135 of the Legislative Building, Carson City, 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
STAFF MEMBERS PRESENT:
Scott Young, Committee Policy Analyst
Sharon T. Spencer, Committee Secretary
OTHERS PRESENT:
Jon B. Wellinghoff, Lobbyist, Vulcan Power
Karl Gawell, Geothermal Energy Association
Stuart Johnson, Geologist, Caithness Operating Company, Limited Liability Company
David L. Beck, Pulte Homes
Steve M. Munson, Caithness Operating Company, Limited Liability Company
Dr. Donald Aitken, Senior Scientist, Union of Concerned Scientists
Tim Carlson, Lobbyist, Nevada Test Site Development Corporation
Paul E. Normandie, Duke Solar
Brook Marlowe, Sunrise Sustainable Resources Group
Mark Smith, Florida Power and Light
Robert Liden, Stirling Energy Systems
Doug Bierman, Lobbyist, Eureka County, Lincoln County, and City of Caliente
John Estill, Concerned Citizen
Alan D. Caldwell, Lobbyist, Green Energy Business Council of Nevada
Terry E. Page, Lobbyist, Calpine Corporation, and Sterling Energy Systems
Richard B. Harjo, Lobbyist, Sterling Energy Systems
Neill T. Dimmick, Director of Regulatory Operations, Public Utilities Commission of Nevada
Judy L. Stokey, Lobbyist, Nevada Power Company, and Sierra Pacific Power Company
Michael R. Smart, P.E., Nevada Power Company, and Sierra Pacific Power Company
Conrado Manago, Citizen
Chairman Townsend opened the hearing on Senate Bill (S.B.) 372.
SENATE BILL 372: Revises provisions governing portfolio standards for renewable energy resources and imposition of civil penalties by public utilities commission of Nevada. (BDR 58-287)
Jon B. Wellinghoff, Lobbyist, Vulcan Power, provided the committee with a Microsoft PowerPoint presentation and a handout (Exhibit C) describing why renewable energy was an important issue to Nevada. Among the benefits cited by Mr. Wellinghoff were diversification of the state’s economy, boosting Nevada’s rural economy, hedging against fossil fuel price escalation, and the reduction of pollution emissions and the need for nuclear energy. Mr. Wellinghoff pointed out 15 percent was a reasonable amount for Nevada’s renewable energy resource portfolio standard because renewable energy was in abundance in Nevada with an estimated 2000 or more possible megawatts each for geothermal and wind, 1000 or more potential megawatts estimated for solar, and a possible 500 or more megawatts potential for biomass energy. The state should encourage incentive programs for contractors and homeowners to construct buildings and homes that use renewable energy sources for power, he said, with the Public Utilities Commission of Nevada (PUCN) tasked with monitoring those programs. Mr. Wellinghoff said S.B. 372 was a good vehicle for accomplishing the objective of bringing renewable energy production into mainstream usage.
Senator O'Connell asked if producers of renewable energy resources had commitments for long-term contracts in order to get on-line. Mr. Wellinghoff responded in the affirmative, adding S.B. 372 required that utilities had 5 years to come into compliance with the law and to seek and secure long-term energy production contracts. Senator O'Connell asked what the approximate cost would be. Mr. Wellinghoff stated Sierra Pacific Power Company estimated the cost would be approximately $300 million over a decade. However, he added, he considered that figure to be a very high estimate that did not bring into consideration many other variables, such as tax incentives and quality-of-life issues. In addition, the net benefits to consumers of producing renewable energy would far outweigh the cost, not only monetarily but environmentally as well. Furthermore, Mr. Wellinghoff stated, a federal production tax credit was currently being considered in Congress and was receiving wide support. This federal production tax credit would apply to all forms of renewable energy resource development and would allow the renewable energy industry to charge much less for their power than conventional resources.
Senator O'Connell asked who would benefit from the federal production tax credit and Mr. Wellinghoff said energy producers were the beneficiaries; however, consumers would ultimately receive the cost benefit due to the development of highly competitive and very diverse forms of renewable energy resources.
Senator Rhoads asked why the proposed legislation applied to counties with populations of 100,000 or more, thereby eliminating rural Nevada from consideration. Mr. Wellinghoff explained that provision in S.B. 372 referred to the performance standard for residential buildings which, in rural counties in Nevada, were different from the standards of building codes and enforcement found in urban areas. Chairman Townsend explained the intent of that provision was to exempt rural areas from strict standards imposed upon urban builders rather than possibly impose additional hardships on construction in less-populated communities. Mr. Wellinghoff added, urban areas were more equipped to assume the challenges of new technologies.
Senator Amodei asked for clarification regarding the penalty clause as outlined in the proposed legislation. Mr. Wellinghoff explained any penalties imposed would be at the discretion of the PUCN and would apply only if the utility failed to comply with any order from the PUCN. Those penalties, he said, would be discretionary and not mandatory. Also, Mr. Wellinghoff added, a maximum penalty amount needed to be established to ensure specific portfolio standards would be attained. Senator Amodei asked if opening up more markets and promoting competition in the renewable energy resource industry would expose Nevada to more “stranded costs” issues. Mr. Wellinghoff said in today’s markets if any contract became useless to a utility because the energy loads were being served by alternative energy sellers, the energy from those long-term contracts could easily be sold. He said a price under the renewable energy contract which was much less than the spot market for nonrenewable fuels could resolve any potential problems that could result in “stranded costs.”
Senator O'Connell asked if any new companies entering the marketplace following deregulation would be subject to the provisions and penalties under the proposed legislation, to which Mr. Wellinghoff responded in the affirmative. Senator O'Connell asked if the measure was modeled after any other state legislation. Mr. Wellinghoff again responded in the affirmative, adding that 12 states currently have similar legislation and another 5 states have proposals similar to S.B. 372 pending in their state legislatures.
Senator Rhoads asked if there was current federal legislation that promoted renewable energy technologies, to which Mr. Wellinghoff responded in the affirmative, adding the legislation the senator was referring to was called the production tax credit and provided for a federal tax credit for wind power. The production tax credit, Mr. Wellinghoff added, was about to be extended because it was nearing its expiration date. The program was also going to be expanded to include geothermal, solar, and biomass energy technologies. Currently, Mr. Wellinghoff pointed out, U.S. Senator Frank Murkowski had an “omnibus energy bill” before Congress which contained a whole package of renewable energy provisions. One provision would expand incentive programs to include geothermal, solar, and biomass energy production and another provision extended the wind power tax credit. U.S. Senator Harry Reid, Mr. Wellinghoff said, was continuing the effort to promote renewable energy resources throughout the country and he fully expected more renewable energy programs to be passed in the near future.
Senator O'Connell asked what criteria Mr. Wellinghoff used to determine the various percentages referred to in the proposed legislation. Mr. Wellinghoff explained those numbers were predicated on figures he considered to be reasonable levels of development in Nevada. The numbers varied, Mr. Wellinghoff pointed out; however, in the geothermal industry there was any amount from 500 megawatts, which could be developed within 5 years and would be a short-term projection, to a long-term projection of 2000 megawatts of developable geothermal resources throughout the state. Those numbers could be matched by wind power development, he added. He said S.B. 372 was the only bill presented this legislative session that provided for long-term utility contracts which, along with nonrenewable energy contracts, were essential to the long-term stability of energy in Nevada.
Senator O'Connell asked if much of the geothermal energy in the state was on Bureau of Land Management (BLM) property, to which Mr. Wellinghoff responded in the affirmative, adding a good reason for that was because much of the land in the state was BLM property. He pointed out that some geothermal resources were located on Native American Reservations and some was located on private property as well. Senator O'Connell asked if it would be possible for Nevada to obtain use of geothermal land for resource development, and if so, at what cost. Mr. Wellinghoff said many developers already had leases on BLM land and were just waiting for passage of S.B. 372 in order to get contracts to move forward with projects slated for geothermal properties. The cost, he said, was reasonable and the process was well defined and had been in place for a number of years. Also, efforts were under way in Washington, D.C., to ensure working relations with BLM would be conducive to assisting the states in moving forward as quickly as possible. Senator O'Connell asked if geothermal was a mineral resource, to which Mr. Wellinghoff responded in the affirmative. Senator O'Connell asked how the geothermal resources would be taxed. Mr. Wellinghoff said he did not know but expected it would be similar to the way other mined resources were taxed in the state. He added, experts in that area were scheduled to testify and would explain the taxation procedure for geothermal energy at that time.
Karl Gawell, Geothermal Energy Association, came forward with a panel of experts to testify on geothermal renewable energy resources. Mr. Gawell explained he was the director of this organization, which was a trade association for the geothermal industry and which was comprised of 78 member companies, and provided the committee members with a handout listing those member companies (Exhibit D). He said his organization produced energy in 4 states using alternative energy resources. Those states are Nevada, Utah, Hawaii, and California, and other states are fast becoming involved due to extensive energy problems throughout the country. Mr. Gawell explained geothermal was a clean and cost-effective energy source, which was considered to be base-load power, meaning it was available as an energy source whenever needed.
Mr. Gawell said considering the extensive power shortages throughout the country, Nevada could receive national prestige for producing model legislation specifically because the state had an abundance of geothermal base-load power available for development. It was necessary to understand that geothermal energy plants were expensive to build, approximately three times the cost of a natural gas plant, and therefore geothermal was considered a high-risk resource. This meant, Mr. Gawell noted, geothermal power plants were expensive to build but paid off considerably in the long run. In addressing the public lands issue, Mr. Gawell explained that over 80 percent of geothermal energy production had been developed on public lands throughout the United States; however, BLM agreed to work with the industry because geothermal energy resources did not have to be developed in wilderness areas. The present administration was eager to work with new- and clean-energy technologies and considered energy production in the United States to be a priority; whereas, the previous administration viewed recreational areas a priority, not energy production. Green technology exists today, he said, and could work well to ensure energy production could coexist with environmental policies. Also, geothermal resource development could greatly improve Nevada’s economy because royalties from the federal government could be paid to the state for its geothermal resources in addition to boosting local and state economies, Mr. Gawell said.
Senator Amodei asked why geothermal energy was considered a high-risk resource. Mr. Gawell explained the reason for the distinction was because currently technology did not exist to identify and characterize a geothermal reservoir without drilling for it, and drilling, he added, cost millions of dollars per well. This meant millions of dollars had to be spent before the capabilities of a geothermal well were determined in terms of megawatts of energy produced.
Stuart Johnson, Geologist, Caithness Operating Company, Limited Liability Company, explained his expertise was in geothermal exploration and development, 27 years of which was done in Nevada. His company, based in Reno, also developed wind and solar energy production in the western United States, and was the second largest geothermal energy producer in the country. In Nevada, the company was the largest geothermal energy producer, producing a gross generation capacity of approximately 93 megawatts in 3 Nevada facilities located in Steamboat Springs in Washoe County, Beowawe in Lander County, and Dixie Valley in Churchill County. Most of the geothermal power produced in Nevada was sold to Southern Cal-Edison under long-term contracts using standard pricing schedules. Geothermal energy plants are typically the most reliable base-load power resource that exists. During the energy crisis throughout the western United States, Caithness has continued to supply California with much needed power without the company having received any energy payments for the past 4 months. Mr. Gawell stressed the high-risk and large up-front investment factors of geothermal resource development by describing the drilling and exploration of the newest and most productive plant to recently come on line, the Dixie Valley plant, which was budgeted at $600,000 but came in at approximately $1 million, despite the fact that drilling was done in an area known to be rich in geothermal resources and the well was shallow.
Senator O'Connell asked how Mr. Gawell’s company Caithness was taxed. Mr. Gawell explained taxation on geothermal resources was very similar to taxation of mined resources, which was taxation on net proceeds plus half the money from federal royalties returned to the local counties in which the company operated. Those federal royalties, along with increased property taxes, are very significant incomes for rural counties in which geothermal power plants operate most often, Mr. Gawell stated.
Senator Rhoads asked if most of the energy produced by geothermal resources went to California what benefits did Nevada see from geothermal energy production other than property taxes. Mr. Gawell said 80 percent of the power produced from geothermal energy resources did go out of state due to long-term contracts for 30 years, some of which were signed over 13 years ago. He said part of what S.B. 372 would do would be to make long-term contracts for geothermal energy production available to Nevada.
Senator Shaffer asked if there were any visible signs geologists looked for when exploring for geothermal resources. Mr. Gawell said looking for geothermal resources was very similar to looking for gold, meaning there were some surface indications such as structures and alternations in rock formations and visible signs of hot springs in the area. After that, a model is developed and eventually that model is tested by drilling for geothermal in the most likely locations, starting with shallow drilling and sometimes going as deep as 11,000 feet, which could cost as much as $3 million. Because of the high risk involved in geothermal exploration, geothermal energy resources have not been developed quickly.
Chairman Townsend asked Mr. Gawell to describe a long-term contract for geothermal development. Mr. Gawell said to finance a geothermal project approximately $2 million per megawatt and a period of at least 10 years would be needed, with financing for the project being paid off in approximately 12 to 15 years. Chairman Townsend asked what the financing rate would be for a geothermal project. Mr. Gawell responded approximately 75 megawatts of expansion, as produced by the 3 geothermal power plants in Nevada currently on-line, equaled a cost of approximately 6 cents per kilowatt hour, a price he considered to be reasonable and in line with today’s market price.
David L. Beck, Pulte Homes, testifying from Room 4406 of the Grant Sawyer State Office Building in Las Vegas, explained alternative energy contractors were currently building homes that used 50 percent less energy than conventional homes. He considered energy efficiency, energy conservation, and homes powered by renewable energy sources to be cost-effective and environmentally sound. Mr. Beck suggested performance-based management of residential construction.
Senator O'Connell asked if Caithness Operating Company was under a regulating body such as the PUCN, to which Mr. Gawell responded in the negative. Senator O'Connell asked if the PUCN was to become the umbrella agency Caithness Operating Company would fall under, would the company still want to do business in the state of Nevada. Steve Munson, Caithness Operating Company, Limited Liability Company, explained his company wanted to remain an independent power producer. Senator O'Connell said she wanted to know how much Caithness could sell its power for if it were under the same regulatory body the other utilities were under, which was the PUCN. The senator added there should be a level playing field established that made all players subject to the same regulations. Mr. Munson noted all competitors of Caithness were also independent power producers. He added the price per kilowatt-hour would remain under 7 cents per kilowatt-hour.
Chairman Townsend explained a legislative vehicle was needed to encourage development of renewable energy resources by developing guidelines for a blended portfolio that would include renewable and nonrenewable long-term energy contracts structured to protect the state from market fluctuations, to allow Nevada to control its own destiny, to protect the citizens of the state by ensuring energy reliability, and to assist in diversifying the economy of Nevada.
Dr. Donald Aitken, Senior Scientist, Union of Concerned Scientists, provided the committee with a Microsoft PowerPoint presentation and a corresponding handout (Exhibit E), along with a complete compendium of all current renewable energy policies for all 50 states plus recent suggested federal legislation (Exhibit F). Dr. Aitken pointed out Nevada had extensive renewable energy resources but little commitment to production of those resources. California, he noted, also had considerable renewable energy resources, albeit not as much as Nevada, but commitment to production of those resources was far greater than Nevada due to California’s conscious political commitment years ago to exploit its alternative energy supplies. California had the world’s largest solar thermal electric generation plant which produced 54 megawatts of energy. He noted, currently, new homes were selling in Sacramento with options on solar roofs which cost the same as homes with conventional roofs.
Dr. Aitken stated wind resource development was another renewable energy resource extensively exploited in California but which, despite more intense wind-prone areas in Nevada, wind power was another renewable energy resources that saw limited use in Nevada, due again to the lack of political commitment for the development of renewable energy sources in the state. In addition, renewable energy resources work well with deregulation, even though increasing the state’s renewable energy portfolio was a totally independent matter from the deregulation issue. Dr. Aitken pointed out congressional support for renewable energy resource development and the energy tax credit was virtually unanimous and completely bipartisan.
Due to California contractors not getting paid for energy provided, continued Dr. Aitken, power companies were withholding over 1400 megawatts of energy from the California grid which caused a widespread blackout. Renewable energy resource contracts in California were the lowest-costing energy of any utility, costing on average approximately 27 cents per kilowatt-hour during the summer of 2000, which is a cost much higher than renewable energy sources that cost, on average, 7 cents per kilowatt-hour. Dr. Aitken stated energy efficiency is still very important, and when combined with renewable energy resource development, which is extremely cost-effective and environmentally sound, energy for the state could become a real bargain. Regarding net benefit to consumers in relation to net cost, especially if the state were to enter into long-term contracts, Nevada is very lucky because when it comes to renewable energy resources, Nevada has it all, Dr. Aitken said, particularly referencing the abundance and importance of the state’s geothermal resources. The choice to tap into the wind, sun, and geothermal for energy has always been a legislative decision.
Senate Bill 372 provides Nevada legislators with the opportunity to make that choice by expanding its renewable energy portfolio standards, he said. After considering all costs, Dr. Aitken said studies he has conducted in the past have shown that using energy from renewable energy resources could provide a net benefit to the state of between 2 and 4 cents a kilowatt-hour in the form of returned profits as well as bringing down the overall cost of energy and energy transmission considerably. Dr. Aitken reminded the committee that wind energy was an intermittent power source and should be considered in relationship to, or blended with, other renewable energy resources for base-load power, such as solar-thermal and geothermal. When different renewable energy resources were combined together in one power plant, that plant was referred to as a “blended facility,” he said.
Senator Rhoads asked what could be done to ensure energy produced from renewable sources stays in Nevada. Dr. Aitken said it is possible for legislatures to pass laws, such as Texas has done, that allows a state that produces energy from renewable sources to demand first preference for that energy.
Senator Schneider asked how much the energy produced from wind power was being sold for. Dr. Aitken said the lowest price he is aware of was 2.5 cents per kilowatt-hour and the highest was 5 cents per kilowatt-hour.
Chairman Townsend asked for details regarding the contract for wind power currently being considered for southern Nevada at the test site. Dr. Aitken said the contract called for 260 megawatts; however, he was not certain of the amount of the contract. Tim Carlson, Lobbyist, Nevada Test Site Development Corporation, came forward to respond to the question. He said he worked for the Nevada Test Site Development Corporation, a wind-turbine power producer, in partnership with MNS Wind Company currently engaged in developing wind power generation by using 325 wind turbines to produce 260 megawatts to service a population of 260,000 at a cost of 4.75 cents per kilowatt-hour. Mr. Carlson explained this project was a commercialized partnership in association with the United States Department of Energy designed to produce wind power for clean and reasonably priced energy which would, at the same time, diversify the economy, bring new industry and revenue sources into the state, create new jobs, and develop new income opportunities for rural counties and Native American Reservations. After the required Environmental Assessment (EA) and Environmental Impact Study (EIS) were completed, the project was slated to begin within 4 to 6 months. Mr. Carlson provided the committee with copies of his testimony along with production and business information pertaining to wind-turbine power production (Exhibit G).
Chairman Townsend asked if every wind utility facility required an EIS be conducted in addition to an EA. Mr. Carlson explained, for the Nevada Test Site facility, an EIS had already been done over 3 years ago, so only the addition of an EA was required. However, in most cases both studies were required.
Paul E. Normandie, Duke Solar, provided the committee with a solar industry information handout produced by Duke Solar (Exhibit H). Mr. Normandie said currently there were 354 megawatts of solar-thermal power in place in California and was a reliable and well-proven technology. However, he added, the solar industry did not have the capability of generating as much power as wind and geothermal resources. One of the issues raised in various proceedings, he pointed out, was that solar technology is very expensive but solar-thermal technology is not. Mr. Normandie explained solar-thermal energy ranged from 10 to 15 cents per kilowatt-hour and that amount would drop to approximately 8 cents per kilowatt-hour once more facilities are built. Solar-thermal energy production was considered a blended facility because other fuel sources were combined with solar power to ensure a steady supply of base-load power. In addition, Mr. Normandie suggested a state tax credit be considered that would match the federal tax credit for renewable energy resources and implementation of energy-design guidelines for construction of buildings, homes, and state offices. Mr. Normandie concluded by stating those in the renewable energy industry considered Nevada to be the Saudi Arabia of the western hemisphere, particularly because of the state’s abundance of geothermal resources.
Brook Marlowe, Sunrise Sustainable Resources Group, explained her organization had a mailing list of over 700 people concerned about resource development. She said she was also testifying as a concerned citizen and wanted to express her support of S.B. 372.
Mark Smith, Florida Power and Light (FPL), stated his organization was an unregulated power generation company. He said he was present to express the support of his company for the proposed legislation, and although he had never been in Nevada before, support for S.B. 372 was his sole reason for being in the state on this day. Mr. Smith explained his company was involved in the production of 1000 megawatts of power from the operation of wind farms in the western United States. In addition, another 2000 megawatts of wind generation was under construction or in active development in the west, but none of that production was currently in Nevada because FPL did not sense a demand for the technology his company offered. He said the proposed legislation could change that and open up the state to new and lucrative forms of renewable energy production. Mr. Smith said a wind farm in Nevada producing 500 megawatts would meet the state’s initial 5 percent threshold for a very reasonable cost and within the time frame specified in the bill. Wind turbines have already been ordered by FPL, he said, and would be delivered later this year. The company was seriously interested in developing wind energy in Nevada and was looking for suitable sites and the right incentive, he said, and S.B. 372 appeared to be the right incentive.
Robert Liden, Stirling Energy Systems, explained his company was a solar-thermal technology manufacturer and supplier. Mr. Liden provided the committee with information describing his company’s solar-thermal equipment (Exhibit I). He pointed out the equipment his company produced was capable of supplying energy during times of peak demand which could augment base-load energy supplies with affordable, clean base-load energy that could replace highly polluting fossil fuels. Mr. Liden said his company supported building a blended renewable portfolio, as provided for in S.B. 372, and hoped to develop renewable energy projects in Nevada.
Doug Bierman, Lobbyist, Eureka County, Lincoln County, and City of Caliente, said, because much of Nevada’s renewable energy potential is located in rural Nevada S.B. 372 would greatly assist in diversifying rural counties, providing employment opportunities, and expanding their economies. He said the bill would also stabilize energy prices and encourage new forms of renewable energy sources to be developed. Mr. Bierman pointed out biomass fuel sources were plentiful in Nevada and thinning pinion-juniper woodlands would improve rangeland while providing approximately 12,000 to 15,000 British thermal units of energy, which is comparable to coal. Mr. Bierman’s written statement is included in the record as (Exhibit J).
Senator Rhoads asked for Mr. Bierman’s opinion regarding the population stipulation in the proposed legislation which required only counties with populations of 100,000 or more to adopt regulations establishing a performance standard to reduce peak demand. Mr. Bierman said he did not have any problem with that stipulation as long as there was an understanding that regulations could be negotiated to accommodate less-populated communities as long as there was no economic detriment to those rural counties.
John Estill, Concerned Citizen, explained he owned 2000 acres of deeded land in Humboldt County that is rich in geothermal resources. He said he had been contacted by numerous companies who expressed interest in developing the geothermal energy resources on his property which was located within approximately 35 miles of the transmission lines connecting northern Nevada with Los Angeles. Mr. Estill said his property also contained great amounts of biomass materials, specifically juniper trees, which he recently began harvesting for processing for power. The current operation is yielding 10 megawatts per day from this biomass energy source. He said he supported S.B. 372 because it would greatly enhance the economic opportunities for his rural community. Mr. Estill provided the committee with a map of Humboldt County which included his ranch, Soldier Meadows (Exhibit K).
Alan D. Caldwell, Lobbyist, Green Energy Business Council of Nevada, provided industry information (Exhibit L) to the committee describing wind-turbine equipment to harness wind power. He explained his company has developed wind farms throughout the country, both western and eastern. Mr. Caldwell cited a recent poll that showed over 75 percent of Americans preferred clean energy and 47 percent thought clean energy was extensively in place throughout the United States. However, Mr. Caldwell pointed out, renewable energy resources represent less than one-half of one percent of the nation’s energy supply. Renewable energy resources are abundant in Nevada, Mr. Caldwell noted, and therefore this state faces a unique opportunity to take advantage of this potential. Some states have already demonstrated renewable energy resource development is far more cost-effective than fossil fuels, he said. In addition, renewable energy technology has greatly advanced and is cost-competitive and highly dependable. He stated his support of the proposed legislation.
Terry E. Page, Lobbyist, Calpine Corporation, and Sterling Energy Systems, stated his support of S.B. 372 and introduced Richard B. Harjo, Lobbyist, Sterling Energy Systems, who stated renewable energy resources were abundant on Indian reservations throughout Nevada. Mr. Harjo said wind, solar, biomass, and geothermal were all indigenous resources that were in abundance on Nevada reservations and all were being actively developed into highly productive energy systems.
Chairman Townsend suggested to Mr. Harjo Native American heritage seemed to blend naturally with renewable energy resources and lent itself comfortably to the technology of clean energy production. Chairman Townsend said the technology of renewable energy sources was sensitive to Native American cultural needs, while at the same time providing economic benefits. Mr. Harjo agreed that Native Americans, as the original stewards of the land, held a place as leaders in the production of green energy.
Chairman Townsend asked Neill T. Dimmick, Director of Regulatory Operations, Public Utilities Commission of Nevada, if the penalty clause for noncompliance, as contained in section 1 of S.B. 372, was severe enough, to which Mr. Dimmick responded in the affirmative, adding the penalty had to be at least more than the cost of power in order to act as a deterrent. Senator Shaffer said just the threat of a severe monetary penalty should be a sufficient deterrent for noncompliance.
Chairman Townsend then asked Mr. Dimmick if he noticed anything in the bill that might trouble him relevant to maintaining regulatory authority. Mr. Dimmick responded in the affirmative, specifically referring to the fact the legislation requested the PUCN to create building standards. Mr. Dimmick explained his agency only regulated a portion of the state because in certain sections of the state other regulatory agencies were the authority. No specific building incentives could be proscribed to those other entities that were not subject to his agency’s jurisdiction. Chairman Townsend said it would be necessary for the committee to use the PUCN as a central authority and an agency in which hearings could be held to develop rules and regulations that could be given to each county for adoption. This method, the chairman said, would be a way to accommodate rural communities who could construct and adopt regulations suitable to their individual needs. Mr. Dimmick suggested the issue might best be served by allowing the Nevada State Energy Office to be involved in the process, to which Chairman Townsend agreed.
Mr. Dimmick also noted another potential problem with the proposed legislation was the current formula for determining the revised portfolio standards presented the entire energy consumption in terms of kilowatt-hours and multiplies it by the standard but only applies that formula to those entities subject to the regulations imposed by the PUCN which again conflicted with those areas throughout the state that the PUCN did not have jurisdiction over, specifically electrical districts and cooperatives. Because the PUCN did not have a mandate, the current calculation would put the full burden of compliance on only regulated utilities, he said. Mr. Dimmick also noted the issue regarding mandatory 10-year contracting which he said could preclude people from contracting because other parties might only seek short-term benefits due to the availability of excess power due to unpredictable variables such as weather conditions.
Another point of concern, Mr. Dimmick said, was the lack of clarity regarding the phasing in of the required 2 percent increase, specifically in what fiscal year would the recalculation of the portfolio standard occur. He said he was not clear if recalculation would begin in the base year, or if it would start in the year 2002, or would recalculation move up year to year while reapplying the percentage to recognize the growth in the state. The final issue, Mr. Dimmick said he was concerned about, pertained to variations in geography that could allow the development of various resources in one part of the state but not in another part; however, the entire state would be under the same mandate but certain areas of the state would not be able to be in compliance.
Chairman Townsend announced the PUCN voted to suspend the order approving the sale of the Mohave Power Plant.
Judy L. Stokey, Lobbyist, Nevada Power Company, and Sierra Pacific Power Company, stated her organizations support the concept of renewable energy resources and encourage the construction of new power generation facilities in Nevada; however, her organizations opposed S.B. 372 in its current form. In addition, Ms. Stokey said, her organizations recently launched an aggressive conservation program which she expected to continue. She introduced Michael R. Smart, P.E., Nevada Power Company, and Sierra Pacific Power Company, who is in charge of the companies’ portfolios. He questioned the change in the penalty clause in section 1 of S.B. 372, specifically the increase in fines from $1000 to $10,000 per day for noncompliance. Mr. Smart said it was his goal to always be in compliance with the law but circumstances could occur that could make that difficult if not impossible because the standards were unattainable.
Chairman Townsend asked if there might be a prudence standard that could be applied which would allow the granting of an exception for good-faith efforts in attempting to meet all required standards but which, due to unforeseeable circumstances, could not be met. Mr. Smart said provisions could be written into any contract to allow for exceptions to the rule.
Mr. Smart said he was also concerned that the measure increased the portfolio standards by amounts greater than he would suggest and at a rate faster than he would recommend. Chairman Townsend said it might be beneficial to get rid of the 10-year requirement and to give the power companies more flexibility to allow determinations regarding proper standards to be based on the market.
Conrado Manago, Citizen, expressed his appreciation for the committee’s discussion on the subject of renewable energy resources.
Chairman Townsend asked if there was any additional testimony and there was none. There being no further business before the committee, Chairmen Townsend adjourned the hearing at 10:27 a.m.
RESPECTFULLY SUBMITTED:
Sharon T. Spencer,
Committee Secretary
APPROVED BY:
Senator Randolph J. Townsend, Chairman
DATE: