MINUTES OF THE
SENATE Committee on Commerce and Labor
Seventy-First Session
April 2, 2001
The Senate Committee on Commerce and Laborwas called to order by Chairman Randolph J. Townsend, at 9:35 a.m., on Monday, April 2, 2001, in Room 2135 of the Legislative Building, Carson City, Nevada. The meeting was video conferenced 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 Mark Amodei
Senator Raymond C. Shaffer
Senator Michael A. (Mike) Schneider
Senator Maggie Carlton
COMMITTEE MEMBERS ABSENT:
Senator Dean A. Rhoads (Excused)
GUEST LEGISLATORS PRESENT:
Assemblyman Richard D. Perkins, Clark County Assembly District No. 23
Assemblywoman Barbara E. Buckley, Clark County Assembly District No. 8
STAFF MEMBERS PRESENT:
Kevin C. Powers, Senior Deputy Legislative Council
Scott Young, Committee Policy Analyst
Jude Greytak, Committee Secretary
OTHERS PRESENT:
Don Soderberg, Chairman, Public Utilities Commission of Nevada
Terry Johnson, Labor Commissioner, Office of Labor Commissioner, Department of Business and Industry
Debra S. Jacobson, Lobbyist, Southwest Gas Corporation
Timothy Hay, Chief Deputy Attorney General, Bureau of Consumer Protection (Consumer’s Advocate), Office of the Attorney General
Harvey Whittemore, Lobbyist, Nevada Resort Association
Marybel Batjer, Chief of Staff, Office of the Governor
Douglas R. Ponn, Lobbyist, Sierra Pacific Power Company
Ernest Adler, Lobbyist, International Brotherhood of Electrical Workers,
Local 1245
Fred J. Schmidt, Lobbyist, Southern Nevada Water Authority
Senator Townsend opened the testimony on Senate Bill (S.B.) 210.
SENATE BILL 210: Makes various changes concerning regulation of utilities. (BDR 58-540)
Don Soderberg, Chairman, Public Utilities Commission of Nevada, began:
. . .To my left is Craig Steele. He’s our manager of Safety and Compliance, and his division, within our organization, handles the regulation of small water companies and gas pipeline inspections, [which] are the two subject matters embodied in S.B. 210. I would make Craig available, here, for your questions on this bill.
Scott Young, Committee Policy Analyst, directed the committee, “The second page of Exhibit C, the blue page, is the mill tax provision.”
Senator O'Connell asked Senator Townsend, “Do you remember the day it [S.B. 210] was originally heard, because my memory is questioning why we needed the bill?”
Senator Townsend asked Mr. Soderberg, “Why are we doing this?”
Senator O'Connell asked Mr. Soderberg, “Do you remember when it was first heard?”
Mr. Soderberg answered, “S.B. 210 was first heard, I believe, about three weeks ago. The majority of the bill does some technical cleanup [as] to how we regulate small water companies.
Mr. Young stated, “The date we heard S.B. 210 was the second of March.”
Senator Townsend decided to delay the testimony for S.B. 210 and began testimony on S.B. 373, which is the labor commissioner’s bill.
SENATE BILL 373: Makes various changes to provisions relating to labor commissioner. (BDR 53-558)
Terry Johnson, Labor Commissioner, Office of Labor Commissioner, Department of Business and Industry, stated the labor commission is prepared to submit S.B. 373 for consideration. He said they have a suggested change regarding the disposition of unclaimed money. He explained, after the bill was originally introduced, they had spoken to the administrator of the Division of Unclaimed Property, who told them, under the Unclaimed Property Act, wages are normally disposed of after a year. Mr. Johnson said the labor commission collects wages on behalf of a worker, and if the worker does not return to pick up that money, they keep it in an account for 5 years. After 5 years, he continued, they turn the money over to the unclaimed property division. He said the administrator of unclaimed property division had told him they handle wages on a 1-year basis. Mr. Johnson suggested they change the statute to also reflect “1 year.” He continued the bill now says 5 years, which is a change from the original “3 years” on the bill. He restated they would now like this changed again, to 1 year.
Mr. Young directed the committee to view page 2, line 48 of S.B. 373. He said, to accommodate Mr. Johnson’s request, they would have to change “3 years” to “1 year.”
Senator Townsend asked if anyone present would like to address that proposed change on S.B. 373. He explained this is the labor commissioner’s bill, on which there would be a change on page 2, line 48, from the proposed 3 years to 1 year.
There was no response.
SENATOR O’CONNELL MOVED TO AMEND AND DO PASS S.B. 373, WITH THE CHANGE ON PAGE 2, LINE 48, TO 1 YEAR.
SENATOR SHAFFER SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR SCHNEIDER AND SENATOR RHOADS WERE ABSENT FOR THE VOTE.)
*****
Senator Townsend opened the hearing on Assembly Bill (A.B.) 150.
ASSEMBLY BILL 150: Establishes deemed wage for certain trainees for purpose of industrial insurance. (BDR 53-1055)
Senator O'Connell explained A.B. 150 allows a trainee, someone who is not currently employed, to be paid at a rate of $150 per month, rather than the deemed wage. She stated there was no opposition at the time the bill was first heard.
SENATOR O’CONNELL MOVED TO DO PASS A.B. 150.
SENATOR CARLTON SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR SCHNEIDER AND SENATOR RHOADS WERE ABSENT FOR THE VOTE.)
*****
Senator Townsend opened the hearing on A.B. 151.
ASSEMBLY BILL 151: Revises provisions relating to solicitation by telephone. (BDR 52-486)
Senator Townsend asked Timothy Hay, Chief Deputy Attorney General, Bureau of Consumer Protection, (Consumer’s Advocate), Office of the Attorney General, if he had any objections or suggested changes to A.B. 151.
SENATOR O’CONNELL MOVED TO DO PASS A.B.151.
SENATOR SHAFFER SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR RHOADS AND SENATOR SCHNEIDER WERE ABSENT FOR THE VOTE.)
*****
Senator Townsend reopened the hearing on S.B. 210.
SENATE BILL 210: Makes various changes concerning regulation of utilities. (BDR 58-540)
Mr. Soderberg testified:
. . . We now have the revised draft of S.B. 210. Its major subject matter . . . deals with how the commission sets rates for small water companies. It also deals with how we deal with accident reports from our gas pipeline safety program. Portions attributable to the railroad safety program have been deleted at the urging of our agency; that might be a subject matter we just need to discuss with industry a little further, and bring back in a subsequent session. Technical cleanup to our mill tax assessment language has been inserted in this bill, as well. Mr. Steele is with me. His department administers both the gas pipeline safety program and the regulation of small water companies and he is here to answer any questions with regard to those portions of the bill and I can answer any questions with regard to the mill assessment cleanup portions of the bill.
Senator Townsend said:
Let’s start with section 2, sub 7 [subsection 7 of section 2 of S.B. 210]. Help us with this . . . in the bill itself. We’re still using the bill? . . . This white sheet, what does this do, with all the red and blue and black on it?
Mr. Young explained Exhibit D:
That’s the amendment proposed by the Sierra Club. The pink is the actual document Joe Johnson of the Sierra Club submitted, and the multicolored document was our attempt to incorporate Mr. Johnson’s proposed amendment into the actual statute. The PUCN’s [Public Utilities Commission of Nevada’s] amendments are on the two blue sheets. The first blue sheet mentions they want to delete . . . section 3 of S.B. 210 in its entirety; I believe that’s the railroad provision. The second blue sheet is a new section the PUCN is proposing . . . .
Senator Townsend asked Mr. Johnson, “So what you’re telling us now, is your proposals to your bill are in blue. Is that correct, Mr. Chairman?”
Mr. Soderberg replied, “[They] are in blue, with respect to how it would be incorporated into the actual bill.”
Senator Townsend stated:
OK, so you’re taking out section 3; good, then we don’t have to ask any questions about that. . . . Section 2 exempts commercial mobile radio providers from the mill assessment. . . . OK now that we’ve taken out 3, [section 3] we’re going back to your blue page, which says “The commission shall levy and collect annual assessment from public utilities.” . . . What have you done? . . . We have a section 1 which doesn’t comport to your section 1.
Mr. Soderberg replied:
The blue sheet [Exhibit C], as I recognize it, is draft language worked out between our general counsel’s office and Mr. Young. So, the section numbers on this blue sheet do not correspond with what’s in the bill here. Is that correct Scott?
Mr. Young replied, “I believe they do not.”
Senator Townsend said, “. . . Let’s deal with the bill, then we’ll deal with these amendments, . . . because these are separate amendments, right? You just numbered them by section?”
Mr. Soderberg relied, “Exactly.”
Senator Townsend quoted from Mr. Johnson’s proposed amendment (Exhibit D):
On page 2, lines 16 and 17 and 18, “The report must show the true cause of the accident. The accident report forms adopted for the reporting of railroad accidents must, as near as practicable, be the same in design as the railroad accident report forms provided . . . [and used by] the Surface Transportation Board.” That just . . . seems to be a technical change.
Mr. Soderberg interjected, “That’s correct, Mr. Chairman.”
Senator Townsend continued:
And then, [the] same with line 28 [Exhibit D]; clearing it up on line 31; and then it goes to, “its investigation of an accident may be open to the public inspection or disclosed to any person, except, upon request, to a governmental agency or the utility that filed the accident report.”
Mr Soderberg declared:
That’s the meat of this section. The meat of the problem being addressed in the first part of this bill, is the existing statute would not allow our pipeline inspectors to share the result of their pipeline reports with the federal government, which we are a partner in the Office of Pipeline Safety, or the actual utility we were inspecting, and that’s caused a great deal of . . . disconcern [sic] with our partners in this - the federal government. And so, we were looking here, to give us the flexibility to share these reports with the Office of Pipeline Safety, or the actual pipeline operator who wanted to see the report. I believe the Sierra Club has asked for something more expansive. I don’t know that we have an opinion, one way or the other, on that. We know, right now, under the existing law, we feel, we are constrained in providing adequate information to the federal government when we need to work with them.
Senator Townsend asked if Mr. Johnson were present. After no reply, he continued, “OK, let’s look at their expansive language.”
Mr. Soderberg testified:
. . . It appears Mr. Johnson has proposed [in Exhibit D], . . . to make these reports completely public, as opposed to just brought forward to governmental agencies, or the pipeline operator who is the subject of the report.
Senator Townsend asked Mr. Soderberg, “Do you have a sense, one way or the other, about that proposal?”
Senator Carlton asked:
My impression, in reading off of the pink sheet [Exhibit D], section 1, at the end, was this is only an investigation of a fatal accident. So, if a fatality is involved, then it would be open to the public? Would this include the other situations the commissioner was talking about, or does this simply aim at if an accident has occurred?
Mr. Soderberg replied:
Based on what we have in the non-bolded portion here, given to us on the pink sheet [Exhibit D], it appears you are correct; it would just be with the fatal accident. Our sense of this has been we believe everything we do should be open to the public. It has been expressed to us by our actual pipeline inspectors they enjoy a rather open relationship with those they inspect, and [it] has been intimated to them, informally, over the past few years, if all of their reports were open to the public, somehow they would not enjoy this cooperative atmosphere. I think, that’s speculation, one way or the other, and so, we don’t really have an opinion, one way or the other, as to what Mr. Johnson is proposing.
Senator Townsend asked, “Is there anyone here to represent any of the parties to these accidents who might have a feeling about Mr. Johnson’s proposal[Exhibit D], one way or the other?”
Debra S. Jacobson, Lobbyist, Southwest Gas Corporation, stepped forward to testify:
I believe, when this bill first came up, the incidents they talked about were actually Southwest Gas incidents, and the way the bill reads now, the reports can’t be released to us, so we’re basically in support of that [Mr. Johnson’s proposed amendment, Exhibit D], because we would like to see what the report said before you get to a “show cause,” which right now, is the only way the commission can release this, even to us. As far as litigation concerns, when you get into litigation, as Senator Carlton mentioned, with a fatality, or something like that, the attorneys on both sides are getting this information, and we do enjoy a good working relationship with the commission staff. I’m not going to tell you that’s going to change, because we’re all working to make a safer system. But we do have concerns, definitely, to make these open to the public, because we think the information is available in litigation, if it gets to that point; if not, there are some things, I believe, that could be misconstrued. But, we would like to be able to get the report for us, because it is about us, and right now we have no way to get that report. And sometimes we are able to do consent agreements, et cetera, [to] make changes to make [the] system safer. So we would be in support of that.
To the committee Senator Townsend elucidated:
The option here . . . obviously, if the commission [PUCN] wants to remove 3 [section 3], because it’s their bill, and they are going to work on that at a later date, that is no problem. But, the choice would be the language proposed in 2 [section 2], or the language proposed by Mr. Johnson on just that issue alone. And then we’ll get to the other . . . . We’ll just deal with one amendment at a time, and try to get it done.
Senator O'Connell stated, “Mr. Chairman, I would move we accept the proposal made by Mr. Johnson [Exhibit D] to S.B. 210.”
SENATOR O’CONNELL MOVED TO ACCEPT THE AMENDMENT TO S.B. 210 PROPOSED BY MR. JOHNSON.
Senator Townsend clarified, “[There is] a motion by Senator O’Connell to accept Mr. Johnson’s proposal [Exhibit D], with regard to the opening of these investigative documents for public purpose. Do we have a second on that?”
SENATOR CARLTON SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR SCHNEIDER AND SENATOR RHOADS WERE ABSENT FOR THE VOTE.)
******
Senator Townsend continued, “All right, let’s move on to the blue sheet [Exhibit C]. Page 2, now, putting aside the way this is labeled as a section 1, this is just new sections. Is that correct Mr. Chairman?”
Mr. Soderberg answered, “Yes it is.”
Senator Townsend responded, “OK, and this [Exhibit C] deals specifically with the annual assessment for all public utilities and providers of discretionary natural gas service and alternative sellers subject to the jurisdiction of the commission [PUCN]?”
Mr. Soderberg replied:
[NRS] 704.033 was drafted at a time when there, essentially, was one electric company, one phone company, one gas company, and all of those entities were under stringent rate regulation. Over time, we have a variety of competitive telephone providers, providing a variety of services. By virtue of commission regulation [they] are not under rate regulation; although, by law, we are allowed to do that. We have alternative sellers of natural gas that have been providing, for some time, natural gas service to large customers, separate from the incumbent gas utility, much as we’ve envisioned for electric competition. And if we do move to electric retail competition, at some point, there’ll be alternative sellers of electricity serving retail customers that wouldn’t be under stringent rate regulation. What we’ve attempted to do here, is to redraft the mill assessment statute in such a way that [it] encompasses all entities under our jurisdiction. Section 2 exempts out the commercial mobile radio service providers, which by federal law, are under a . . . much lower level of regulation by state agencies. And that was an attempt to resolve the ongoing conflict, that maybe, the CMRS [Commercial Mobile Radio Service] providers, or actually, cell phone providers, as we know them in common nomenclature, should, somehow, not pay a full mill assessment as [do] other traditional utilities, either competitive or incumbent.
Senator Townsend asked, “[Are there] any questions, committee? [Is] anybody here from the industry who wishes to say anything regarding this proposed amendment [Exhibit C], including Mr. Hay? [Have] you had a chance to see their proposed language?”
Mr. Hay responded, “Yes,” [from the audience.]
Senator Carlton asked the audience:
Section 1, subsection 2 [NRS 704.033, subsection 2, paragraph (b)], the money that will be going to the consumer advocates bureau for operating revenue derived from the utilities, can someone explain to me exactly what that money is going to be used for?
Mr. Soderberg answered:
As the system stands now, our agency collects the mill assessment for our agency and up to 0.75 mills to fund the Bureau of Consumer Protection, and we transfer that across. That concept has not changed here.
Timothy Hay added, “That does not reflect any change in the funding mechanism we’ve used for nearly 20 years now.”
Senator O'Connell stated:
I would move we further amend S.B. 210 with the amendment presented by the public utility commission [Public Utilities Commission of Nevada] . . . Do we have any more than the two amendments? OK so we’ve already amended the first part, so we now need to just include the amendment presented to us listed as section 1 on the blue sheet of paper.
SENATOR O’CONNELL MOVED TO AMEND AND DO PASS S.B. 210.
Senator Townsend restated “We have a motion to amend and do pass S.B. 210, which would include the public utility’s work document changes, and also includes Mr. Johnson’s [amendment].”
Mr. Soderberg asked for clarification:
Just so we’re sure. Senator O'Connell’s amendment would involve section 1 and section 2 on the blue sheet [Exhibit C]? . . . This pink sheet [Exhibit D] from Mr. Johnson, this morning is the first time I’ve seen it. Mr. Johnson has suggested we have language which would make open to the public accident reports for fatal accidents, which we discussed. There’s also another line, where he suggests deleting the entire section we have added, that would allow us to share other types of reports with the federal government. To my knowledge, we didn’t discuss that, and that is not part of where we’re going right now?
Senator Townsend answered:
I don’t believe that was part of the motion. Your ability to share with the appropriate agencies, including the federal government, including the utility, should not be barred, which should be your language, but “open to the public” was . . . the concept Mr. Johnson had presented.
Mr. Young asked:
The question I have, is along the lines of the one Mr. Soderberg just asked. If you look on the pink sheet [Exhibit D] from Mr. Johnson, his first proposed amendment would be to delete lines 27-37 on page 2. That’s reflected in the double strikeout on that multicolored document I gave you. It, essentially, eliminates all but the first line of subsection 6, and all of subsection 7, which I believe is language Mr. Soderberg was just referring to. It was my understanding the committee voted to adopt Mr. Johnson’s proposal number 1, on his pink sheet [Exhibit D], and I’m asking for clarification, because I think from your comments, Mr. Chairman . . .
Senator O'Connell interrupted, stating, “Scott, the motion is intended to accept the concept that the records be all open to the public, and I think that’s pretty much the end of the motion.”
Senator Townsend stated, “So that would therefore leave sub 7 [section 2, subsection 7, of S.B. 210], which would allow them to share the information. Is that right Ann [Senator O'Connell]?”
Senator O'Connell answered, “Yes.”
SENATOR AMODEI SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR SCHNEIDER AND SENATOR RHOADS WERE ABSENT FOR THE VOTE.)
*****
Senator Townsend closed the hearing on S.B. 210 and opened the hearing on A.B. 369
ASSEMBLY BILL 369: Revises and repeals various provisions governing the regulation of public utilities. (BDR 58-1156)
Assemblyman Richard D. Perkins, Clark County Assembly District No. 23, began testimony:
. . . [I am] here to, at least, in tandem with Ms. Buckley [Assemblywoman Barbara E. Buckley, Clark County Assembly District No. 8], try and present A.B. 369 as it has made it through the Assembly and landed under the jurisdiction of your committee. Before we start, let me first thank you and your committee for the yeoman’s work. I guess, maybe in this body, the “yeoperson’s” work you’ve done in the area of electrical utilities, and regulation, deregulation, and . . . all those things under that umbrella. It’s provided a great deal of information for us, as we deliberated, drafting a bill, and deliberating the bill you have before you today. Assembly Bill 369 addresses one of the most complex and important issues facing the Legislature this session, insuring the delivery of affordable, reliable energy to the people of our state. We have introduced this bill to help Nevada avoid the devastating problems that are confronting California right now. [Assembly Bill 369 goes] along with S.B. 362, which I believe you’ve already heard [testimony on] from Senator Titus, which would streamline the approval of new power plants.
Senate Bill 362: Consolidates and revises process for reviewing applications for permits, licenses and other approvals required to construct certain utility facilities. (BDR 58‑689)
Assemblyman Perkins continued:
Legislation sponsored by Assemblywoman Parnell and Assemblyman Goldwater [would] provide energy assistance to low-income residents. Assembly Bill 369 is part of package of potential solutions to energy problems. In addition, the Assembly is considering other bills dealing with . . . increasing the use of alternative energy, and refining the rate-setting process. . . . I know there are bills that have come out of this body to address similar situations, or other pieces that are not encompassed in the bills previously mentioned. It is important to understand what we cannot do with these bills, or any other legislative action. We cannot prevent energy prices from rising. The underlying causes of increasing electricity prices include such factors as: the rapid rise in demand without a corresponding increase in supply; unseasonable weather, [which] would be the heat waves and drought; and higher fuel prices, especially for natural gas, for which we have seen low production levels, low inventories, and high demand. Nevertheless, we can insure we take every possible step to increase supply, to make sure price increases are justified, and to make sure energy policy is implemented fairly.
In the next few minutes, we would like to explain how the key provisions of A.B. 369 will help to achieve our goals. The provisions include: a repeal of provisions providing for the deregulation of retail electric services, a moratorium which restricts the divestiture of Nevada’s power plants at this time, and additional provisions to protect the public interest. Much is at risk. If, for example, divestiture of generating plants continues unabated, Nevada could loose control of electricity prices and delivery upon expiration of the by-back contracts, which would begin to occur within the next 2 years.
Assemblywoman Barbara E. Buckley, Clark County Assembly District No. 8, began:
As Assemblyman Perkins just mentioned, A.B. 369 would repeal provisions providing for the restructuring or deregulation of retail electric energy in Nevada. We believe this step is necessary, because of previously unforeseen conditions we are facing in our energy market, and because of the uncertainty of future prices and reliability. Does this mean deregulation is dead for all time? Absolutely not. Future Legislatures can reinstate deregulation at any time, when it is determined to be in the public interest of the residents of the state of Nevada. We have reviewed the legislative history on S.B. 438 of the 1999 [Seventieth] Session, and, indeed, many of us remember S.B. 438 [of the Seventieth Session] very well from sitting in the hearings.
SENATE BILL 438 OF THE SEVENTIETH SESSION: Makes various changes related to electric restructuring. (BDR 58-861)
Assemblywoman Buckley continued:
. . . It was clear consumers were to be protected from rate instability for almost 4 years, until March 2001, largely due to efforts of the consumer advocate on that issue. All the parties, including the utilities, agreed to the package in S.B. 438 [of the Seventieth Session], and protections for consumers. Then litigation was filed after session; the global settlement took place, which increased rates, allowed monthly fuel and purchase power riders, and undid the rate freeze, to allow deregulation to begin. This session, instead of trying to fix all of the provisions relating to restructuring of retail electrical services, we need to focus on the current energy crisis, and what we can do now. We may reconsider deregulation down the road, and we can revisit all those statutes at that time. Specifically, in A.B. 369, first reprint, section 31 of the bill, repeals 29 separate sections of chapter 704 of NRS, and portions of the 1997 and 1999 [Nevada Legislature] Session laws. These are the provisions regarding electric utility restructuring, and they are listed at the end of the bill.
Assemblyman Perkins continued:
Moving on to the subject of divestiture, A.B. 369 places a moratorium, which stops the sale of Nevada’s power plants at this time. The plant sales should only be allowed to go forward if, and here is a critical phrase again, “they are in the best interest of Nevada’s residents and businesses.”
Let’s review the California situation for a moment. After the passage of California A.B. 1890 in 1996, investor-owned utilities were required to divest at least half of their fossil fueled generation, and the effected companies did sell the bulk of their generation facilities. Retail competition began in March 1998, and price spikes began to appear in the wholesale market in the summer of 2000. Hot weather, rapid economic growth, high fuel prices, and insufficient growth of the supply were given as the cause of the spikes. But as early as July 2000, California’s attorney general, the Federal Energy Regulatory Commission, the state auditor [California State Auditor, Bureau of State Audits], and the public utility commission [California Public Utilities Commission] were investigating whether other factors were involved, such as, gouging and the manipulation of power markets. The Federal Energy Regulatory Commission is investigating one of the largest wholesalers, and has notified 13 suppliers to either make refunds, or justify their high prices. And news reports on March 22 of this year said the California Independent System Operator [California ISO] found that wholesale suppliers overcharged by $5.5 billion since last May. These are some of the same companies that are trying to buy our plants, and seek to derail this bill. The allegations of market manipulation and price gouging are unproven at this time, but they certainly indicate we should proceed very cautiously.
Sections 18 and 19 of A.B. 369 are the main provisions regarding divestiture. In section 18: the disposal of generation assets must be approved by the Public Utilities Commission of Nevada in advance; the consumer advocate is deemed a party to any divestiture action; and any disposal of assets, in violation of section 18, is void. No disposal of generation assets is allowed until July 1, 2003. Then, from July 1, 2003, to July 1, 2007, disposal is allowed only in the case of a substantial financial emergency. Section 19 covers the possibility that Nevada’s utility companies could be the subject of a merger or acquisition during the moratorium. In that instance, the act would apply to the new owners as well. And finally, section 32 of the bill directs the Public Utilities Commission of Nevada to vacate any order which requires divestiture, to oppose divestiture, and to request the Federal Energy Regulatory Commission to do the same.
Assemblywoman Buckley added:
Before we conclude, we would like to mention the provisions of A.B. 369 which are intended to protect the public interest and to make sure the actions of PUC [PUCN] are conducted in the sunshine. In light of some of the recent actions of the Public Utilities Commission [of Nevada], some legislators are concerned about public access to the decision-making process, and approval of rate increases, without sufficient scrutiny in advance. Therefore, sections 3-6 of A.B. 369 rescind the commissioner’s authority to appoint hearing officers on divestiture actions, and to require hearings be held. This section states the commission must insure the public interest is served, customers are protected, renewable energy is encouraged, and prudent business practices are required.
Sections 22-24 also limit the authority of the commission to dispense with hearings in cases involving issuance modifications and transfers of certificates of public convenience. Under sections 28 and 29, the consumer advocate must intervene in all proceedings before the commission, under this act. Additionally, we have more provisions regarding hearings, all the documents which need to be filed, and what needs to be proved; and requiring hearings be set on A.B. 661, which is set for its first hearing tomorrow afternoon.
ASSEMBLY BILL 661: Revises and repeals various provisions concerning utilities and energy. (BDR 58-1128)
Assemblywoman Buckley continued:
The other provisions of the bill are essentially cleanup drafting relating to the repeal of the restructuring act. Section 25 amends the statute [NRS 704.961], which requires the PUC [PUCN] to spend money from its reserve account to educate people about dereg. [deregulation]. Because of that repeal, section 25 allows the commission to use the reserve account to educate customers about utility services, generally. . . .
Assemblyman Perkins concluded:
In conclusion, what we are trying to accomplish with this package of energy bills can be summed up in several simple statements: We want to insure affordable, reliable energy for all Nevadans; protect residential rate payers and small businesses from bearing more than their fair share of the burden of rate increases; increase energy supplies by streamlining the process for new plants, and for greater use of alternative energy; make sure all price increases are fair, necessary, and approved in a public forum; help those Nevadans, retirees on fixed incomes, and low-income wage earners who need financial assistance to pay their utility bills; and probably above all, to avoid Nevada falling into a situation California finds itself in, an energy crisis that is the largest threat to lifestyles and economies in our western United States. With that, we’d be happy to answer any questions. . . .
Senator O'Connell asked Assemblywoman Buckley, “Under section 25 [of A.B. 369] where it talks about the $500,000, did you, by any chance, get an update on what is left in that fund?”
Assemblywoman Buckley answered, “We did not, in our hearing, although, I heard from Assemblywoman Giunchigliani, they did receive an update in ways and means [Assembly Committee on Ways and Means].”
Senator O'Connell replied, “But we don’t know what the bottom line is here?”
Assemblywoman Buckley answered, “I don’t have that, no”
Senator Townsend interjected, “I’m sure, within the next few hours, that information will find its way over to this building. . . .”
Assemblyman Perkins added:
I’d just indicate to you we did receive information on a proposed amendment . . . . [I] just received that this morning, so it’s not something we’ve had any time to digest or provide any commentary on.
Senator Townsend replied:
. . . We will not act on that today so people do have time. I just have a couple of questions. First of all, this committee has taken a substantial amount of testimony on this issue, and I appreciate you getting your bill here. And we scheduled it as fast as humanly possible, because we think it is [an] important bill. . . . Whether we make changes to it or not, it’s coming back to you as fast as we can get it out of here. So it’s a day or two before we can get it moving, but you’ll get it back by the end of the week.
I am very impressed, on page 4, with the term you used. I just want to make sure we can do this. [subsection 5, of section 5 of A.B. 369] “Requires providers of electric service to engage in prudent business management, effective long-term planning, responsible decision making, sound fiscal strategies and efficient operations.” I’d like to put that in very bold print, because that is the constant contention at the PUC [PUCN], with regard to who pays what rates. . . . The most important thing you have in there is the effective long-term planning. And under the Utility Resource Planning Act, we may have to go back in and look at that after we process this bill, and make sure it better defines the current market condition in which we find ourselves; because we drafted that 20 years ago, and that may need to be updated to meet the criteria I think is important that you’ve established in this bill.
Senator Townsend continued:
Where we do that, and what bill, or whatever, we don’t know, but that may be something we pick up here in the next week and we’ll keep you informed of what we’re doing on that. . . . I think, . . . [with] the statement in there [A.B. 369], there’s a way to do part of that in the Utility Resource Planning Act, if it’s updated. The real question I have, that is important, is: I think all of us in this body [Nevada Legislature] are a little squeamish over lawsuits, and the result of the lawsuits filed in federal court and in district court over some of the things that occurred in 438 [S.B. 438 of the Seventieth Session of the Nevada Legislature]. I believe the district court [case] had to do with the regulation that was drafted, but the federal court [case] was [regarding] the constitutionality of 438 [S.B. 438 of the Seventieth Session of Nevada Legislature]. And although, I think, . . . [there are] only three of us here who ever passed conlaw [Constitutional Law], I’m not sure I want to debate you or Senator Amodei on the issue . . . . But I don’t want to revisit it if I don’t have to; and so I want to make sure whatever we do in here, keeps us at the highest level of defensibility, . . . because you know the second we leave here, all kinds of stuff can happen.
The prohibition you have in 18 [section 18 of A.B. 369], which is an absolute prohibition for 2 years, according to our counsel, is very defensible . . . . And according to our counsel, the 4-year term after that using . . . “substantial financial emergency” is also defensible. The only thing we would take testimony on here today, is: Is that the most defensible? Because, that’s a legitimate concern. I don’t know that, and I don’t know what kind of testimony you received on just the constitutionality of those next 4 years, or if you did.
Assemblywoman Buckley replied:
The only testimony, I think, we received, was, perhaps, from AES [The AES Corporation], the proposed purchaser of the Mojave plants, which their very able representative argued every argument, I think, from policy to constitutionality to, “we’re filing a lawsuit concerning impairment of contract.” I’m sure it’s nothing dissimilar from what you’ve heard. We have been advised by legal [the Legal Division of the Legislative Counsel Bureau] that, in fact, it is constitutional. Mr. Powers [Kevin C. Powers, Senior Deputy Legislative Counsel, Legal Division, Legislative Counsel Bureau], I believe, drafted this section as well, and believes it is defensible, and I certainly think legal [the Legal Division of the Legislative Counsel Bureau] is being very cautious this session, in light of what happened last session, to make sure they’re advising us on our stance, should this be taken to court.
I also would like to comment, the issues of divestiture and deregulation are very much married. We were informed the bill banning the sale of the power plants stands a better chance of holding up in court, if it is coupled with a stop to deregulation, and I think it can’t be overstressed at this particular time. . . . Certainly, Mr. Chairman, I know you have worked very long and hard on this issue, but at this point in time, I think, it’s really clear, we can’t loose our power plants. With the amount of money, . . . whether it’s 1.6 billion or 3.2 billion [dollars], whoever’s estimate you believe, that’s a lot of money, and I think the bill is constitutionally stronger, if we take a break from deregulation. I also think, although this gets beyond your question a bit, with regard to constitutionality, but it puts us in a better stance with the federal government. The last thing we want is the federal government telling us what we can and cannot do. They, of course, have ordered these plants to be divested. I believe if they considered that, in the context of our energy crisis we were revisiting this legislature, that decision, as well as the decision about whether now is the time to go forward with deregulation in a shortage market, when we’re reeling in an energy crisis, I think that would be very persuasive evidence to them . . . they should uphold Nevada’s wishes.
Senator Townsend responded:
Your points are well taken, and just because any of us, either individually or as a body, puts a lot of time in on an issue, doesn’t mean we can’t continue to educate ourselves and adapt to the market for the benefit of the state. The five components that created the problem in California, as you’re well aware of, were never in any bill that ever went through this body, whether it originated in your house [Nevada Assembly] or our house [Nevada Senate]. And more importantly, we never started deregulation. I think that’s an important point, but more importantly, is the immediacy with which we must deal with a defensible position to stop these plants, and if that means stopping deregulation because it’s more defensible, that becomes an important point of discussion for this committee.
Probably as big [of] a point as that, is the fact we still purchase 50 percent of our power, and Senator Titus brought us a bill. . . . I’m not sure we’ve gotten it out of our house [Nevada Senate]; [it] needed an amendment. . . . As soon as it’s on the floor, it might be today or tomorrow, it will get to you. Was there debate on the two components? You had a very specific time set in here [A.B. 369], and you have a complete repeal. Now, was there discussion on that relative to the impact on people who might be building plants in this state? Was there any debate on that at all, or did anyone come forward on that at all?
Assemblywoman Buckley answered:
I don’t believe there was any testimony on that point. . . . Would a repeal of deregulation stop folks from coming in and buying power plants? But, of course, as you well know, Mr. Chairman, the deregulation is for retail competition, not to stop anyone from building plants; and, in fact, I think we’re doing all we can to encourage folks who want to come in and abide by environmental regulations, to come in and build, to help, not only our consumers, but the crisis we face. So, while that’s been mentioned, . . . we did not hear any persuasive evidence of that at all.
Senator Townsend asked Assemblywoman Buckley:
[My] last question would be, the real concern, for [the] stability of the marketplace for our consumers, is really one that allows the utility to go out and create a blended portfolio with a great deal of long-term contract, which I think goes back to your very articulate language on page 4, line 18, [of A.B. 369], which is “effective long-term planning, responsible decision making, sound fiscal strategies.” Was there any discussion regarding any language necessary, other than once you repeal, you go back to the original language of how we encourage long-term planning through the Utility Resource Planning Act, and their ability to recover? I cannot tell you how often we hear that in this committee. “We’ll do anything you want, as long as we have an ability to recover.” And obviously we’ve argued, and your committee argued for hours over language relative to guarantees, versus allowing people to present their case for recovery. Did you hear anything more regarding that long-term issue, and their ability to recover, during your testimony?
Assemblywoman Buckley answered:
No, not on this bill, but on A.B. 661, where we begin the discussion of deferred energy, that will go hand-in-hand with that discussion. We have concerns; we believe the utility has made their case that, in light of where we are today, we need to reconsider deferred energy accounting. But the question we so often hear, and you probably hear it more than we do since you have more hearings on this topic, is: How do you insure there is some incentive to cut costs; to do proper planning; to do a mixture of long-term contracts, short-term contracts? And I think we feel very strongly there has to be that mix. There has to be prudent recovery, and those folks who pay, whether they’re a constituent senior citizen in our district, or a large user, they have to make sure the company is doing all they can, prudently, to keep down costs.
Senator Townsend said:
We want to make sure . . . since your proposal goes back to rate of return . . . it takes care of all these repeals. Is there a better mechanism . . . to apply to that, to accommodate what you’ve put in sub 5 [section 5, subsection 5 of A.B. 369] here? Traditionally, they took hearings. . . . The planning act was an application they made on a regular basis to the PUC [PUCN]. The parties came in, including the advocate, and reviewed those. We’ve taken hours of testimony, hours, with regard to the potential renewables [renewable resources] in this state, and hopefully, we’ll process a bill this week on that, as another domestic resource that is real positive. It not only helps economic development, but it’s clean. . . . [We have taken testimony on] how we can put that [renewable energy] into the portfolio, and we’ve taken hours of testimony on that issue alone. As we do this, we want to keep you informed, we’re going to look at using the language, I think, you have here, in sub 5 of 5 [subsection 5 of section 5 [of A.B. 369], as our mantra of how . . . we get a little more clarity and focus in some of the . . . current regulations or statutory requirements. Maybe we can’t. Maybe we have to have a certain amount of flexibility, [I] don’t know yet, but we’ll spend some time on that.
Assemblyman Perkins added:
I think it’s been Nevada’s policy for some time to approach our . . . electrical power issues in a “least-cost” fashion. Only, least cost was least cost of the day, instead of creating the portfolios you’ve spoken of over longer terms. And sometimes, least cost today is not least cost 2 years from now. And to allow the diversification of a portfolio in terms of renewables [renewable resources] and other types of power generation, I think that’s very prudent for us to do to provide the kind of balance we’ll need for [the] long term. And as we’ve had a conversation with many folks about this in the past, I would agree with some we need to not have amnesia. . . . 5 years from now, if the least cost today is not the least cost then; but it was built into a portfolio. So, . . . I think, we have to take the package as a package, and move forward that way.
[A] couple of things that have been commented on, and as Ms. Buckley mentioned, there wasn’t a whole lot of testimony, if any, about whether or not power plants will be produced or constructed in Nevada, should these provisions move forward. But I think, it’s a pretty simple law of economics; the market is there; the demand is there; the supply is not. I think Nevada is better placed than other states to do this with the actions we’ll take this session, with our proximity to the markets in California, with us buying 50 percent of our power now, and with the reserve margin in the entire western grid being as low as it is and actually putting us in a crisis mode.
And, as you mentioned, Mr. Chairman, the second we leave here, many things can happen. I think that’s the thing that bothers me the most, and the thing we need to be the most careful of as we craft our legislation. The governmental process, over the last couple years, as we’ve been in transition from [a] regulated environment to a deregulated environment, has opened itself up for a lot of things to happen which I don’t think have been proper. . . .
Assemblyman Perkins concluded:
I think we also need to remember our constituents all elected us to come up here to make the policies of the state. There are regulatory bodies that review things; there are executive branch agencies that carry out the public policies, but we can’t continue to advocate our responsibility as a Legislature. . . . I know, my constituents, and yours, expect us to come up here and represent them on a biennial basis. The regulatory bodies are creatures of the Legislature. They certainly have to be housed in the executive branch, by virtue of . . . the way our government is set up. But we’re the ones who created them, and we’re the ones who create the policies, and they’re the ones who actually provide the regulation. So, after we leave here, I’m hopeful whatever legislation moves forward from this Legislature provides that kind of direction that will get us through until the next time we have to revisit this issue.
Senator Townsend thanked Assemblyman Perkins and Assemblywoman Buckley and stated:
. . . I was the one that was hoping we’d just fight that one out in court 2 years ago. . . . I thought we were right, . . . but obviously we didn’t win that one, and I agree with all your comments. . . . We thought this issue was so important we wanted to get it scheduled as soon as possible.
Assemblyman Perkins thanked the committee, “. . . I know you’ve put untold hours into this, and issues that are similar, and it’s not an easy one; but it’s one, I think, that is the most pressing for our state right now.”
Senator Townsend added:
Whatever other bills you process . . . [will] get immediate hearing and top-priority, whether it’s 661 [A.B. 661] or any of the other bills you have. We’re particularly interested in the low-income bills. We’ve looked at a couple of them. We want to make sure we get those processed quickly. And whether it’s the money the Governor [Governor Kenny C. Guinn] . . . had in his State of the State [address], or other monies we come up with, those are extremely important, so we want to make sure we get those correct. But I know there are a couple of mechanisms out there, and I know working with a couple members of the agencies in our communities that deal with low-income citizens, we want to make sure we get that correct, so then we don’t have a problem for them. . . . We can have a problem for some other people who can take care of themselves, but those folks need this thing to be precise. So, we’ll process everything as quickly as we can.
Assemblywoman Buckley thanked Senator Townsend and stated, “. . . and we’ll enjoy reading your amendment later today, I’m sure.”
Senator Townsend responded, “So will I.”
Senator Amodei asked Assemblyman Perkins:
. . . Rich [Assemblyman Perkins], you had talked about the concern, in your remarks, with some of the market practices that are being reported in the media . . . to the west. And I was wondering, since the proposal here is to stop the divestiture of the plants, but then on the other hand, we’re encouraging the construction of [power] generation by many of the same entities we want to stop the purchase of existing [power] generation from. Was there any discussion on safeguards or the dichotomy that presents?
Assemblyman Perkins answered:
. . . I’m not sure there was a great deal of discussion about that, in terms of the hearings, but I think the safeguards are in the lack of divestiture. If our incumbent utility has the ability to compete with anybody that’s in the market, on that same level, then that, I think, forces that same company to provide power into the market at a competing price, rather than at a price that’s inappropriate. And let me also say, I zipped over that part of my testimony fairly quickly. I’m a big due-process kind of guy, and you know, this stuff, right now, is still under investigation. I don’t want to tarnish any company that’s out there, and I think, many of them are very, very reputable; but I think, what it does tell us is we need to proceed cautiously. But, to answer your question directly, I think if we maintain ownership of some of our plants, that creates the competition within the market that helps hold . . . those prices down.
Assemblywoman Buckley answered Senator Amodei’s question:
Additionally, because of the dormant commerce clause, it’s, I think, difficult to, in statute, require more protections, in terms of serving in-state residents more, and at what prices; and I think that’s why the Southern Nevada Water Authority is working so hard on insuring long-term contracts for both price, and to make sure our folks are served first. I think, with regard to the new power plants, it’s very hard for us to legislate in that area, and not be found to violate the commerce clause. I think, the testimony we got, which assured us somewhat, was the ability through water rights to insure our constituents were served first.
Senator Amodei asked, “Was there any discussion on the extension of the buy-back provisions under any of the existing power plant sales contracts, beyond the terms contained in the contracts now, on your side?”
Assemblywoman Buckley answered:
Some of the folks who are anxious to proceed with the sales, I think, because of their concern the sales might be stopped, began to say, “Well, 2 years, how about 3 years? We can go a little bit longer.” But I think, from our point of view, right now, with the crisis at hand, with the amount of savings projected by the consumer advocate, and with the very real possibility that new power can’t get on line to serve the entire region in 2 years, [it would] be more likely to be 3, 4 [years], we felt it wasn’t worth the gamble to our constituents, to have them face the type of rate increases they might get, should all of those stars not align themselves, and then we lose . . . control of the power plants. And I think Speaker Perkins speaks for all of us: those allegations are unproven about stoppages of production, price gouging, manipulations; but they’re enough to scare us into not wanting that for our constituents.
Senator Amodei asked:
And then, speaking in terms of our concern with costs and rates, and how we expect them to go up, was there testimony on what the costs of deferred maintenance for keeping the plants, and what the costs for purchasing fuel for those plants would be in the short term, as they would impact residential rates?
Assemblywoman Buckley answered:
There was not a great deal of testimony on that point. Certainly, some of the perspective buyers argued there’s been deferred maintenance, and so, we could expect more stoppages if someone with capital did not come in to do that maintenance to improve capacity. But it’s a balancing test. And, to us, the projected $1.6 billion to $3.2 billion savings, and having control and protections from potential market manipulation, [and] protection from a crisis over which many of us have no control, were outweighed by the fact that someone might have more capital to be able to do maintenance quicker. It’s all a balancing test.
Senator Townsend thanked Assemblywoman Buckley and Assemblyman Perkins and asked if anyone else would like to testify on A.B. 369.
Harvey Whittemore, Lobbyist, Nevada Resort Association, testified:
We want to recommend those provisions of A.B. 369 to this committee, as we have in our earlier discussions regarding divestiture. The provisions, which are in A.B. 369, are similar to those in prior drafts, which had been the subject of testimony with respect to the Senate version of similar bills.
The portions of the legislation, which causes some concern in A.B. 369, are those, obviously, dealing with the repeal of restructuring. In fact, . . . the repealed sections deal with very significant issues dealing with rates, and, obviously, our concern is if [NRS] 704.9826, .9829 [NRS 704.9829], and .9823 [NRS 704.9823] are repealed, we believe there could be significant rate shock, if, in fact, all the rates were rolled-back, and then having to be implemented through a new deferred mechanism. So, we pledge our cooperation, as we did with legislative leadership in the Assembly, to continue to work through those issues. And we have pledged our cooperation with the Governor’s office and the utilities, to try to come up with language with respect to the implementation of a deferred package, which would be acceptable to all the parties.
Mr. Whittemore continued:
With respect to the text of the language itself, and the issues suggested in the proposed amendment, Mr. Chairman . . . in light of the time, I’m not sure what the chair’s request is: whether we go through a significant explanation of the proposed amendments; or walk and compare the proposed amendment to the bill, so we can, at least, point out to the committee where some variations are, for their purposes of review, later this afternoon. If that would be the chair’s request, I think we could probably do it in 5 [or] 10 minutes.
Senator Townsend answered, “I believe the Governor’s staff is here to propose an amendment, and I would like do that at this time. . . .”
Marybel Batjer, Chief of Staff, Office of the Governor, stepped up to testify. Senator Townsend asked her if he could have a copy of the proposal. She answered she did not have copies.
Ms. Batjer introduced herself and read a statement:
On February 22, Governor Guinn announced a comprehensive energy plan, to protect Nevada. . . . His plan consists of five elements. Quickly, they are: conservation; a reexamination of divestiture of the plants owned by Nevada Power [Nevada Power Company] and Sierra Pacific Power Resources [Sierra Pacific Resources]; creating a positive permitting environment to allow safe and efficient building of new plants to meet Nevada’s energy needs; and to expand and build transmission lines and pipelines to carry needed natural gas into the plants, and carry out electricity to Nevada customers. And finally, the Governor’s comprehensive plan contained an element to plan for future energy needs, and for the state to do energy resource planning, which will assist in planning for renewable energy resources: thermal, wind, biomass, and solar.
The Governor stated, at that time, and continues to feel strongly, the solutions to our energy situation will take comprehensive planning, and a bipartisan effort with the Legislature. He is very appreciative, therefore, of the efforts that have gone into creating A.B. 369. To quote the Governor, “A.B. 369 does well for the length it travels.” However, it does not include an important element the Governor believes is vital to comprehensively solving the problem of skyrocketing rate increases. This bill, as amended, as its proposed amendment states . . . does not contain a performance-based deferral accounting method, which the Governor believes strongly, is vitally needed to protect Nevadans from rate shock. The Governor believes, to have reliable energy sources, [and] to keep the lights on in Nevada, we must put a halt to divestiture, which . . . the proposed amendment to A.B. 369 does.
However, to stop divestiture without including performance-based deferred energy accounting will subject Nevadans to monthly rate increases and will assure financial stability for our utility company [companies] so they can afford to build the critically needed transmission lines, so the new plants that will be built in the next three years will be able to transmit newly produced electricity to Nevada customers. The Governor is gratified to see a bipartisan bill that advances us to the goal of reliable electric service for Nevada. However, this bill only gets us halfway there. Halting divestiture is important. Achieving reliable electric service into the future requires more. The Governor thanks you, Mr. Chairman, and the committee for the efforts to produce this bill and urges you to take the next step to performance-base deferred energy accounting.
Senator Townsend asked, “Ms. Batjer, is someone going to walk us through this, . . . staff, or somebody from the company, or the consumer advocate’s office?”
Ms. Batjer answered, “The Governor’s office was not prepared to walk through the change proposals today. ”
Senator Townsend asked, “Is that going to be tomorrow or the next day, because, we’re going to keep going until we get to that point where it’s second reading downstairs.”
Ms. Batjer answered, “I do believe that there will be other people today that will be testifying to this proposed amendment, and some of the questions I’m sure the committee has will be, at least, brought up, if not resolved.”
Senator Townsend replied, “OK, we just wanted to give you the opportunity to do it.”
Senator Carlton asked:
Are we now discussing the Governor’s amendment, the amendment I got on Friday, or the amendment mailed to me early this morning? Which amendment are we discussing right now?
Mr. Whittemore stated, “Mr. Chairman, the amendment, which we’re proposing to discuss, is the amendment, which was prepared by LCB [Legislative Counsel Bureau] staff and delivered this morning.”
Senator Carlton asked Senator Townsend, “Is that the Governor’s amendment, I just heard about?”
Mr. Whittemore answered, “My understanding is the Governor’s proposed language, with respect to a portion of the amendment, is contained in the amendment, which was delivered to all the Senators this morning.”
Mr. Powers clarified:
The amendment that was e-mailed, this morning, (actually, it was last night), to members of Senate Commerce [the Senate Committee on Commerce and Labor], is the one that’s in the hard copy, dated, April 1, 2001 [Exhibit E.]. It does not include anything dealing with deferred accounting.
Senator Townsend pointed out, “Deferred accounting is in A.B. 661, which they’re processing, or at least, hearing tomorrow.”
Douglas R. Ponn, Lobbyist, Sierra Pacific Power Company, responded, “Deferred energy accounting is not in A.B. 661. At least, not a mechanism which we have agreed to, at this point.”
Senator Townsend responded:
OK, well, I don’t want to get into semantics here, guys. Let’s just deal with this. Deferred energy is not part of this, but there is a deferred energy mechanism in 661 [A.B. 661]. . . . I just want to deal with this for now. . . . I understand everybody has to protect the interest of their clients, or their companies, or whoever, but this group has to protect the interest of everybody in Nevada.
Senator O'Connell stated, “As I understood . . . [Ms. Batjer’s] testimony, this morning, . . . they’re asking us to amend the bill to include . . . deferred energy accounting.”
Senator Townsend responded:
Yes, they want it in one bill, and we will take that up right after we go through this portion of it. Is that all right? I just want to deal with what I have printed in front of me, [Exhibit E] because, to the best of my knowledge, there is no deferred energy language anywhere, at this time, other than in 661 [A.B. 661], whether anybody likes the way it was drafted, or not.
Mr. Whittemore stated:
I ‘d like to give a brief overview of the general changes in the amendment [Exhibit E], as it pertains to existing 369 [A.B. 369]. The provisions in sections 1, 2, 3, … are identical to those contained in A.B. 369, and on pages 2 through 3 of the existing bill. Basically, it just simply provides a hearing officer, under existing law, you could have a hearing officer, but in both the bill and the amendment, a hearing officer is not entitled to conduct the hearings or proceedings contemplated by sections 8 through 19 of the act. So, again, those provisions are fairly straightforward. Sections 8 through 19 of the act are the proposed methods by which divestiture is stopped. Sections 9 through . . . 13 are . . . definitional sections, which are very similar to the definitions contained in A.B. 369.
The major difference in section 14 is that a political subdivision of the state or an agency or instrumentality of a political subdivision of the state; that definitional section is different from that contained in A.B. 369; because, in this proposed amendment, the Governor has a failsafe mechanism, which is proposed, pursuant to applications which individuals, who would like to dispose of generation assets, must go through. Sections 17 and 18, basically, provide the timing of that disposition. The timing proposed in this amendment is a hard-cap for 2 years, although, applications can be made after 18 months. The application process is provided as follows: The commission must approve the request for disposition, or it goes no further. Only upon an approval by the commission, does it then go to the Governor for his final review, to determine whether the disposition of the asset is in the public interest.
So, basically, there is a two-pronged approval process, and that approval process, again, cannot begin for 18 months. There are, obviously, provisions dealing with what record the Governor looks at, and what appeals may be taken. If, for example, the commission disapproves of the disposition, the parties to those proceedings may immediately commence judicial review.
Senator Shaffer asked, ”Where does the language come from, that you’re talking about right now?”
Mr. Whittemore responded, “Section 17, pages 10 through 12 [of the proposed amendment, [Exhibit E] . . . it’s all, basically, section 17, through line 16 on page 13.”
Senator Shaffer asked, “Who put this in here? Did you put it [in]?”
Mr. Whittemore answered:
This language, [in the proposed amendment [Exhibit E], which was proposed to give the Governor flexibility, was done by the Governor’s office. Again, [it was] to provide specific areas of flexibility. And again, I would point out, . . . what the Governor is concerned about, and I’ll let their office speak for themselves, is a concern, if there is an emergency, and the state needed to get involved, with respect to this review, they wanted to make sure they had a final review process that was complete.
Section 18 [of the proposed amendment, [Exhibit E] provides that the utility . . . may dispose of its assets pursuant to merger acquisition, or a transaction that, basically, sells . . . all, or substantially all of its assets. And, again, in that provision, nobody can purchase that, except a person, as defined in the prior section of the bill, or a governmental entity in the state, unless the Governor, by written order, authorizes that entity to acquire such assets.
Sections 20, through the rest of the bill, are substantial clean-up sections, dealing with making sure the rates, which are presently being imposed, are allowed. For example, on page 26 [of Exhibit E], under section 29, NRS 704.9823, paragraph (b), basically, authorizes the company to continue to charge the existing rates, which they’re presently charging, and contemplates the potential they would be allowed to charge those rates, which were proposed under the CEP [Comprehensive Energy Plan].
The other provisions of the bill dealing with the changes would be required as a result of the imposition of the moratorium to make the bill . . . facially constitutional. In other words, there are items, which are absolutely necessary to make any moratorium withstand constitutional challenge. There is a substantial issue . . . with respect to each and every section; and I’d be happy to go through those, but I think, as a general overview; and [to] let the other parties speak, would be appropriate.
Senator Townsend said:
Let me see if I can be helpful. The difference between 369 [A.B. 369], which says you will have a solid moratorium for 2 years. Then, the only way you can dispose of an asset for the next 4 years is under their definition of a substantial emergency, and then they repeal any reference, or any condition of restructuring. That’s the essence of their bill. Then, in this proposed amendment, it would say there would be a 2-year solid moratorium. . . . Then flexibility would be given to the commission, with a final authority given to the Governor, on a proposed sale, using the best interests of the residents of Nevada, and not repealing any of the restructuring act. In essence, is that what this is, with certain conditions about how the funding continues? Is that correct?
Mr. Whittemore answered:
That’s an accurate restatement, with a very significant proviso that the changes, which were made to the restructuring act, basically, simply allow the utility to go forward with their existing rate structure, as presently being charged to the consumers. And then, leaving the restructuring issue and the deferred issue for further discussions and negotiations as, I think, Tim [Timothy Hay] would suggest.
Senator Townsend asked Mr. Hay:
Under 369 [A.B. 369], they have a solid moratorium for 2 years, with a 4-year exigent circumstance, known as substantial financial emergency. What happens to the rate structure, under the global settlement and CEP under their proposal?
Mr. Hay answered:
Under the amendment, as I have reviewed it, the rate structure currently being considered by the Public Utilities Commission [of Nevada], and the rates . . . which are currently in effect, would go on under A.B. 369 as originally proposed. I think it leaves somewhat in question . . . the monthly fuel and purchase power adjustments, which have been implemented since August of 2000; and the CEP rate structure, which was implemented by action of the commission on March 1, 2001. I think it leaves both of those mechanisms somewhat subject to further analysis, whether or not their legality has been established. Obviously, our office was a participant in the global settlement. We believe the mechanism that was derived from those agreements is legally supportable under the existing law. We have continuing concerns whether the CEP rate imposition was legal on both, basically, procedural, as well as, other analysis. So, the difference between the bill and the amendment, as proposed, is fairly substantial in the legal rights of parties on those issues.
Senator Townsend stated:
I want to make sure I asked this correctly. Putting the amendment aside, what [in] your opinion would happen to the CEP and the global settlement if 369 [A.B. 369] was passed in its first reprint form, if anything?
Mr. Hay responded:
I’m not sure we can expressly state what we think would occur. I believe, under 369 [A.B. 369], as it was originally proposed in the first reprint, the legality of both the global settlement, and, more importantly, probably, the CEP filing, remain very much up in the air. So, I don’t think it’s clear the bill itself would vitiate the CEP rates, necessarily; but it appears to me it would come close to doing that.
Mr. Whittemore stated, “As a participant in the global settlement, I think with the language in the proposed amendment, it’s clear, again, on page 20 . . . ”
Senator Townsend interrupted:
. . . I would like to know, and the committee owes it to our colleagues in the Assembly, what happens to rates, if we pass this bill just like it is. Mr. Chairman [Mr. Soderberg], if you have any insight into this? . . . I’m talking about the first reprint of the bill, not anybody’s amendment, just the first reprint of the bill. The bill the . . . Speaker and Majority Leader [Assemblyman Perkins and Assemblywoman Buckley] presented to us today.
Mr. Soderberg answered:
We were always, somewhat, in confusion, as to what the original [bill] meant. As having the responsibility of implementing it, we were, quite frankly, hoping to get clarification of that. Now we have the first reprint in front of us, it appears that has been dialed in a little bit, but we still have some technical concerns as to how the first reprint is drafted. But, we are concerned. We need to step back. We do not have any approved rates, under the global settlement, or the CEP. These rates had gone into effect by virtue of the 30-day suspension statute, and have not been approved. . . . It would either be approved, disapproved, or modified sometime in the future. So, we’re concerned with both documents, as to how that effects what we do. Do we continue to have proceedings; do we just say they’re all approved; or do these provisions actually mean nothing, because they reference something that has not occurred?
Senator Townsend replied:
I think, the question, and Mr. Schmidt [Fred J. Schmidt, Lobbyist, Southern Nevada Water Authority], you can jump in here, if you’d like, or anyone at the table, or anyone in the audience, the testimony we heard this morning, was their anticipation of the effects of this bill, was to eliminate any reference to restructuring, [and] go back to rate of return regulation. And they have language in another bill which refers to deferred energy, whether, in fact, the repeal of all of restructuring, gets rid of the rate cap, [and] gets rid of prohibition against deferred energy, I don’t know.
Ernest Adler, Lobbyist, International Brotherhood of Electrical Workers, testified:
. . . I’ve talked to the Assembly committee members, and I think it was their intention to . . . resolve that conflict within A.B. 661. The way they resolve it, preliminarily, and I’m not sure this is going to end up that way, is they would have an immediate deferred energy case. And after the order comes out on that, the CEP and the global settlement disappear. Then, they have a rate hearing in September of this year, which trues up that situation even further, and it has to do with Nevada Power [Nevada Power Company] in southern Nevada. . . . Then there is a general rate hearing 6 months later, I think it’s March 1,2002, in the north, to deal with those rates in northern Nevada. So, essentially, they return you back to the standard regulatory mechanism, they get rid of the CEP, [and] they get rid of the global settlement, through those various mechanisms. That’s my understanding of how they intend to deal with it in A.B. 661. And I’m not sure you shouldn’t deal with that, though, in this bill, but that’s at the committee’s discretion. But they do have a mechanism in that other bill to deal with that question. Whether or not, that bill will pass, I don’t know.
Mr. Ponn stated:
I think your question is critical. There’s been an on-going concern in this committee, and I think it’s on the other side of the building also. . . . How do we set rates going forward? What do we do about the fuel and purchase power riders in the global settlement? What happens with the rates that were placed into effect, subject to further proceedings under the CEP as far as the company [Sierra Pacific Power Company] [is concerned]? That is the critical question in this bill or a companion bill, because, as I think I testified on 253 [S.B. 253], one of the questions that needs to be answered, in our opinion, out of this session, is: How do we go forward recovering fuel and purchase power costs so we can pay our bills, and provide the service we need?
SENATE BILL 253: Prevents certain electric utilities from disposing of certain generation assets for a limited period and places restrictions on disposal of such assets after that period. (BDR 58-1122)
Mr. Ponn continued:
We’re not one of . . . [the ones proposing this] amendment today. . . . I would just renew my concern that in this bill, [it is] preferably to us, that we deal with the question of deferred energy. . . . I know all the parties at this table have strong opinions [on] how we would transition from the rates in effect today to rates that result from: (1), deferred energy cases that may be filed, and (2), general rate cases that may be required to follow on with those cases. But, again I’d renew the concern, if we do a divestiture bill, and it is not coupled immediately, or very closely, or in the same bill, with the answer to the deferred energy question, we have, we think, considerable reaction from the financial community to that and concerns about our financial condition going forward.
Fred J. Schmidt, Lobbyist, Southern Nevada Water Authority, testified:
To answer your question, A.B. 369 would repeal provisions from the prior restructuring act. Those would include repeal of the rate-cap provision, which was the only constraint, in terms of legal questions raised, with regard to whether the global settlement . . . was legal as a concept moving forward. The global settlement was based upon . . . existing statue [NRS] 704.110, sub 6 [subsection 6]. That section of the law is not placed in the law, either by A.B. 366 [of the Sixty-Ninth Session] or S.B. 438 [of the Seventieth Session].
ASSEMBLY BILL 366 of the Sixty-Ninth Session: Reorganizes public service commission of Nevada and makes various changes concerning regulation of utilities and governmental administration. (BDR 58-1390)
Mr. Schmidt continued:
It has been in the law for [a] substantial period of time. So, to answer your first part of your question, I believe the global settlement provisions, as far as rates are based on those currently in effect, would not necessarily be repealed or undone by A.B. 369. The second part of your question relates to the CEP, which is a new filing. The more recent filing by Sierra [Sierra Pacific Resources] has not actually been ruled on, with regard to its legality. The new rates, as the chairman has explained, were filed also under an existing provision of law that was in effect long before A.B. 366 [of the Sixty Ninth Session] or S.B. 438 [of the Seventieth Session], that allows a utility to file rates, and if the commission [PUCN] does not act within 30 days, those rates become effective. The commission, then, does still have discretion or authority to take action with regard to those rates under law, which is what it is now doing: to investigate the reasonableness of those rates. So, I don’t believe A.B. 369, in its attempts to repeal restructuring provisions, would change the current status of the CEP filing, as well.
That does not mean the CEP rates would or wouldn’t stay in effect for any period of time. That, as I understand, at this point, is subject to a number of legal arguments, as well as a series of hearings, and a procedural schedule, as of last Friday, the PUC [PUCN] issued, where it intends to fully, and fairly, I believe, evaluate the reasonableness of that level of [an] additional new rate increase, which has been experienced. And I think . . . it’s critical, in terms of talking about adequate rates, to support the cost the company . . . is incurring and will incur this summer and in the next year, to make sure we have enough electricity, and they can pay for the electricity. [It] is critical that we have those types of reviews. Now, I expect the PUC [PUCN] is committed to doing those reviews, and I believe A.B. 369 . . . was not intended to thwart those reviews.
However, I believe a mechanism for transition into a vehicle for insuring the utility has adequate rates, still needs to be done, and still needs to be addressed. . . . The Southern Nevada Water Authority is committed to working toward doing that, and we’ve had substantial discussions about how that could be accomplished, whether it’s reinstituting the old deferred energy mechanism, or something like it, and that still can be done. The critical question before you, though, this morning, I believe, and has been for the last several weeks, is, Do you take action on a divestiture issue, which is imminent. . . ?
Senator Townsend interrupted Mr. Schmidt:
I know, I keep trying to get to that, and everybody wants to start hanging stuff on this, but when you send over a bill they have contemplated and worked hard on that stops divestiture, and, in turn, repeals restructuring, because their statement . . . makes it a more defensible bill. And is that correct? Did I hear them say that, Mr. Powers?
Mr. Powers answered:
That was the statement of Ms. Buckley [and] Mr. Perkins, and that is correct. It removes much of the uncertainty as to what FERC [Federal Energy Regulatory Commission] may or may not do, in the wake of a moratorium on divestiture.
Senator Townsend replied, “So, it makes us a little more defensible on this issue?”
Mr. Powers answered, “It does, Mr. Chairman.”
Senator Townsend stated:
OK. Then that throws the question in to rates, because what does the repeal of that do to rates and the effect on the company? So, it’s a little hard to deal only with what, I think, our goal . . . was to immediately deal with divestiture, and then come back and try to resolve the issue of rates and the needed revenues by this company. Unfortunately, they’ve coupled the two in a manner that puts us in a bit of a tough position. Because, I don’t know the effect of the repeal of the restructuring act on rates and . . . the two things currently in front of the commission, . . . the global settlement, as well as the CEP. Apparently, that question was never asked. Is that true?
Mr. Whittemore replied:
No that’s true. Mr. Chairman, I might remind Mr. Schmidt, [NRS] 704.9823, section 2, under subsection (a) [paragraph (a)], was the provision, which allowed us to modify and clear out the deferred accounting mechanism. And so, you recall, under the global settlement, [NRS] 704.9823 was absolutely essential to create the base clearing mechanism, [in] which you agreed on a total amount. And therefore, if you’re repealing it, how do you then get that base included with the f and pp [fuel and purchase power]? So, I think the issue is very, very important, in terms of not making a mistake by repealing provisions of the restructuring act, which have to do with rate and other issues. So, I would just point that out.
Senator Townsend stated:
OK, here’s what I think is appropriate, since, I think, we’re at some legitimate questions. Number 1: I think you, as all parties to this, need to speak with the two leaders who were here today presenting this bill to find out what their perception is of the effect of the repeal of restructuring on the global settlement, and on the CEP, and rates in general. What is their perception? It’s their bill, and I think, if they did not have that testimony, they deserve to have something. And I would hope we could get an answer to that by tomorrow morning at 7 o’clock, because that’s when we will pick this bill up again.
But that’s the issue; we have a bill in front of us and we don’t know its effects. . . . We can’t respond to a proposed amendment without knowing the effects of the bill in front of us. I think that’s only fair to the committee. And since, obviously, they didn’t have the testimony necessary to answer that question, perhaps it’s in everyone’s best interest to figure that out.
Because, I think, the point made by the Governor’s office and the company, is there needs to be some mechanism in the future to deal with their revenue issues. And, whether that’s in this bill or it’s in 661 [A.B. 661] can be debated, but we don’t know the effect of this bill on the company, and I don’t think that’s fair, because if we don’t know the impacts on the company, then we don’t know the impacts on our rate pairs. So, it’s going to be hard to debate this proposed amendment without knowing the impacts. . . . Then, we can talk about the amendment. So, if we could get all of you to discuss that with our colleagues, then tomorrow morning, we’ll take up the effects of this proposed amendment.
Mr. Adler said:
The IBEW [International Brotherhood of Electrical Workers] agrees with that position you just laid out; something needs to be done on deferred energy. Do you want specific language on deferred energy, a proposed . . . rough draft?
Senator Townsend answered, “Well, I think, everyone at this table has been working . . .”
Mr. Adler interjected, “We could pull some stuff out of 661 [A.B. 661] and just isolate it. At least, you could look at it.“
Senator Townsend answered:
Well, we all have copies of 661 [A.B. 661]. We all know what we’re looking at. . . . I would just like to know, the impact of the bill we have in front of us on the company and the rate pairs. And I think, Mr. Commissioner, you might have to look at that and ask your lawyer what he thinks it is. [The] company’s lawyer is going to have to decide. Mr. Schmidt, I presume you, representing the Southern Nevada Water Authority, as a lawyer, might give us some insight, and [the] same with Mr. Hay, and Mr. Whittemore. I mean, we have a bill, and we don’t have a clue what its impacts are, other than we think that repeal of restructuring gives us a better chance in court regarding the sale.
Mr. Ponn replied, “[To] follow up on Mr. Adler’s proposal, Mr. Chairman, is it acceptable to the committee if proposed language on the reinstitution of deferred energy is presented?”
Senator Townsend answered:
Without question, as long as we answer the first question, which is, What is the impact on the company and the rate pairs if this bill passes? I mean, I know that’s a novel question in this body, but we . . . would like to know the impact on the people we represent before we pass a bill, or we hear another amendment.
Mr. Adler added:
I think it’s easier to make that determination if you figure out . . . how you’re going to phase-out the CEP and the global settlement. Because you’ve got to get back to something regular so you can make that calculation.
Senator Townsend replied:
Oh, we know that real well. We know that real well. But the point is, there’s not been an ability to come to resolution, as to the language involved . . . . And, my concern has always been the same, and I think it’s the committee’s concern; there is no intent in harming the company or rate pairs. It’s not one over the other; it’s a balancing act. But while we’re trying to get the perfect balance, we have an issue known as divestiture, that we need to deal with, because timeliness is crucial. Now, we’re trying to weigh both of those, because they happen to repeal everything that would impact rates in this bill. So, . . . we’re trying to . . . get our arms around all of those.
So, what I’d like to do is, [at] 7 o’clock tomorrow morning, I’d like to have an answer on the following: What did the two members and their committees actually think the impact of the repeal of restructuring would have on rates, particularly CEP and global settlement? And then, I would be glad to entertain anybody’s deferred energy language at that time, but we will . . . get the answer to the first question, then we will walk through this. [Is] that fair? And, that should give everybody time to read it, including me.
Senator O'Connell asked:
Before everybody at the table leaves, I wonder if Mr. Soderberg has had an opportunity to review that . . . . Have [you] done any synopsis of that bill? . . . The same question would go to both the company, Doug [Mr. Ponn], and to the consumer advocate. Have you had an opportunity to actually do an overview of the bill, to see how you think it’s going to affect the rates?
Mr. Soderberg answered:
We have reviewed the bill before it was passed through the Assembly. We did not do the mechanics of how it impacted rates; because, at first glance, we did not see how the repeal of essentially a repeal was going to impact what we had now. . . . It was more, looking into the future. So, we did not, actually, do a mechanics of, if we repeal this certain section, how it might affect a pending case before us, because, at first glance, we didn’t feel it did.
Mr. Ponn testified:
We have looked at the repeal provisions . . . in that bill, and I think there’s still an open question about what that does to the fuel and purchase power riders, or more particularly, to the CEP filing. And, again, that’s the challenge I think we’re all faced with here. As you said, Senator, I think there’s good faith on the part of the parties to try to get a mechanism going forward which does no harm. It’s the transition from where we are today, and the rates being charged today, to some other mechanism, and the timing of that transition, that is critical to finances of the company and the reasonableness of the rates; and we recognize that and are certainly willing to work on deferred language to try to make that transition happen smoothly.
Senator Townsend responded:
And, we appreciate that. We just happen to have a bill in front of us, [that] we’d like to know the financial impact [of] on everybody affected. I think, that’s only fair, including your shareholders, and the people on the street who look at this. I think that’s only fair for you and everyone else.
Senator O'Connell added, “Another thing, I think, that’s critically important for us to know, is the effect of this bill on Wall Street.”
Mr. Ponn replied:
I think [in] my earlier testimony on 253 [S.B. 253], I raised those concerns, and to repeat them here, I think we need, if possible, at the end of this session, to have a resolution on a number of questions. One of those questions is, How is this company going to recover fuel and purchase power costs going forward; and consequently, are they going to be able to pay their bills; and consequently, what is going to be their ability to pay for their forward position through this summer in southern Nevada in particular? And, so, it’s been my position you need to resolve the divestiture question, and you know what the company’s position is on divestiture. I’ve given that testimony previously, and our obligations there. But, if the state resolves the divestiture question, they need to resolve concurrently the deferred energy question.
Senator Townsend concluded by stating:
Let’s be real clear, so no one misunderstands, including the . . . [Governor’s office]. . . . If we do not have a resolution to this financial question tomorrow morning at 7 o’clock, it would be my recommendation to the committee, to carve that portion of the bill out that talks about the repeal of restructuring, and simply move forward with their language on stopping divestiture. That would be my recommendation, so it would give the parties time to get their concerns together on the financial issues. And then, we would proceed with either 253 [S.B. 253] as a vehicle, or 661 [A.B. 661] as a vehicle to resolve the financial issues. But, I’m hoping the parties can resolve those. Because it is a concern to this committee. We want to send the right message to the street, and we want our consumers to understand they’re getting the best possible rates they can under terrible conditions. That’s not unreasonable. OK? [We will] see you here at 7 o’clock.
Senator Townsend closed the hearing at 11:33 a.m.
RESPECTFULLY SUBMITTED:
Jude Greytak,
Committee Secretary
APPROVED BY:
Senator Randolph J. Townsend, Chairman
DATE: