MINUTES OF THE

SENATE Committee on Commerce and Labor

 

Seventy-First Session

April 13, 2001

 

 

The Senate Committee on Commerce and Laborwas called to order by Chairman Randolph J. Townsend, at 7:11 a.m., on Friday, April 13, 2001, in Room 2135 of the Legislative Building, Carson City, Nevada.  The meeting was video conferenced to the Grant Sawyer State Office Building, Room 4401, Las Vegas, Nevada. Exhibit A is the Agenda.  Exhibit B is the Attendance Roster.  All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

COMMITTEE MEMBERS PRESENT:

 

Senator Randolph J. Townsend, Chairman

Senator Ann O’Connell, Vice Chairman

Senator Dean A. Rhoads

Senator Mark Amodei

Senator Raymond C. Shaffer

Senator Michael A. (Mike) Schneider

Senator Maggie Carlton

 

GUEST LEGISLATORS PRESENT:

 

Senator Terry John Care, Clark County Senatorial District No. 7

Senator Bob Coffin, Clark County Senatorial District No. 3

 

STAFF MEMBERS PRESENT:

 

Scott Young, Committee Policy Analyst

John L. Meder, Committee Policy Analyst

Gayle Nadeau, Committee Secretary

 

OTHERS PRESENT:

 

Jon B. Wellinghoff, Lobbyist, Green Energy Business Council of Nevada, Sierra             Concepts, Incorporated, and Vulcan Power

Neill Dimmick, Director of Regulatory Operations, Public Utilities Commission of             Nevada

 

Timothy Hay, Chief Deputy Attorney General, Bureau of Consumer Protection,             Office of the Attorney General

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

Duane Nelson, Director of Transmission and Business Development, Nevada             Power Company, Sierra Pacific Power Company

Scott M. Craigie, Lobbyist, Stirling Energy Systems, Incorporated, and             Environmental Oil Processing Technology, Incorporated

Alfredo Alonso, Lobbyist

Jack Kim, Lobbyist, Health Plan of Nevada

Fred L. Hillerby, Lobbyist, Nevada Association of Health Plans

John P. Sande III, Lobbyist, Merck-Medco Managed Care

Carole Vilardo, Lobbyist, Nevada Taxpayers Association

John Wiles, Division Counsel, Division of Industrial Relations, Department of             Business and Industry

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

Jerry Smith, Director of Maintenance, Clark County School District

Robert A. Ostrovsky, Lobbyist, Nevada Resort Association

Danny L. Thompson, Lobbyist, Nevada State AFL-CIO

Don Soderberg, Chairman, Public Utilities Commission of Nevada

Janice C. Pine, Lobbyist, Saint Mary’s Health Network

Linda L. Sheldon, Lobbyist, Great Basin Primary Care Association

Dennis J. Arch, D.D.S., President, Board of Dental Examiners of Nevada

Carolyn Ford, Director, State Office of Rural Health, School of Medicine,             University of Nevada, Reno, University and Community College System of             Nevada

Bobbette E. Bond, Culinary Workers’ Union

Elizabeth Gilbertson, Lobbyist, Hotel Employees and Restaurant Employees             Welfare Fund

Mary Morgan, Kinder Morgan Energy Partners

Commander Edmund Rybold Jr., Executive Officer, Naval Air Station, Fallon

Kurt Segler, Utility Services Director, City of Henderson

Terry E. Page, Lobbyist, Environmental Oil Processing Technology, Incorporated

 

Senator Townsend opened the work session on S.B. 372.

 

SENATE BILL (S.B.) 372:  Revises provisions governing portfolio standards for renewable energy resources and imposition of civil penalties by public utilities commission of Nevada.  (BDR 58-287)

 

Senator Townsend stated:

 

In your workbooks [tab section S.B. 372, (Exhibit C)] at the back of the area [this section], the last page was submitted yesterday by the Southern Nevada Homebuilders [Association] as an amendment dealing with construction and lowering energy.  [Senator Townsend read the submitted amendment.]

 

Mr. Ashleman [Renny Ashleman], on behalf of the Southern Nevada Homebuilders [Association], thought it was the cleanest and easiest way to deal with section 2 [of S.B. 372] that would be proposed to replace section 2.  Is that correct?

 

Jon B. Wellinghoff, Lobbyist, Green Energy Business Council of Nevada, Sierra Concepts, Incorporated, and Vulcan Power, responded:

 

Yes, it does replace section 2 in the bill [S.B. 372].  I just have an amendment, and in the amendment it is talking about section 1 as that section, but in the bill it is actually section 2.  So, yes, it would replace section 2, and I have no problem with that, Senator. That would be fine.

 

Senator Townsend questioned,  “So it takes out all that standard language?  It would replace section 2, which has subsection 6, (a), (b), and (c), and just, simply, replace it with Mr. Ashleman’s language?  That is the way I read it.”

 

Mr. Wellinghoff,  “That is correct, Senator.”

 

Senator Townsend remarked,  “Now, we have in our books [Exhibit C], an amendment which is Amendment No. 137.  Mr. Wellinghoff, why don’t you walk us through that, and then we will see where we are.”

 

Mr. Wellinghoff clarified,  “Senator, I believe Amendment No. 224 replaces [Amendment No.] 137.”

 

Senator Townsend said,  “Amendment No. 224 is in our packet [Exhibit C]. Let’s go ahead and go through that.”

 

Mr. Wellinghoff responded,  “First of all, section 1 of Amendment [No.] 224 now will come out entirely, because that is what we just replaced with the homebuilders’ provision.”

 

Senator Townsend reiterated,  “Section 1 of the amendment [No. 224] would come out, and it would be replaced with Mr. Ashleman’s language.”

 

Mr. Wellinghoff continued:

 

First, to preface this, I do want to indicate all these amendments were done collaboratively with Mr. [Neill] Dimmick, the Director of Regulatory Operations [at the Public Utilities Commission of Nevada (PUCN)], the Public Utilities Commission [of Nevada] staff, and myself after the hearing on the bill to address the concerns of the committee and the concerns the Public Utilities Commission [of Nevada] raised at the hearing.

 

Section 2 of Amendment No. 224 is a conforming amendment that goes into [Nevada Revised Statutes] NRS 704.743 and makes that section permissive.  This was not in the bill before, but what this does is, in essence, allow the utility to, in a permissive manner, set up a program that may allow them to charge certain customers specifically for renewables if those customers so desire.  It is not mandatory in any way, and there is no mandatory requirement here.  That, in essence, allows them to do that on a permissive basis.  It could, in essence, functionally lower the overall cost of the provisions of the bill.  Mr. Dimmick and I thought it was a necessary provision to add.

 

The next amendments to section 3 of the bill provide for some clarifying language.  We felt, Mr. Dimmick and I under discussions, it was better to set out, on a year-by-year basis, the percentage required and specify that in language.  Again, that changes nothing substantively in the bill; it only specifically provides for very precise language so we know what is required every year.  In fact, I‘m going to let Mr. Dimmick talk about this section for a second, because he actually had another recommendation on this section.  This is on page 3 of your Amendment [No. 224 in Exhibit C] starting with the top, where it says number 2 there, “The portfolio standard must be set at no less than:”  He actually had a suggestion to clarify this further.

 

Neill Dimmick, Director of Regulatory Operations, Public Utilities Commission of Nevada, testified:

 

In further review and in recognizing there still is the possibility some competitive options may be available over the first part of this period, the formula as set forth uses a prior period to establish the requirement for a particular period.  For example, 12 months ending December 31, 2002, you would apply the percentage.  That would be the amount, let us say, the utility company would be required to meet in the following year.

 

However, if it loses a portion of its customers, it still has the obligation to meet the requirement.  Therefore . . . if it lost         25 percent of its customers, it could end up with 6 or 7 percent renewables requirement, which might be inappropriate for them, and by the same token, because the customers that left weren’t being served by any party than the previous year, they have no requirement.

 

So, we felt if we could alter the language, that Jon [B. Wellinghoff] has in front of him, to specify it is the percentage in a specific year, as opposed to a percentage of the sales in a preceding year, that would bring equity4, and everybody would know, precisely, what they were doing.

 

Mr. Wellinghoff interjected:

 

So, Senator, suggesting that language change, which I think would do exactly what Mr. Dimmick suggested, and this is anticipating ahead, of course, some transition into a competitive environment is why this would necessary.  We do not want to put the utility in a position that would harm them in any way financially, if that were to happen.  The change would be as follows:

 

 

 

Under [section 3] subsection 2, [paragraph] (a), [Exhibit C]            5 percent, and then you would insert the words “per year” of the total amount of electricity annually consumed by customers of an electric utility, or alternative seller in this state.  You would cross out the words “as of December 31, 2002” and you would insert “therein for the years ended, December 31, 2003, and December 31, 2004.”  Then you would, in essence, put in the same amendatory language in [section 3, subsection 2] [paragraphs] (b), (c), (d), (e), and (f) [Exhibit C], but you would, simply, change the years, you would ratchet them up.  Then, in [section 3, subsection 2] [paragraph] (b), the years would be December 31, 2005, and December 31, 2006, [section 3, subsection 2] [paragraph] (c) would be 2007 and 2008, [section 3, subsection 2] [paragraph] (d) would be 2009, 2010, [section 3, subsection 2] [paragraph] (e) would be 2011 and 2012, and [section 3, subsection 2] [paragraph] (f) would be 2013 and 2014.

 

Senator O'Connell clarified,  “In the other bills we have looked at, and maybe because of the changing around here I haven’t got this down, yet, but we’re talking specifically in this section about solar energy.”

 

Mr. Wellinghoff responded:

 

No, the solar adder here is it only applies to 10 percent of the total.  This is a holdover from the existing law that had a 50 percent solar requirement that now, in this bill [S.B. 372] has been reduced down to 10 [percent], but it does not mean we are talking totally solar here.  It is only 10 percent of, for example, in the first year it would be 10 percent of the 5 percent requirement in the first year the bill requires that.  So, it would be .5 of 1 percent.

 

Senator O'Connell clarified,  “Okay, and, as we go up, we’re still talking about   5 percent in each of the years?”

 

Mr. Wellinghoff responded,  “Ten percent solar in each year of the increment up.  Yes, 10 percent of the amount.”

 

 

 

Senator O'Connell said:

 

Let me take you back to number 2, on page 3 [Amendment No. 224] where it says, “The portfolio standard must be set at no less than 5 percent . . .”  And, I am assuming the 5 percent is the overall renewable energy.

 

Mr. Wellinghoff interjected,  “Yes, that’s correct.”

 

Senator O'Connell continued,  “And, the 5 percent doesn’t change.”

 

Mr. Wellinghoff responded:

 

No, the 5 percent changes in [paragraph] (b); you see it goes to     7 percent, and in [paragraph] (c) it goes to 9 percent.  So, what we have done is made it specific, now, in the new language Mr. Dimmick and I drafted and had the LCB [Legislative Counsel Bureau] put in this amendment, which gives specific percentages that go on up to 15 percent, as it did before, but we now have specific dates and more clear language as to how it is to be applied.

 

Senator O'Connell asked,  “Okay, and, do we, as yet, have a cost to this       15 percent, or to each year?”

 

Mr. Wellinghoff answered:

 

Well, my cost estimate, Senator, is based upon the escalating prices of gas, and the projected decreasing prices of renewables, the cost will be a cost benefit to consumers.  In essence, it will cost them less money over time, over the 10 years of the overall projections.  Consumers will actually pay less.  They may pay a little bit more in the first years to ramp these things up, but once they are ramped up, in fact, consumers will ultimately be paying less and the curves will cross.

 

 

 

Senator O'Connell asked,  “Okay, but when you are saying in the first years, how many years are we talking about that they are going to be paying more for this?”

 

Mr. Wellinghoff responded,  “It depends upon how fast the price of gas goes up and how fast the prices of these renewables go down. I can’t really project that, but assuming, a couple years, a year or two.”

 

Senator Townsend voiced:

 

Mr. Wellinghoff or Mr. [Timothy] Hay, if you could look at section 3, on page 4 [Exhibit C], the question I would have is two-fold.  Number one, we put a 50 percent solar standard in there a couple of years ago because of CSTRR [Corporation for Solar Technology and Renewable Resources, Inc.].  We are now reducing it to       10 percent.  Perhaps it could be a better opportunity for the utility to meet this standard if we don’t put specifics, you know,          15 percent wind, 30 percent, and the reason is because the vast majority of the solar will probably come out of Southern Nevada.  The vast majority of the geothermal we know is going to be rural.  Wind is pretty much all over the state.  Biomass is located in two different counties.  I think we have been all impressed by what we have seen on solar here, and I am a supporter.

 

We’re asking the utility to enter into a contract, which brings me to my next point.  On subsection 3 [page 4, Amendment No. 224, S.B. 372, Exhibit C], I don’t understand the necessity to say it will be for 10 years, because, I think, it is one more hurdle for them to be able to manage their portfolio if they look at renewables.  Let me give you a for instance.  The goal here is to jump-start our own industry.  If somebody is a smart enough person who will take a 5-year [contract], I don’t want to preclude them from that.  It is probably going to be 15 [years], maybe 20 [years].  But, again,      I don’t want to prejudge the contracts we’re asking them to enter.  I do think the language is appropriate in the second part, which is [Senator Townsend read from subsection 3, page 4, Amendment No. 224, S.B. 372, Exhibit C.].  I think that is extremely important.

 

And, over on the backside we discussed the issue where we are moving in this state, which I don’t think is what we are trying to do.  We had testimony yesterday afternoon, I think, on a bill Senator O'Connell and Senator Rhoads had to deal with [on] the economic development side of renewables. We were all excited about helping them with their tax structure. I don’t think taking that out helps.

 

Mr. Wellinghoff responded:

 

Working backwards on the last one, I will say the amendment at the end of this on page 5, it takes that “in the state,” it is sort of a phantom amendment.  We can’t figure out where it came from.  If nobody wants it, we can delete it.  It was always the intent, and it was, in fact, the original language of [NRS] 704.989 that would be from renewables in this state.  I think we all desire to jumpstart and boost the economic development and economic diversity in this state.  We certainly don’t want to make a bill that allows us to improve the economic diversity and development of Oregon and California and Utah.  That’s not the intent of this bill. We would like to have that stricken from the amendment.

 

On the other issues, with respect to the 10 years, I think you had considerable testimony from a number of developers that 10 years is necessary, but I agree with you, it should be at the developer’s option.  In fact, there’s amendments to [Assembly Bill] A.B. 418 on the Assembly side.  And, one of the amendments, which I would suggest we add to this bill [S.B. 372] is at the end on page 4, paragraph 3, “The portfolio standard must provide that if electricity is procured from a renewable energy system by an electric utility or alternative seller pursuant to a contract with a third party, the term of the contract must be not less than 10 years.”

 

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

 

 

 

I would add this following language:  “If the third party so desires.”  I think that takes care of the option that the third party, certainly, can come in and say, “Look, I can take a 7-year contract. I can take a 5-year contract.”  It gives the third party that option, and I think it would be a very helpful amendment to the bill.  I agree with you about the second sentence Mr. Dimmick and I added, if the contract by the utility is approved by the commission, it shall be deemed prudent investment, it may recover all just and reasonable costs.

 

This was to address Senator Amodei’s question at the hearing with respect to the issue of stranded costs, and this language is already in the statute.  We took it right out of [NRS] 704.110 that already provides for this for other provisions for the utility.  So, I think this will take care of the cost issues with respect to these provisions.    I think it is very appropriate.

 

Now getting to your first question, the issue of the 10 percent solar versus, it was originally, 50 percent solar.  I am a little conflicted on this. I have clients who are solar clients; I also have clients who are geothermal clients.  I think you could, in fact, eliminate that if the committee so desired, and just open it to all renewables.  Although, the set-aside for solar, I think the consideration there is the fact solar is, everybody will agree, incrementally more expensive than some of these other technologies, than geothermal, wind, and biomass, in general.

 

So, because of that incremental, additional cost, it may be appropriate to do a set-aside.  I don’t know if 10 percent is the right number; quite frankly, 10 percent was picked out of the air. So, if the committee were to feel that a different number would be appropriate, or no number whatsoever, we certainly could still live with the bill.  But, I think, it’s something that is certainly within policy purview of the committee.

 

Senator Townsend commented:

 

I bring it up for those reasons, but I think southern Nevada members understand that is where they are going to get their benefit is for that peak load during the summer.  I don’t know whether we want to prejudge how much it is.

 

Mr. Wellinghoff commented:

 

Let me add one other thing.  If you look at the top of page 5 [Amendment No. 224, Exhibit C], we’ve added another provision that actually was in the original language in the 1997 legislation but was taken out in the first draft of  [S.B.] 372 that we have now put back in . . . to provide for a system of tradable credits.  So, if we have a tradable credit system, you could, in fact, have geothermal, wind, and biomass in northern Nevada that is traded to southern Nevada to be used there to apply to the renewable portfolio standard.  So, we may not have to have solar in the south to have Nevada Power [Company] meet the standard. You can, in fact, use northern Nevada resources to do that now that we put the tradable credit provision back in.

 

Senator Townsend said,  “Okay, so, in essence, we’re now going to treat them as one company.”

 

Mr. Wellinghoff responded,  “We are going to allow them to trade back and forth.”

 

Senator Townsend replied,  “Okay, because that debate took place here prior to their merger, and it was a problem.”

 

Mr. Wellinghoff pointed out:

 

Then one other amendment substantive change on page 5, to address Senator O'Connell’s question, was the issue that the penalty applied to everything, not just this provision.  It was back in 703 [chapter 703 of NRS].  What we have done now, is we have moved it up so it applies, specifically and only, to this particular provision.  So, it is not a penalty of general applicability to utilities activities, but, instead, only applicable to the activity of a utility or alternative seller with respect to the renewable portfolio standard.  And, that is contained on page 5.  And, I think that completes the amendments for the bill.

Senator Townsend stated:

 

Let me ask Mr. Dimmick a question regarding that portion.  These are substantial penalties that even this committee has not seen the likes of.  I guess the goal here is not to extract money from the utility.  The goal here is to encourage their behavior relative to their contracting for renewables.

 

Mr. Dimmick responded,  ”That is correct. As we discussed in one of your earlier work sessions, there was no penalty provision in the previous legislation.  Therefore, there was no tool to enforce proper behavior, as you’ve stated.”

 

Senator Townsend remarked:

 

If we want to encourage their behavior to change based on this, would you consider, now that you’ve changed the language, on pages 3 and 4 regarding the dates, and it would be for the previous year.  Now you’re going to change that in the middle of the page, so you’re going to go to the end of the year, then you are going to measure it.  Wouldn’t you need a more flexible position, since the goal is not to get money from them, the goal, I mean, what are we going to do with $3 million?

 

You know, they’re going to come back and argue with you, or go to court to say that comes out of ratepayers’ money, or it goes out of shareholders’ [money], and who pays for it?  The goal is not to get money from them, because what are you going to do with    $3 million?  We already dealt with your budget. I would think the goal would be to change their behavior.  If at the end of the year they didn’t meet this standard, they have, pick a number, 6 months, or so, to get back to that standard.  Then there would be an appropriate penalty, whatever that penalty is.  And, I don’t have a problem leaving it up to the PUCN.

 

Senator O'Connell added:

 

Along with that same issue, if they were penalized, how then would they recoup it, or would there be a provision for the PUCN?  I mean, to me it doesn’t seem like we’ve accomplished anything with it, because the rate payers are going to either be penalized, as the chairman said, or the utility shareholders, or everybody’s going to end up with the higher costs, which is what we are trying to get rid of.

 

Senator Townsend asked,  “Don’t fines go into the General Fund?”

 

Mr. Dimmick answered,  “That’s correct, Senator.”

 

Senator Townsend responded:

 

Well, the last place I think we ought to be placing, whether it’s the shareholders’ money or the ratepayers’ money is in the General Fund.  Mr. [Timothy] Hay, do you see the purpose of the questions we’ve asked?  We’re trying to modify behavior here as opposed to being punitive. I understand the reason you need to put it in here because we didn’t have a penalty before, but can’t we find a way to be more encouraging to change behavior, if, in fact, they don’t meet the standard?  And, they may meet it and never have to be dealt with.

 

Timothy Hay, Chief Deputy Attorney General, Bureau of Consumer Protection, Office of the Attorney General, suggested:

 

I think my suggestion, in light of the changes Mr. Wellinghoff described, which I approve of, [is] the appropriate mechanism would probably be to link the size of the penalty with the amount of the non-compliance. For instance, if in a particular year they needed to make a 5 percent renewable standard, [and] they only came in at 4 percent, the commission has the authority to assess some amount for the retrospective period.

 

And, say you missed it by 20 percent of what the statute required, then have a penalty that’s appropriate to the amount of, essentially, the underutilization of the renewable energy source.  And, I think we can work on language to do that.  I think what we could do is have language just to say the penalties shall not exceed a fixed amount and shall be determined by the commission in proportion to the violation.  In essence, to address the mechanism so that we’re looking at a fixed window of time, rather than the way the bill was originally drafted.

 

Senator Townsend stated,  “I don’t know, Mr. Wellinghoff, I’m not trying to talk you out of your bill.  I’m trying to meet the original purpose, which is to get them to sign contracts with these developers.”

 

Mr. Wellinghoff:

 

I agree with you.  Actually, there are other enforcement (I don’t want to call them penalties) mechanisms used in other states, and they come to mind.  And, I should have anticipated this would have been an issue today, but I’ll tell you one I think is creative, effective, and, in fact, addresses, specifically, your issue.  That is to impose upon the utility, or alternative seller, and we have to understand the supply is not just the utilities, but anyone else who is providing retail electric service in the state, an amount equal to some amount per kilowatt hour, call it 3 or 5 cents per kilowatt hour, for each kilowatt hour they do not, in fact, achieve under the portfolio standard, that amount of money then to be applied by the Public Utilities Commission [of Nevada] in a fund to go buy down renewables.

 

Senator Townsend asked,  “Isn’t that Colorado’s standard?”

 

Mr. Wellinghoff answered:

 

I cannot remember which state actually uses that mechanism, but there is at least one, and maybe several states, that, under the renewable portfolio standard, used the mechanism.  The issue is, you’ve got to pick a number, and you could put this all at the discretion of the Public Utilities Commission [of Nevada].  They could, in fact, determine what the number per kilowatt-hour is that the utility would pay into a fund that would be used to buy down renewables that the utility doesn’t do it themselves.  Then, in essence, you turn it over to the Public Utilities Commission [of Nevada] to do what the utility should have been doing under the statute.

 

Senator Townsend said:

 

I think one of the reasons it is important to have flexibility, is if we are going to come to an end of a year and measure, the use of energy in this state fluctuates; it is not a fixed thing.  So, unless, and let’s assume in the previous year they bought 5 percent, we get to the end of the year, you measure it and because of a high usage, they drop down to 4.  You know, they were well intended, and they met the standard in the beginning of the year, but because of the rise in use, they dropped down to 4.  I think the commission [PUCN] should have the option of saying, “When you entered into the contract for X number of kilowatts at the beginning of the year, the average yearly usage was a certain amount, and therefore, it was a good-faith effort, you’re not in violation.”

 

But, you also should be able to say at the end of the year, “Oh, you dropped down to 4.  Over the next six months could you report to us on how much you bought?  Are you going to get back to 5?”  I don’t think the goal here is to get them to see this as some punitive measure.  These are very sophisticated people in a very tough market.  I want to make sure there is flexibility there so the commission [PUCN] and the OCA [Office of Consumer’s, Office of the Attorney General Advocate] can work with them to encourage these contracts to be developed.

 

Since it is going to directly affect Senator Rhoads’ area, you know, he and Senator McGinness represent probably 95 percent of the geothermal potential in this state, we want to make sure that there is an option there, and not fly in the face of what did in Taxation.

 

Mr. Wellinghoff suggested:

 

I have some suggested language, Senator.  You may want to consider something like this, replacing the penalty section with language that would give the commission [PUCN] flexibility that would, in essence, say the following:  “The commission [PUCN] shall determine a mechanism for the enforcement of the portfolio standard including, but not limited to, assessing a per-kilowatt-hour fee for each kilowatt hour not achieved under the portfolio standard in a particular year.”  That should do it.  That could substitute for the penalty provision.

 

Senator Townsend said, “Mrs. Stokey, while they’re debating the language that attempts to accommodate our concerns of encouragement, would you care to comment on the other changes that have been made?”

 

Judy L. Stokey, Lobbyist, Nevada Power Company and Sierra Pacific Power Company, commented, “We are looking at this amendment for the first time this morning, and we do have a couple concerns I would like him [Duane Nelson] to address.”

 

Duane Nelson, Director of Transmission and Business Development, Nevada Power Company, Sierra Pacific Power Company, testified:

 

I want to point out to you the way the bill was originally drafted, increases the solar requirements from the current law by 250 percent.  That’s the number of megawatts we have to acquire.  Even though the numbers look like they went down, we start from a large renewable base with a smaller percentage, and the end result solar number comes out a lot higher.  I think we provided testimony a couple weeks ago when I was absent that indicated that in 1999, all over the United States, there was only              20 megawatts of solar equipment installed, or shipped here to be installed (who knows whether it was installed, or not) to generate electricity.  This bill would require the state of Nevada, in the first year, to install 66 megawatts of solar capacity.

 

Senator Townsend said, “So that internal standard in the standard becomes a problem, particularly, in southern Nevada.  Is that correct?  Even if we put this credit language in?”

 

Mr. Nelson responded:

 

I would suggest we not influence what renewables are used.  Use the renewables that are most available and most beneficial for the state.  Use an RFP [Request for Proposals], or bidding process, and see if we can get market-based prices, or less, for these renewables as some have testified is actually a reality.  And, then, allow the utility to meet the performance of the standard by performing an RFP, setting the standard for an RFP, issuing all comers get to bid, and that will allow us, if you want the development only to be in the state of Nevada, and you don’t want us to go outside the state to meet the standard, and allow us to perform an RFP only in the state.  And then bidders will come, and if they don’t come or they can’t, for whatever reason, they can’t perform, we will still meet the standard.

 

As Mike Smart testified the other day, we have a problem with the requirements we have of large fines, because we are going to put that in contracts for the bidders.  The bidders, if they don’t perform, we’ve signed a contract with this as we’ve seen in the past, and they can’t perform for whatever reason, they can’t get financing or whatever, don’t perform. We don’t want to be fined for that.  So, we’re going to pass it along to the people who sign contracts.

 

So, I think requiring a bidding process in the state of Nevada, not limiting it to solar, allows us to use the geothermal in the North to supply in the South with the credit-trading mechanisms, [and it] would probably work well.

 

I do want to qualify my statement about the number of megawatts.  We’ve looked at several different bills.  I performed those calculations off of some stuff.  I may be looking at the wrong bill and the wrong numbers.  Subject to check, this bill would require 66 megawatts in the first year.  It may be a smaller number based on some changes.

 

Senator Townsend said, “You’re just concerned about the lack of ability, currently, in the solar market that could put you in jeopardy.”

 

Mr. Nelson responded, “Right.”

 

 

 

 

Mr. Wellinghoff remarked:

 

I think we had some testimony, and I know the reference by Sierra [Pacific Power Company] was that it was the PV [photovoltaic] manufacturing capability that could not meet the requirement.  Or, I think the testimony by Mr. [Scott M.] Craigie’s client was, in fact, we are different technology.  We are solar thermal, and in fact, we do have the capability, quite easily, to meet that.  So, I think that argument doesn’t wash with respect to that particular issue.

 

On the issue of the RFP, there is nothing in this bill preventing them from doing an RFP, and we would expect they would do that.  [There is] nothing in this bill preventing them from putting in the contracts, [and] passing along any penalty provision.  And again, I think the language I’ve suggested for you, the amendatory language, is preferable, but even putting in to the contractors , if in fact, they don’t supply the energy  required, if there is something assessed by the PUCN because of that, it could be passed on, there is nothing preventing that either.

 

Scott M. Craigie, Lobbyist, Stirling Energy Systems, Incorporated, and Environmental Oil Processing Technology, Incorporated, testified:

 

One of the things about this 10 percent being set aside is, this particular technology, this thermal solar technology, can, in fact, come down and reach into the market price area if mass-produced.  We’ve talked to this committee about it.  And, that particular technology, if they can create these mirrors and assemble these modular units, we could literally build 100 megawatts in southern Nevada.  This is primarily a southern Nevada technology, because that is where the best sunlight is.

 

We could do it on peak in the range of 12 cents per kilowatt-hour, which really does make it market-friendly in terms of price.  This is not one that would have to be subsidized.  And, the 10 percent  in there is very important for us.

 

The reason these technologies have not been developed is there has not been a proven financial position they can take to investors, or to the financial community, so they can get financing and they can mass-produce on a level that would produce 100 megawatts, and the only way we can make it to that level.  It’s a much higher cost issue if we’re making a few of these instead of a large number of these.

 

So, I recognize the problem Senator O'Connell has, and others, about we don’t want to strap everyone to a requirement on a specific technology, if in fact it can’t make the grade financially, and if for some reason it doesn’t develop because we’ve said, “Hey,” there are going to be penalties, you’ve got to do it.  And, I’ve got a solution for that issue and it’s one I’d like to just put on the table.  I’ve mentioned it to a few individuals here.

 

I believe, and I’ve worked with some of these alternate sellers that have come in here, and they looked at the renewable requirement that was in the law in solar before, as small as it was, and they said, “We really can’t come here because that solar has not developed.”  I think there should be a provision that says to the extent these technologies that we’re investing our public policy in to try and get started, to the extent they don’t move forward, the Public Utilities Commission [of Nevada] ought to be allowed to waive that requirement because it can’t be met.  I mean, if it is unreasonable, there ought to be a trigger that gets you out of it.  And I think that’s totally reasonable.

 

But, again, as a public policy body, if we want to start the renewable industry in our state, we have to do something that helps get it started.  I testified on the Assembly side, I haven’t done that here, but commissioner, then, Schmidt and I, in 1983,   4, and 5 [1983, 1984, and 1985], were two of the five members of the commission, but we really pressed those two individuals hard to get the geothermal plant at Steamboat [Nevada] started. There were no major geothermal plants at the time.  We believed if one got up and running, it would kick off the industry.  And, as you mentioned, Senator Rhoads and others here represent areas that are heavily invested now in that, and benefit greatly from it.    If we start it, it helps.

 

 

Senator Townsend clarified, “So, flexibility of the commission on the standard if it can’t be met is what you’re proposing?

 

Scott Craigie responded, “Keep the 10 percent, if possible.”

 

Alfredo Alonso, Lobbyist, representing BP Solar, remarked:

 

Again, I won’t go into anything further than Mr. Craigie has indicated.  Obviously, that 10 percent is very important to jumpstart the industry.  What’s important to understand, though, in the last 5 years, solar has grown at a rate of about 30 percent.  Our Fairfield [California] facility, which just opened, is going to double.

 

Senator Townsend interjected, “Okay, don’t do an advertisement during a work session.  Do you have a problem with the flexibility of the commission if the utility is unable to secure a contract?”

 

Mr. Alonso responded, “No, I think that would be appropriate, obviously, for the first couple years.”

 

Senator Townsend said:

 

Well, if the standard can’t be met; it can’t be met.  Then they end up getting penalized because [of] something that was out of their control.  I don’t think that’s fair.  All right, I want to go back to this, gentleman.  I needed you to finish, or were you done with the amendment?  We were trying to address the issues you brought up.

 

Mr. Nelson answered, “Yes, and I think what’s been expressed here is workable if the commission sees we’re trying, we perform an RFP and they judge that’s adequate and if the market’s just not there, then it’s not there.”

 

Senator Townsend interjected, “Okay.”

 

 

 

 

Mr. Nelson continued:

 

The one thing I would add to this is Sierra [Pacific Power Company] believes in the existing law.  We are not receiving credit, continuing credit, for the renewables that  purchased.  And, I think it’s important we get credit and roll in past purchases and future purchases into the portfolio requirement.

 

Senator Townsend asked, “Let me ask you, Mr. Dimmick. How do you see the way this would affect what this gentleman has said?”

 

Mr. Dimmick answered:

 

I think there are two issues that are up. One is, I believe we have already attempted to, in some draft regulations we’ve been working on in this area, accommodate the fact that if there’s a demonstration that the resources are not available to meet the standard, obviously, the company, if it can demonstrate that reasonably, would not be penalized or be put upon to make up for it.  By the same token, there is the issue as to how do you treat the resources already in the state.  This particular bill does not, essentially.  It removes the exemption that was put in the A.B. 366 legislation [of the Sixty-Ninth Session].  That’s something you, as a body, will have to decide whether you want to remove or leave it, or recognize that in some way through credits, or what have you, what is already in place is part of the portfolio.  There are two choices there, and people can argue both ways from public policy that you want to promote more than what’s on here.

 

Senator Townsend clarified, “Well, I understand, but what I’m saying is, how do you view it right now?  If this legislation passes, are they going to get credit for their current portfolio, applied towards this?”

 

Mr. Dimmick answered, “It’s my understanding the way the legislation is drafted today, whatever resources are already in place would not be accounted for in this portfolio.”

 

Senator Townsend said, “Well, that’s what I thought.  Mr. Wellinghoff, you don’t see it that way?”

Mr. Wellinghoff responded, “Yes, Senator Townsend.  No, I do see it that way.  This is all new renewables, 15 percent [of] all new renewables starting at         5 [percent].”

 

Senator Townsend queried, “Wait a minute, when you say, ‘all new?’”

 

Mr. Wellinghoff restated:

 

All new renewables, meaning it has to be renewables that were in place after, I think, we changed the date, but I think it’s January, 1997.  So, if something was built before January, 1997, they would not get credit for it.  But, on the issue of credit, if they want to have credit for something prior to January, 1997, I have no problem with that, but we have a whole new bill then.  Then we maybe start at 20 percent instead of 15 percent.  I mean, the     15 percent was very specifically selected because we felt, as an industry, the geothermal industry, and the wind people I’ve talked to, and the solar people, and the biomass people I’ve talked to, 15 percent is a minimum that is doable for new [renewables].

 

So, if you add on the credit of wherever they are now with existing geothermal, if it’s 3 or 4 percent, I’m not sure what the percentage would be of their total, taking Nevada Power [Company] and Sierra Pacific [Power Company] together, overall, then that would diminish the 15 percent by that percentage amount, and it’s not what we’re after.  We’re after at least a minimum of 15 percent.

 

Senator Townsend asked:

 

Do you know what percentage you currently have based on what this bill says?  The proposed bill takes it back from July 1, [1997], to January 1, 1997.  Do you know what that does?  In other words, how much of your portfolio that’s now renewable came on line after January 1, 1997?

 

Mr. Nelson responded:

 

It’s my recollection we have not added any renewables after 1997.  If you wish, I would tell you the numbers for Sierra Pacific [Power Company].  We were once about 9 percent were renewables, and to a much lesser number for Nevada Power [Company] if you don’t include the hydro [power].  We would have quite a hurdle to meet this standard, even if we include those renewables we have right now.

 

Senator Townsend clarified, “Okay, so most of your 9 percent in the North was acquired prior to 1997?”

 

Mr. Nelson answered, “Yes. It was part of the QF [qualifying facility] process.”

 

Senator Townsend said, “Okay, when Mrs. [Judy] Stokey introduced you, she made reference to transmission.  You are in charge of transmission?”

 

Mr. Nelson responded, “I work for the transmission line of business. I’m on loan, right now, to the legislative and restructuring group.”

 

Senator Townsend requested:

 

Some time could you come back?  We’re under a time frame today and Monday.  We’d like to have you tell us about the Falcon-Gonder transmission line, where that is, why it is, what potential it has, and all of those things.  Could you do that at a time that works for you?

 

Mr. Nelson answered, “I would be happy to do that; we have updates every month on that.”

 

Senator Townsend responded, “Great.”

 

Mr. Craigie said, “I didn’t put my client on the record, Stirling Energy [Systems, Incorporated].  Thank you.”

 

Senator Townsend stated:

 

Committee, I have a lot of notes.  I don’t know if we want to have an amendment drafted, because we’ve got to move on to some other bills, and have something clean for Monday to work on, or if you want to deal with it now?  It is your pleasure.  I understand the first part, which would put in the 10 percent to set the homebuilders’ standard, Mr. [I.R.] Ashleman, that I understand.  That takes care of section 1.

 

On section 2 is the measurement issue. Five percent per year of the total amount, and then moving it off where it takes out those two dates and it says for the years ending 03, 04, and 05 [2003, 2004, 2005] and then that moves all the rest of the dates.

 

Then we have to deal with, which I think is the appropriate way to go in terms of measurement, then we have the issue of whether we do 10 percent solar, we take that out or we leave 10 percent in and give discretion to the PUCN to establish whether it is actually meetable [sic].  Then, on subsection 3, after 10 years if the third party so chooses, it gives flexibility to the third party who would be the provider of this resource.  Then section 7 would be entirely rewritten to take out the size of the fines and just give flexibility to the PUCN.

 

My recommendation would be to encourage it, so at the end of a year, if you didn’t meet it, you had 6 months, or whatever the period they’d want, to get them to change their behavior before something occurred, and then to take out the in-state part, the repeal of the in-state part on section 8.  That’s what I have in my notes.

 

Senator Rhoads remarked, “Mr. Chairman, I think we should get an amendment and bring it back Monday, so we could take a look at it.”

 

Senator Townsend responded, “That would be fine.  Is that all right with the committee?  All right, we’ll go ahead and do that.”

 

Senator Townsend opened the hearing on S.B. 2.

 

SENATE BILL 2:  Requires provider of insurance coverage for prescription drugs to disclose certain information regarding use of formulary and to continue coverage for prescribed drug under certain circumstances.  (BDR 57-597)

 

 

Senator Amodei drew the committee’s attention to the draft reprint of the proposed amendments to S.B. 2 in the work session document of April 13, 2001 (Exhibit C).  He stated the amendments were submitted by John P. Sande III, Jack Kim, and Fred L. Hillerby.  Senator Amodei offered to postpone hearing S.B. 2 until the following Monday, April 16, 2001, because these gentlemen are not in attendance at this time and he has some questions for them since the amendment came out so late.

 

Senator Townsend acknowledged that would be fine, since it is              Senator Amodei’s bill.

 

Senator Amodei said:

 

I will tell you the questions I have for them relate to the existing bill.  And, the language repeats itself throughout, but if you go to the existing bill on page 2, lines 14 through 17, it talks about a notification requirement that was omitted in the amendments.  And, lines 35 and 36 talk about prescription of another appropriate drug covered by the policy, which were omitted, and I’m not sure why those were.  And then my only other question on the reprinted one is on page 2, line 19 [S.B. 2], which talks about conducting a reasonable investigation by the health care provider about what to prescribe, and I’d like some clarification on what they think the definition of that is.  So, with that on the record, I will request it be skipped until Monday.

 

Senator Townsend noted Mr. Kim’s presence in the audience and asked him if he would like to respond to Senator Amodei’s concerns.

 

Jack Kim, Lobbyist, Health Plan of Nevada, stated Health Plan of Nevada submitted one proposed amendment to limit the impact of the provisions in section 3 to each contract year, which Health Plan of Nevada does not have a problem with.  Their concern was the way S.B. 2 was originally written, which would cause them to end up with hundreds of different formularies because every contract year things will change.  He stated employers would then have the option of choosing whether to go with the plan or not.  Mr. Kim said that was their amendment.

 

 

Senator Amodei interjected this is fine with him.

 

Senator Townsend pointed out Senator Amodei had other problems.

 

Mr. Kim asked Senator Amodei which section he had concerns with.       Senator Amodei responded they repeat themselves, and the easiest section to look at to see this is in the existing bill (S.B. 2) in section 2, page 2.  He said lines 14 through 17, which talk about notification, have been omitted.    Senator Amodei read from this section and then said it seems like a ministerial thing that would have been easy to do.  He was wondering why, and if the amendment was even Mr. Kim’s ( on behalf of Health Plan of Nevada).

 

Mr. Kim responded he did not think that was his amendment, but suggested the concept behind it is to make sure the doctors have the choice to decide what medicines to prescribe.  He added this section might not be needed because the doctor decides what the patient needs.  That is part of good practice medicine; the doctor makes his choice on what medicine to prescribe.

 

Senator Amodei directed his comment to Mr. Fred Hillerby regarding page 2, lines 14 through 17 of the original bill, which were omitted as a result of the amendment.  He said he did not know whether the omission was Mr. Hillerby’s or Mr. Sande’s request.  He stated notification that the inclusion of a medication on a formulary does not guarantee the patient will get that medicine prescribed is probably a good thing to tell people requesting information.  Senator Amodei wanted to know why that was omitted.

 

Fred L. Hillerby, Lobbyist, Nevada Association of Health Plans, said he thinks this is a draft reprint and they did not intend to take that out of the amendment.  He stated it was Mr. Sande who presented that particular amendment.  Mr. Hillerby said the amendment is good because, with the direct advertising prevalent with drugs on television (TV) all the time, sometimes there is a lot of demand put on a physician to describe the drug.  And, people watching TV want to look as happy as all the people in the commercials do.  Mr. Hillerby said just because it appears on the formulary does not mean the physician is necessarily going to prescribe the medicine if he or she does not think it is medically indicated.

 

Senator Amodei drew Mr. Hillerby and Mr. Kim’s attention to lines 35 and 36 on page 2 of the original bill, which talks about not prohibiting a provider of health care from prescribing another drug covered by the policy that is medically appropriate for the insured.  Senator Amodei said he reads these sections to say if a health care provider wants to prescribe a different drug contained on the formulary the provider may do that.  He questioned why this option has been omitted in the amended reprint, because as long as both potential drugs are on the formulary, why would anyone care which one was prescribed.

 

Mr. Hillerby said, “I don’t remember anything in the amendments we discussed, Senator Amodei, changing this.”

 

Senator Amodei read from the amendment reprint, page 2, lines 14 through 19, and asked for input on the following section on line 19, “after conducting a reasonable investigation.”  He wanted to know whether that is something that could be determined by prior office visits or whether this would require somebody to incur the expense for another office visit if the formulary changes.  He said this was one of the concerns expressed in prior testimony in dealing with a previously prescribed drug, such as certain heart drugs that may not be on the formulary when it changes.  Senator Amodei asked for clarification on when the “reasonable investigation” would be conducted and what it would include.

 

Mr. Hillerby indicated he thought the intent of that language was just to encourage providers to not resist changing unless the provider has taken a look at what the new drugs are supposed to do.  The new, replacement drug many times goes on the list because it is a better drug based on the research.  He said many times it is not just because of economic reasons. Mr. Hillerby said he believes this is the reason they wanted the physician to have some responsibility to at least check the new drugs that become available.

 

After hearing Mr. Hillerby’s explanation, Senator Amodei agreed to leave that language in the bill.

 

Mr. Kim acknowledged he also had no problem with leaving that language in the bill.

 

Noting John Sande was now in the audience, Senator Amodei asked him if the source of the omission of lines 14 through 17, on page 2 of the original bill (S.B. 2), was the amendment Mr. Sande provided.  Senator Amodei reiterated, in his opinion, it was a good notification because there is no guarantee a physician will prescribe a certain drug just because it appears on the formulary.

 

John P. Sande III, Lobbyist, Merck-Medco Managed Care, told Senator Amodei he would have to check, but thought it was his amendment.

 

Senator Amodei stated this notification would indicate just because the drug is listed on a formulary does not mean the doctor is going to prescribe it, which, Senator Amodei indicated, gives the formulary keeper more flexibility.

 

Mr. Sande responded he was not sure if that was part of his amendment, but he would have to check.  He stated Senator Amodei may want to put the language back in the bill.

 

Senator Amodei addressed a second section of the bill omitted in the reprint (page 2, lines 35 and 36), which provided more flexibility for the keeper of the formulary if there were two drugs the health care provider deemed appropriate.  This allowed him or her to prescribe another drug from the formulary list.  Senator Amodei asked Mr. Sande why we would want to remove that language from the provisions of the original bill.

 

Mr. Sande responded by asking if this is the provision allowing a patient to continue to use a drug that has been removed from the formulary.

 

Senator Amodei said it allows a patient to change to a different drug that is still on the formulary if the medical care provider thinks it is appropriate.

 

Mr. Sande concluded he is not at all certain that is part of his amendment.  He said he thought the main part of his amendment was if a drug is taken off the formulary and a health-care provider wants to keep the patient on that drug from the old formulary, the health-care provider would have to do some kind of reasonable investigation to determine that the drug is not medically appropriate or the other drugs in the formulary are not medically appropriate.

 

Senator Amodei told the chairman he would request the committee take action on S.B. 2 by reinserting the language found on lines 14 through 17 of page 2, and lines 35 and 36 of page 2.  He said that language repeats itself because the bill, basically, repeats itself to all the different plans that are available.

 

SENATOR AMODEI MOVED TO REINSERT THE LANGUAGE FOUND AT LINES 14 THROUGH 17 OF PAGE 2, AND LINES 35 AND 36 OF PAGE 2 IN THE AMENDMENT, AND AMEND AND DO PASS S.B. 2 WITH THAT CHANGE FROM THE CONCEPTUAL AMENDMENT THAT THE COMMITTEE HAS BEFORE IT.

 

Senator O'Connell seconded the motion.

 

THE MOTION CARRIED UNANIMOUSLY.

 

*****

 

Senator Townsend opened the hearing on S.B. 425.

 

SENATE BILL 425:  Makes various changes concerning certain utilities operated             by certain governmental entities.  (BDR 20-1243)

 

Carole Vilardo, Lobbyist, Nevada Taxpayers Association, thanked the chairman for including S.B. 425 on today’s work session.

 

Ms. Vilardo said:

 

This is the bill the committee saw last week, which none of us who knew it was coming recognized, because it was so much more extensive than what the Nevada Taxpayers Association had asked for.  The amendments being passed out to you [Exhibit D], I hope, make this a relatively simple bill and follow the intent of what we were trying to do.

 

You will note in new section 1 we put down the purpose of the bill.  And the purpose of the bill was to allow 2 years for  S.B. 253 until the next session to understand and figure out the tax implications from anything that might happen relative to electric deregulation and anything further, which might happen with telecommunications and teleservices.  These are two unregulated or maybe semi-regulated [industries] at this point, not knowing where electric is coming from.  So, that specifically states the intent of this bill, which was missing in the original [S.B.] 425.

 

The next item is to leave sections 1 to 3 as they exist in the bill, but renumber them 2 to 4 because we think the preamble needs to be there first.  Then amend NRS 244 starting on line 13 to add a new section.  Now [NRS] 244 is county government law and, in effect, what we are doing here is creating this 2-year moratorium for the expansion or acquisition on any generating or electric facilities, or phone services that might go out.  However, providing the county commissioners, if they feel it is necessary for whatever reason, will have a public hearing, will notify all jurisdictions that might be impacted by their acquisition or [are] building any sort of a facility.  Acquisition being particularly important, because if you are acquiring a private company, the private company is paying taxes, and those companies are centrally assessed.

 

Ms. Vilardo stated:

 

Based on central assessment, particularly in electric, and depending on which grid you’re on, you have an issue where that facility taken off the tax role could impact 7, 8, [or] 9 counties because of line-mile distributions.  That would be devastating.  A county like Lincoln County receives 51 percent of their assessed value on property tax, which is based on line miles.  If you do anything, whether you do it right now or in two years from now, to take the generating facility and break that from the transmission lines, they have lost a major percentage of their assessed value and their property taxes.

 

And it’s not only the county.  It’s Pioche.  It’s Caliente.  It’s the school district.  So, what we’ve done in here is try to put an out that if, in fact, it becomes necessary for you to do this, you must notify the other local jurisdictions who would receive taxes.  And, you must work out a plan with them to replace the revenue that would be lost for each of the two years until we can come back and see what would be a good statewide plan for replacement of revenue when we have divestiture.

 

You have the same language going between NRS 244         [chapter 244 of NRS], which is county law; all of those sections are duplicated in NRS 268, which involves cities.  And in NRS 318, which then goes over to page 3, starting at line 22, the language repeats itself those three times.  [NRS] 318 are general improvement districts, and we do have some general improvement electric districts.

 

In addition, to make sure that it is unequivocal, we have put if a local government provides this service to one of the municipalities under its jurisdiction for which they enjoy the same governing body, then these provisions do not apply because, obviously, there would have been no tax within those areas.  In the last provision on 9, which is 4, the provisions of the act expire by July 1, 2003.  This was meant only for 2 years to give us enough time to understand fully what the tax implications might be.  We have no definition of how to handle a plant that would be acquired, which might be owned by a tax-paying facility right now, where that location, that county where the plant is located, becomes site-based and receives all the revenue, but then everybody else loses.

 

I had amended this.  We were talking about property tax and franchise fees, and I had added sales tax.  If for some reason somebody felt they had to build a new plant, talking to Mr. [John O.] Swenseid outside, he feels over the next 2 years if that were to happen, we would have a very difficult time trying to apportion sales tax.  So, I am more than happy to have the sales tax portion amended out of this.  The most important becomes the franchise fees and the property tax issue on this.

 

Ms. Vilardo continued:

 

There will be a great deal of opposition on this bill.  Some of it may have been minimized.  Unfortunately, I was not able to get to every local government with the last set and visit with them on concerns.  Generally speaking, there might be some modifications the committee would feel is beneficial, and I think that’s amenable, but I’ve worked with these taxes for so long, particularly in the rural counties and seen the problems [and] that is the reason for this bill.  I urge the committee to consider implications.  I know you have been dealing with it, but this is a whole other host of implications I don’t believe have come up in any detail during most of the discussions about electric deregulation.

 

Senator O'Connell asked, “Carole [Ms. Vilardo], why is there resistance from the local counties if, indeed, we’re trying to protect their tax base with this?”

 

Ms. Vilardo answered:

 

It’s not from all of the areas, and it’s not counties, per se, it’s municipalities that might have something where they think they could develop or expand that service right now to take advantage of where we are with this market. 

 

Senator O'Connell queried, “But wouldn’t they be robbing Peter to pay Paul to do this?”

 

Ms. Vilardo responded:

 

That’s my feeling.  I think that’s why I was so concerned about having interlocal agreements.  If there were a reason for them to do it at least for 2 years they would make whole anybody that might be robbed under the “rob Peter/pay Paul” scenario.  Because remember, in some instances you’re crossing jurisdictions, and when you cross jurisdictions, if you see you have an immediate problem you may not be as concerned for the other jurisdictions you’re impacting, because you’re trying to address your problem.  And I’m trying to forget that in saying, “Okay, if there is that problem, and nobody knows what’s going to happen, you have a much better feel for it, but at least let’s keep somebody whole.”

 

Let’s try to come back in with a tax formula that if X happens, this applies and we know exactly what we’re doing, and we’ve got this transition of revenue so we don’t have local jurisdictions coming back next session or the session after or the session after that saying, “Make us whole, because this happened to us, an unintended consequence of the current situation.”  I think we should be proactive.  To me, this is letting us get proactive knowing exactly how we’ll handle these situations.

 

Senator O'Connell asked, “So, if [we] just blanketly [sic] charged everybody the same, regardless if they were a local government, municipality, or the private sector what happens?  Is it just paying themselves the money then?”

Ms. Vilardo answered, “I’m not totally sure I am clear.”

 

Senator O'Connell clarified:

 

Okay, if you said to the counties that wanted to go into this, or the counties that are currently in it, in order that we don’t lose any of the tax base, if that is your preference, then we’ll just charge you.  In fact, I think this is what a lady from Arizona has testified they do, they just are under all of the same provisions that the private sector is.

 

Ms. Vilardo responded:

 

Yes, that would be true, Senator.  There is one interesting thing, though.  When you are comparing as to what you think you owe, you have situations like Colorado and Texas, which allow bidding of a government against a private sector, have set up very, very specific forms, because government does not account for expenses the same way the private sector does.  And to be able to get to this level playing field, if you will, you need some more detail.

 

Senator Townsend stated:

 

All right, I understand in Senator Rhoads’ [Senate] Committee on Natural Resources, there’s another bill affecting utilities, governments, et cetera.  And so, until the committee’s had time to look at this, we’ll put this back on Monday, and make sure we don’t bring it up until you [Ms. Vilardo] get back from your plane flight.

 

Ms. Vilardo remarked, “Thanks for the consideration.”

 

Senator Townsend opened the hearing on S.B. 337.

 

 

SENATE BILL 337:  Provides for regulation of boilers, elevators, pressure             vessels, boiler inspectors and elevator mechanics. (BDR 40-1033)

 

John Wiles, Division Counsel, Division of Industrial Relations, Department of Business and Industry, remarked he believes Senator Care’s proposed amendment (Exhibit C) is going to be withdrawn and in its place is the amendment proposed by the Division of Industrial Relations (Exhibit C).  Mr. Wiles explained the proposed amendment does several things.  First, in section 4, it strikes provisions related to the certificate for boiler inspectors.  Those provisions are more appropriately placed into a regulation.  In section 8, the Division of Industrial Relations is given some latitude in defining the responsibilities of an elevator mechanic by including the language that was at the end of section 8.  By regulation they can carve out those areas they believe are appropriate to maintain public safety and the workers’ safety.

 

Mr. Wiles said in sections 10 and 11, language is added for certain types of boilers.  The reason is the expansive nature of the definitions in the statute; it could include, for example, domestic hot water heaters and boilers of a very small size.  He said it is certainly not their intention to do that.  He said they have existing regulations pertaining to the size of boilers and pressure vessels and the types of elevators they are regulating.  He said those regulations would go forward.

 

Mr. Wiles explained that provision in section 12 (Exhibit C), has been deleted because it is provided for in subsection 3 (of section 12, Exhibit C) in terms of the reference to a statute in the assessments.

 

Senator O'Connell suggested a change to line 11, by adding “actual and reasonable” instead of just “reasonable” fees.

 

Mr. Wiles said that is an excellent suggestion, because it is certainly the division’s intention to attempt to recover only the actual cost of the services they are providing.  He said the division is not trying to make money above and beyond the cost of carrying out these provisions.  He agreed to inserting “actual and reasonable” at that point for clarification.

 

Senator O'Connell clarified it is not “actual and reasonable,” it is “actual/reasonable.”  Mr. Wiles remarked, “Oh.”  Senator O'Connell asked, “Okay?”  Mr. Wiles answered, “Fine.”

Mr. Wiles continued, saying, in subsection 3, there is reference to the assessment statute.  The fees would be used to replace the assessment as the funding mechanism for this program.  He then noted in sections 16 and 17, the provisions relating to boiler inspector have been deleted.  Mr. Wiles explained these provisions were inadvertently placed in the original draft, and they are being removed to effectuate the intended purpose.

 

Senator Terry John Care, Clark County Senatorial District No. 7, stated the bill is now completely different than it was on the previous day.  There were some reservations initially expressed by the school district, and later by the NRA (Nevada Resort Association), but his understanding is everybody is on board. So, he said, “I think we have a product here.”

 

Rose E. McKinney-James, Lobbyist, Clark County School District, expressed appreciation to Senator Terry Care and John Wiles for their willingness to consider the concerns of the Clark County School District regarding this bill.  She stated it is her understanding the school district is satisfied with the changes that have been made through this amendment, and they now withdraw their opposition.  She said she would defer to Mr. Jerry Smith, Clark County School District’s technical person related to this issue, if the committee has any technical questions, but they now support this measure, as amended.

 

Jerry Smith, Director of Maintenance, Clark County School District, concurred with Ms. McKinney-James’ testimony, stating at first the school district was concerned about the bill because it did not really know what all it included and what the fiscal impact was going to be, especially on its maintenance department.

 

Robert A. Ostrovsky, Lobbyist, Nevada Resort Association, said he did review the amendments and spoke to Senator Care, but was unable to talk to some of the sponsors of S.B. 337 before today’s committee hearing. He said he had some concerns, especially with section 7, which defines a stage lift as an elevator.

 

Mr. Ostrovsky explained his clients have a lot of stage lifts, which are large and, in some cases, small devices.  Some can be extremely large, he added.  He said after construction, the stage lifts are maintained and operated by the Las Vegas stagehands union personnel, for the most part.  Mr. Ostrovsky said over the years his clients have worked out a very sensitive situation between the various local unions (such as the Operating Engineers Union, the Stagehands Union, IBEW [International Brotherhood of Electrical Workers], and some others) and asked who has jurisdiction in certain areas.  He said they are very concerned this will raise a jurisdictional dispute about who has the right to operate, maintain, and repair stage lifts.  Therefore, Mr. Ostrovsky asked the words “stage lifts” be stricken from this bill.  He added they have litigated this matter before the Occupational Safety and Health Administration at the federal level as to whether or not a stage lift is an elevator.  There are varying opinions about that definition.

 

Mr. Ostrovsky said his second concern is about not being permitted to alter the cab of an interior elevator in a hotel with the use of hotel operating engineers personnel.  They would have to have a specialist come in to do that, he added.  Mr. Ostrovsky said the interior cab work of an elevator, such as mirrors, wallpaper, et cetera, is currently done by hotel operating engineers on a routine basis.  He said he is asking the proponents of this bill whether this alters this situation so those individuals can no longer perform that work.  Mr. Ostrovsky asserted, if it does not, then that concern goes away.  However, he added, his biggest concern is the stage lift issue.

 

Mr. Wiles said his understanding is those jurisdictional issues have been resolved.  In reference to the stage lift issue, he said it would be the division’s intention to move forward.  There are applicable standards to stage lifts, which, he said, are essentially hydraulic devices that raise and lower a platform, much like a hydraulic elevator.  Mr. Wiles said it would be the division’s intention to preserve the workers’ safety issues and to preserve the issues related to public safety if any are related to those devices, and to respect current jurisdictional boundaries in the process. 

 

Mr. Wiles said the same would be true for the interior work done on elevators.  However, an interior modification of an elevator that affects the weight is a very significant concern to the division in terms of passenger safety. He said decreasing the load on the cab or increasing the load in a certain margin can affect the way the elevator stops.  The elevator needs to be inspected or certified for use after that and the division certainly wants to do that.

 

Mr. Wiles pointed out, to the extent there is work done on the inside by         Mr. Ostrovsky’s  people, be they carpenters or operating engineers, the  division

believes that work can continue up to a certain level.  He reiterated this is not a jurisdictional battle. He went on to apologize because the union representatives are not at the hearing.

 

Senator Townsend asked, “Are they available?”

 

Mr. Wiles responded he has not been able to find Danny L. Thompson or a representative from the Elevator Industry Workers union.

 

Mr. Ostrovsky interjected he did speak with Mr. Thompson on the previous night and Mr. Thompson said he was going to try to maintain contact with the local stagehands union in Las Vegas, in particular.  However, he noted,         Mr. Thompson had not gotten back to him yet.

 

Senator O'Connell queried whether there would be any concern about the removal of the language on line 16 that said “stage lift.”

 

Mr. Wiles stated, at this particular point, in order to process what the division believes is a very favorable bill for public and workers’ safety, he would have no objection to removing that portion if the committee chooses, and proceeding with this bill.

 

Senator Townsend said the last thing the committee wants is a jurisdictional conflict between respected bargaining units.  He said if the committee uses Senator O'Connell’s proposal to take out those words for now, the bill can be sent to the Assembly.  If everyone’s concerns are met and people do not anticipate, for example, a strike or other problems that can result from this kind of situation, the committee would entertain that, explained Senator Townsend.

 

Danny Thompson, Lobbyist, Nevada State AFL-CIO, having arrived, testified his organization supports S.B. 337.  He said he had talked to Mr. Ostrovsky about the stage lift issue, but had not yet gotten an answer on that issue.  He said he did not know if Mr. Stanley (Bill Stanley, national organizer for the International Union of Elevator Constructors) was in attendance to talk about where that issue fits into the regulations.  He added a lot of this is not talked about in the regulations, but he reinforced they do support this bill and believe it is an important one, because there are a lot of people killed every year who play with elevators who don’t know what they are doing.  He said it is a very dangerous job, and they lose a lot of elevator constructors who know what they are doing.

Senator Townsend pointed out the committee’s concern on the testimony was the jurisdictional issue between unions.  He acknowledged the committee realizes Mr. Thompson will not be able to give them the answer today.  He reinforced the committee does not want to create that issue, and explained the committee, to make everybody happy, would remove the words “stage lift,” and then send the bill to the Assembly.  During that time, he requested,        Mr. Thompson and Mr. Ostrovsky get together to solve the jurisdictional issue between the unions when the bill is being considered by the Assembly.  Then the bill can be amended and sent back to the Senate.

 

Mr. Thompson responded that would be great.

 

Senator O'Connell moved TO amend and do pass Senate Bill 337 with the amendment proposed by the Department of Business and Industry, and TO omit the wordS on page 2, line 16, “stage lift,” and that we add the word in Section 12, line 11, “actual” before the word “reasonable.”

 

Senator Amodei seconded the motion.

 

THE MOTION CARRIED UNANIMOUSLY.

 

*****

 

Senator Townsend said before the hearing on the dental bill is opened we need to get back to the issue of divestiture and recognized PUCN Chairman Don Soderberg, waiting to testify in Las Vegas.  Senator Townsend asked Chairman Soderberg to walk the committee through the order the PUCN authored the last couple of days regarding what Senator Townsend believed was Timothy Hay’s petition regarding the divestiture of the plants.

 

Don Soderberg, Chairman, Public Utilities Commission of Nevada, testified:

 

Prior to the merger ordered entered into by the commission [Public Utilities Commission of Nevada] approving the merger between Nevada Power Company and Sierra Pacific Power Company, existing law allowed utilities to sell assets with approval from the commission if it were in the public interest.

A condition of the merger approval was that both of those utilities would sell off their generation assets, or commonly called power plants.  Largely at the Public Utilities Commission’s [of Nevada] urging, the federal energy regulatory commission entered into an order approving the merger of those two utilities, with the very same condition.

 

With all that’s gone on in the electric market place over the last year, the Bureau of Consumer Protection brought forward a petition to us and asked us to re-examine that condition and place a moratorium on divestiture.  However, as you are aware from prior testimony, the sale of one plant, actually Nevada Power Company’s interest in the Mohave generating station, had been approved last fall pursuant to an agreement between the consumer’s advocate, Nevada Power Company, and our staff, which was accepted by the commission [PUCN].  That sale has not been consummated.

 

A week ago, today, the commission conducted a public hearing on the issue of whether or not we should honor the consumer advocate’s petition in whole or in part.  Based on that hearing, Wednesday morning at a special agenda, the commission entered into an order that effectively reverses the condition placed upon the Nevada Power Company/Sierra Pacific Power Company merger, which finds that divestiture of generation assets was in the public interest and mandates they be sold.

 

Along with that finding, we have directed our General Counsel to take any legal or administrative action necessary to petition the FERC [Federal Energy Regulatory Commission] to reverse their similar condition upon that approval.  And, because we are aware existing statutes still would allow any utility to sell its assets with approval, we have placed a 60-day moratorium on the acceptance of any of these applications.  The effect being we were uncomfortable knowing the Legislature was contemplating action that would take care of the underlying law with regard to divestiture of power plants.

 

We didn’t want anybody to be able to come in with an application and try to toll some sort of legal right we hadn’t anticipated in our legal research, and thereby claim, because the application had been filed, somehow it should take precedence over any law you may pass or is signed into law by the Governor.

 

Senator Townsend asked the committee members if they had any specific questions of Chairman Soderberg.

 

Senator O'Connell asked Chairman Soderberg if he could tell the committee whether the AES Mohave Limited Liability Company (LLC) deal has a time-certain date when they were to receive the title of that plant, and looking at the 60-day out, if it overlaps in anyway.  Also, she asked if it does anything the committee should know about regarding the moratorium and the time-certain date when they were to receive title.

 

Chairman Soderberg responded:

 

I am not familiar with intricacies of the contract of sale between Nevada Power Company and AES [Mohave LLC].  That sale was approved in October of last year.  The parties had not consummated that sale. Because there was a concern [it may] somehow be accelerated, a few weeks ago we entered into a separate order, which stayed the effectiveness of our approval for 60 days.

 

Again, that 60-day staying was very similar to our 60-day moratorium on accepting new applications.  We did not want our approval to be effective that would allow the parties to rush to close, pending any change in law which might affect that sale.  And we chose that time frame to extend beyond this legislative session and overlap a little bit to give the Governor the opportunity to sign any legislation into law he saw fit without the parties, again, rushing to attempt to close.

 

We have been informed the parties had not intended to close for at least 30 days from the date of that action.  So, I think we’ll have to see how that shakes out, and 60 days, depending on the actual language of any legislation that’s passed.

Senator Rhoads asked, “What happens if FERC [Federal Energy Regulatory Commission] turns down your request?”

 

Chairman Soderberg answered:

 

Our legal counsel has opined the FERC order, in and of itself, does not preempt state law.  The FERC order applies to portions of the utility’s activities that are jurisdiction to the federal government.  I think if FERC does not somehow modify its order, and this state changes its law to prevent divestiture, we do have a conflict situation.

 

It would be my anticipation that we do not get into that type of situation.  Our Washington [D.C.] representatives had informal discussions with people at the staff level of FERC, and they are watching the situation closely, as well as the situation closely throughout the West, and we are not getting an indication that generation divestiture is a hard-and-fast policy of the FERC.           I understand the Bureau of Consumer Protection’s representatives in Washington [D.C.] have had similar conversations.

 

In some various FERC filings that we have intervened on over the past couple of months, we have continually made the FERC aware on an official basis there is legislation pending before you that may alter the ability of this company to divest its generation assets, and we are considering reversing that condition within our own order.  So, this is not something that will be a shock to the FERC, both on an official or unofficial level.

 

Senator Townsend asked:

 

Mr. Chairman [Don Soderberg], the language, therefore, which is left for your jurisdiction, is the standard that was in place before any of this occurred.  Is it correct that a sale of a generation asset would require an application to you and then you would rule based on the evidence on what is in the best interest of the state of Nevada?  Is that the former standard that you are now going back to once you removed your mandatory sale provisions?

 

Chairman Soderberg responded:

 

Mr. Chairman, that is correct.  Now any sale of a major asset of the utility will be judged under a public-interest standard, which would allow the applicants to argue it is in the public’s interest, and any opponents to argue it is not.  Prior to Wednesday’s action, it was presumed to be in the public interest and all that was on the table for the commission [PUCN] to look at is whether the bundle was appropriate for market-power purposes.

 

Senator Townsend stated:

 

The actions of the commission have, therefore, placed a 60-day moratorium and then gone back to the original standard.  I don’t believe that is what our colleagues in the other house or the Governor or anyone in this committee has thought should be appropriate.  Under chapter 369 of NRS there’s a 2-year prohibition, and the concern of the committee has always been one of how do we defend that if we’re in court, again.  Particularly with regard toward utility and what it may suffer ultimately puts them in a precarious financial position, or is passed on to our consumers. 

 

Those two issues are of concern to us in how we phrase a bill that would, in fact, be the most defensible and, yet, provide options that would be potentially appropriate for all classes of customers.  This committee originally, and the bill is sitting, currently, on the desk, has an amendment that provides the prevention of the sale on a 2-year basis.  It does reconstitute deferred energy in a manner that was more closely aligned with the original provisions clearing up the two issues in question before the commission, which were the F&PP [fuel and purchased power] rider and the CEP [comprehensive energy plan].  And then the last thing was removing from 369 [A.B. 369] the total repeal of restructuring. 

 

There is some question as to whether that is as defensible as the repeal would be, but just as importantly, when you read the amendment and you read the bill and you analyze what is in the amendment vis-à-vis restructuring, there does not seem to be a clear-cut legal position regarding the Governor’s authority during the moratorium on whether he, at that time, could start [stop] any group from leaving or aggregating.  And that is a serious question.  It would be my recommendation that we author an amendment that would be in conflict, but it would keep the repeal that we have put in, which is a 2-year-specific moratorium.  It would also have the deferred energy language in it, and it would reconstitute 369’s [A.B. 369’s] original provision of repealing the restructuring.

 

That would solve the question of when the Governor could do this, if at all.  It would also solve the last lingering question        regarding defensibility.  And, Mr. Chairman [Donald L. Soderberg],                I appreciate your being here today.

 

So, it would be my recommendation, committee, we adopt out of this committee a conflicting amendment that would maintain the two provisions I’ve outlined, which is the moratorium and deferred energy, and place back in the repeal of restructuring, and author it as the committee’s position on the floor, and let the other one [amendment] die for another day.

 

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

 

Senator O'Connell asked, “Mr. Chairman, are you talking about the original proposal we made prior to Senator Rhoads coming in and changing it?”

 

Senator Townsend answered, “Yes, exactly.”

 

Senator O'Connell mentioned, “The one area I don’t think you included in that was the taking out of the Governor, as far as where it comes back to the Legislature at the next session.  Did you intend to include that?”  Senator Townsend responded, “If that was in there, then that’s what I intended.”

 

Senator O'Connell stated:

 

That was in there.  Okay, then, for the secretary, we would be talking about the original amendment that was passed on April 6, 2001.  It was my motion.  Senator Rhoads made the second.  So that would be the motion, Mr. Chairman.

 

Senator Townsend said:

 

All right, I have a motion from Senator O'Connell to author a conflicting amendment to Amendment [No.] 219 that would include the original amendment that came out of the this committee that would cover the four issues we discussed.

 

Senator O'Connell moved TO AMEND AND DO PASS a.b. 369 WITH AMENDMENT NO. 354, WHICH CONFLICTS WITH AMENDMENT NO. 219.

 

Senator Amodei seconded the motion.

 

THE MOTION CARRIED UNANIMOUSLY.

 

*****

 

Senator Townsend opened the hearing on S.B. 133.

 

SENATE BILL 133:  Authorizes board of dental examiners to issue limited number of licenses without examination each year to dentists licensed in other jurisdictions. (BDR 54-241)

 

Senator Carlton explained the second amendment (Exhibit C) to this bill would be addressed, along with another amendment (Exhibit D) that is being distributed to the committee.  She said one of the biggest priorities stressed at the committee hearing was the problem in the rural communities.            Senator Carlton asked the committee to look at the amendment dated April 12, 2001, (Exhibit D).  She said she believes the restricted geographical license amendments address the concerns of the rural communities.

 

 

Senator Carlton said the times were changed because the subcommittee thought the years originally listed were a bit cumbersome.  She commented this particular amendment received a very good consensus in addressing most of the problems.  Under section 1, [paragraph] d, they added the word “rural” to make sure that this was before the county commissioners so they would have the options to do this. 

 

Janice C. Pine, Lobbyist, Saint Mary’s Health Network, asked for clarification as to which particular section of which amendment Senator Carlton was addressing.

 

Senator Carlton answered she is on the second page of the April 12, 2001, amendment under the subheading: Restricted Geographical License Amendments (Exhibit E).

 

Linda L. Sheldon, Lobbyist, Great Basin Primary Care Association, testified the only thing her organization asked to be included, after having checked with some of the other constituents, is it be a 90-day time line from application to approval so the agencies or counties that are looking to bring these individuals in can have some sort of a time frame they can work within to plan for services.

 

Senator Carlton acknowledged that was discussed and she neglected to put it into her notes.

 

Senator O'Connell stated the committee does need to know where, specifically, that language needs to go in the bill.  She then asked if that language is going to be inserted in this section of the amendment.

 

Ms. Sheldon responded her organization would like a time frame on the restricted geographical license for what is being called the rural piece, for rural urban areas for the federally-qualified health centers, be they in Clark County, Washoe County, or in the rural areas.

 

Senator O'Connell said her question dealt with the actual placement of the language.

 

Mr. Hillerby stated he had discussed the 90 days with Dr. Dennis Arch.

 

Dennis J. Arch, D.D.S., President, Board of Dental Examiners of Nevada, said he did not think there would be any problem in that situation.  Not having done it before, he said, they are subject to change without notice.  However, he said, expeditious would be the correct word.  “We would do it as quickly as we could; we believe in this amendment,” he added.

Senator O'Connell reiterated the committee needs to know where to place the language in the amendment.

 

Senator Carlton said she believes the committee is getting an opposing position without actually saying they are opposing.

 

Mr. Hillerby clarified, to include the dental board amendments with this one change, the committee needs to look at all the dental board amendments on geographic licensure, because the only thing they are changing is adding the examination fee for restricted or limited license to practice.  He said he would discuss fees because of background checks on unexamined applicants that are now going to get a license in the state.

 

Mr. Hillerby said he was trying to look at all the language to see where the word “expeditious,” as Dr. Arch has said, could be added.  He directed attention to the amendments presented by the Board of Dental Examiners of Nevada, which are part of the April 4 amendment (Exhibit C), and to the new NRS section, restricted geographical.  He said somewhere in subsection 1, it could be added because it says “we will issue a restricted.”  He said the word “judiciously” could be inserted or, somewhere in that section, would be the words to indicate “we do not get to drag our feet to get this done.”  Mr. Hillerby said after NRS 631.300, in the second line, the word “judiciously” could be inserted before the word “issue.”

 

Ms. Sheldon stressed she is in agreement with this section; however, an interpretation of “expeditious” could be quite broad.

 

Senator Townsend pointed out the Legislative Counsel Bureau will write it exactly the way they want to write it, and “that is the way we have to live with it.  It may be expeditious, in a timely manner, or as soon as practicable.  So, we need to just agree on the concept.”  Ms. Sheldon responded that would be fine.

 

Carolyn Ford, Director, State Office of Rural Health, School of Medicine, University of Nevada, Reno, University and Community College System of Nevada, said they agree with the amendment, but wanted to clarify the suggested amendment to section 1, (d), to insert the word “rural” before “county commissioner” because this does not, necessarily, do that, because there are not rural county commissioners; there are town boards.  Ms. Ford stated, if it is the pleasure of the committee to say this would take care of it, she is fine with that amendment.

 

Senator Carlton asked if Ms. Ford would be more comfortable with the typical population levels.

 

Ms. Ford responded, “No.  Population levels need to be adjusted in Nevada.”

 

Senator Carlton recalled there are rural communities in Nevada, such as Laughlin and Overton, that are part of a larger county.

 

John L. Meder, Committee Policy Analyst, Research Division, Legislative Counsel Bureau, said the way it is worded it would include all of the rural county commissioners, even though they have town boards and the county commissioners would be the board that would have to take that particular action.

 

Ms. Ford clarified, “So, the Clark County Commission is noticed as a rural county commission?”

 

Mr. Meder answered, “Not in this case, but I thought there was a provision down lower where it talks about federally qualified or not-for-profit clinics [that] covered that issue.  I thought that was taken care of with that.”

 

Ms. Ford responded, “That is an ‘or’ part of it.  You could apply to the board as an FQHC [Federally Qualified Health Center] or a nonprofit clinic.  But if somebody were approaching the county to go to a place of work, they could still go to the county commissioners and request they go to the board for a restricted license.”

 

Mr. Meder said it was his understanding the rural county commissioners were the only ones that had to act to enforce this provision.  Either the federally qualified clinic or the not-for-profit clinic could go directly to the board for this provision.

 

Ms. Ford responded, “Right. We were also identifying rural parts of urban counties would qualify, so we were just trying to find the correct language.”

Senator Carlton stated she thought if those rural areas proactively went to the commission, they would be covered by that provision.

Ms. Ford stated she was just pointing out she does not believe “rural county commission” is a legal title, or that it covers those areas she was referring to.

 

Senator Carlton reiterated, as Senator Townsend said, when this is sent to the Legislative Counsel Bureau they will make sure the actual words used are the legal terms needed to address these issues.

 

Mr. Hillerby added at the subcommittee meeting the board did agree to that, to the rural parts, but it would be geographically limited to that rural area, as we know Gerlach, for example, is hardly an urban area.  However, he said, the words need to make it clear we are not offering this licensure to people to practice in urban areas of Washoe and Clark counties.

 

Senator Carlton said that is the intent.

 

Ms. Pine commented while on this page, following in subsection (e), she wondered if it would be appropriate to insert the words “or mobile van” where it says “or a non-profit clinic.”

 

Senator Carlton mentioned she believed that was covered.

 

Ms. Pine remarked, “Okay, I just wanted to make sure.”

 

Senator Carlton responded, “Because they are in association with those particular entities they would be covered under this provision.”

 

Ms. Pine said, “The vans are not a part of a clinic; in our case they are a part of a hospital. I do not know about the University of Nevada, Las Vegas (UNLV), van that goes into the rural areas.”

 

Mr. Hillerby said it was Nevada Association of Health Plan’s understanding the mobile van was a clinic. He said one of the reasons that language was added was because of the Saint Mary’s clinic, and even though it had wheels, it was still a clinic.

 

Senator Carlton said, “And that was my recollection, also, Ms. Pine.  So,          I believe you are taken care of; and now we have that on the record, so that is a good thing.”

 

Ms. Pine responded:

 

Great.  Now, on the top of the next page, it also talks about practicing in Washoe County and Clark County, and our vans go into the rural areas.  As I read this amendment, the dentist would be prohibited in subsection 4, the dentist that would be covered under the top subsection would be prohibited in section 4 from going into the rural area.  So, I am wondering if it would be appropriate to . . .

 

Senator Carlton interrupted:

 

Ms. Pine, I believe we did address that issue in the subcommittee meeting, and if they are home-based out of one of these particular places, there was no intention of trying to restrict them from going where the dental care was needed.  And we did discuss that in the hearing, and it was agreed upon.

 

Ms. Pine stated, “Okay, just so long as that is on the record.”

 

Mr. Arch commented on the April 12, 2001, amendment, page 2, section 1, paragraph (c), where it says, “pays the examination fee.”  Actually, he said, “There is not an exam fee for restricted or limited license.  That would be ‘application fee’ for restricted or limited license.  That is just housekeeping.”

Senator Carlton responded:

 

No, that is not housekeeping.  If we wanted to discuss this now, that is fine.  Actually, I know this is going to be a part of this section and this will reappear in other sections, so if the committee will indulge me, I will explain the reasoning and rationale behind this.

 

In talking to the board and hearing the concerns they had in doing the background checks they would need to do, and hearing, in my mind, one of the underlying concerns is the cost of possibly doing this and doing it well to protect the public safety . . . .  Actually,    I didn’t think of this at the subcommittee meeting, but I would like to include the examination fee you have, and with language saying, that per the conditions in this legislation, when the examination is waived, you will still charge the $750 to be able to accomplish your mission in doing the background check and all the paperwork and licensure that is involved in doing this.

 

So, anyone coming to the state of Nevada and wanting to practice will pay $750 whether they go through the exam or whether, for this piece of legislation, they are not subject to the exam.  They will all be paid the same amount so there is no financial incentive other than the qualifications in this bill.  Everyone will pay the $750 coming through the gate of Nevada.

 

Committee, I do apologize.  This is something that is new to some of the members here, and I was planning on addressing it as we got further in.  Are there any concerns about that piece of language?

 

Mr. Hillerby pointed out the only issue raised was the term “examination” fee when there is no “examining.”  He noted they are pleased to be able to charge a fee, but technically for this it is a licensing fee, not an examination fee.

 

Senator Carlton pointed out in the bill it says, “examination and license” and, therefore, this would fall under that license.  She noted they looked very hard to find another place to put this and found it very difficult, but there is no actual license fee in the original bill or in the regulations.  Senator Carlton said adding it to “examination and license” seems to be the most logical place to put it to keep an equal footing for all dentists coming into the state.  She asked if she had read that correctly.

 

Mr. Hillerby answered he was sure the Legislative Counsel Bureau would take care of it, but, he noted, it says “examination fee” for a license to practice dentistry in the current law.  It does not say “examination.”

 

Senator Carlton stated, “Examination fee for a license.  And, that license does include the background checks, which we are aiming to go after. So, I thought that would be the logical place to put it because of the opportunity to be able to do these background checks.”

 

Bobbette E. Bond, Culinary Workers’ Union, asked, “Can we change the existing language to say, ‘examination and licensing fee?’”

Senator Carlton answered, “I have discussed that with LCB [Legislative Counsel Bureau], and I would have to go back down and discuss it with them, again.       I just felt this was the most appropriate line to put that under.”

 

Senator Townsend interjected:

 

What we do not want to do here is spend time trying to be craftspersons.  That is what the 75 people in the basement do.  We need to know what you agreed to, or did not agree to, and then the committee will address what was not agreed to.  That is all.

 

Senator Carlton expressed to Senator Townsend that this was not agreed to before today’s hearing.  She said this was something she had tried to address while working these amendments and putting together the best package possible.

 

Ms. Bond stated, “I know that Culinary Health Fund and Culinary Union both concur that this is fine with us.”

 

Ms. Sheldon said, “We concur, as well.”

 

Mr. Hillerby remarked:

 

Again, like I said, I think, I am saying this because I am convinced that LCB will address this, because I think it could raise a legal issue if you are paying for an examination fee and you are not being examined.  But, they will handle that, is all I am saying.

 

Senator Carlton, said:

 

I think we can put a statement at the beginning of the bill to clarify that, in an appropriate section, a line “or upon the board waiving the exam, this fee will be” with the legal term of art.  So, if we have gone there, then we can move on to the next item.  Mr. Chairman, would you like the committee to make their preferences known on each section as we go, or would you prefer to deal with this all together at the end?

 

Senator Townsend answered, “I would just go right through it.”

 

Ms. Ford requested and noted:

 

On page 2, subsection 6, of the April 4 amendment [Exhibit C] of this same section, for clarification sake, I would like to make sure we insert the word “private” in front of practice on the second line.  This is to clarify the restriction on the license is outside the bounds of a private practitioner.  Somebody working in a federally-qualified health center or non-profit setting still could receive compensation, so we did not want it to restrict their ability to receive that compensation, but to make sure what we were restricting was private practice.  I would still like to, additionally, add, on the record, I still have my concern about the two-tiered system of care.  And, this still bothers me, somewhat, but I will move this forward.

 

Mr. Hillerby pointed out even though the initial fee for the examination or licensure is paid, there will be a need to have a renewal fee, as well. He said a renewal fee is not addressed, but because the practitioner will have a special license, a renewal fee for the geographically restricted license will be needed.

 

Senator Carlton said it was her intention to incorporate them into annual    license renewals and into the same subheading so everyone stays equal.            Senator Carlton said she will discuss this with the Legislative Counsel Bureau to make sure it is a legally sound piece of legislation.

 

Senator Carlton moved to the specialty section under the April 4 amendment.  She stated the only concern voiced to her after the subcommittee hearing was an e-mail she received from a dentist who had questions about the language regarding “certified by the board” or “board eligible.”

 

Mr. Hillerby stated it would be “certified as a diplomat.”  Board eligible just means a person is eligible to take the test.  If the person has not taken the test then that is the qualification the board was looking at to being willing to license them strictly by that credential, that they are board certified, not that they are eligible.

 

Senator Carlton clarified they have not taken the test when they are eligible to take the test.  Senator Carlton then asked if the language were left here, will it be restricting, in any way, or hampering, or slowing down, the possibility of people coming to practice in Nevada.  She also asked whether the threshold is being set at too high a level.

 

Mr. Hillerby responded, “I do not think so.  The problem is you can be eligible by education and certain training, but you still have to test to prove you have absorbed that additional training and education.”

 

Senator Carlton clarified,  “Since we would be waiving the examination here, we want the examination to be given somewhere else.”

 

Mr. Hillerby stated, “Exactly, somewhere else.”

 

Senator Carlton said she would now be moving to the April 12 amendments to address some of the issues discussed at the subcommittee hearing.  The next issue she pointed out is the 5-year discussion with the 2-year license.     Senator Carlton mentioned this warranted some discussion for the committee, and this issue was not agreed upon during the subcommittee hearing.  This is the urban component of this piece of legislation.

 

Senator Carlton pointed out the staggered dates (Exhibit E), which she thought might make it a little more palatable.  Senator Carlton said the Legislature is asking the dental board to do a lot with this legislation regarding the specialist components.  She said she would like to see this particular component addressed as of July 1, 2003, if the committee so wishes.  The Board has  not  agreed to this, Senator Carlton said, but, she added, this is an important  issue to raise to gain access in the urban areas through the provisions discussed earlier.

 

Elizabeth Gilbertson, Lobbyist, Hotel Employees and Restaurant Employees Welfare Fund, reviewed points covered in Exhibit F.

 

The last point Ms. Gilbertson made was regarding temporary licensure.  She said the proposal is formulated so there is a 5-year period of practice required to ensure that any dentist who comes from another jurisdiction has no disciplinary history.  Following that, she said, is a 2-year period of oversight by the Nevada dental board during the period of temporary licensure to, again, ensure that dentists practicing under this provision maintain the quality of care expected in the state of Nevada.

Senator Shaffer asked Ms. Gilbertson if she has any idea what the complaint rate is against the dentists in Nevada.

 

Ms. Gilbertson answered it is shown in Exhibit F.  She said the national average in calendar year 1999 was 7 complaints per 100 dentists.  In Nevada, it was slightly under 9 complaints per 100 dentists.

 

Senator Townsend stressed to Senator Carlton the committee is not debating whether Nevada has good dentists or bad dentists; the committee is trying to determine if Nevada needs more dentists.  He asked that the discussion focus on that.

 

Senator Carlton explained the reason she is having these two particular issues presented is, being a subcommittee of one, she wanted to have the full committee hear all the information she heard so the committee can make the decision with all the information.  Senator Townsend responded it was “not a problem.”

 

Mr. Hillerby testified the dental board has come a long way.  He stated they are trying in a very responsible way, through the rule, to get access to dental care in rural Nevada, and with the agreement of those folks representing rural Nevada at the table.  Included in the specialists, Mr. Hillerby pointed out, are “pediadontists,” or dentists who take care of children, noting there is a need to determine how to open the doors to more people that take care of children.

 

Mr. Hillerby said:

 

When you start talking about access in urban Nevada, that is an economic issue.  And, I will submit to you that you can bring in as many dentists as you want; they are going to practice where the money is.  They are going to practice where they get reimbursed well.  And, I just want to say that, for the record, and I still believe this board has a responsibility that was given to it by this Legislature to protect the health and safety of the public.  That is done through quality, and that is why we are not in support of this [bill].  Senator Carlton said that right up front, so I do not think      I need to say anymore than that unless you would like some questions from me.

 

Senator Carlton stated since the committee has heard both sides on this particular issue, she has accomplished her mission.  She then referenced another component of a possible urban solution, which she discussed with Senator Rawson.  She said she has not heard any objections to this particular proposal and would submit it to the committee for evaluation.  This would delete references to the various regions: central, northeast, and southern.  It would simply be the Western Regional Examining Board, and if dental applicants would pass that examining board with a score higher than the 50 percentile, then they would be allowed, with this piece of this legislation, to go without the exam here in Nevada.

 

Senator Townsend, because time was getting short, directed Senator O'Connell to prepare a summary booklet of the proposals as she heard them in her subcommittee hearing, and give them to the committee so they could go right through it on Monday.

 

Senator Townsend closed the hearing on S.B. 133 and opened the hearing on S.B. 309.

 

SENATE BILL 309:  Makes appropriation to Division of Emergency Management of Department of Motor Vehicles and Public Safety to purchase equipment that will provide emergency power supply for pumps that push fuel into Clark County. (BDR S-1158)

 

Senator Bob Coffin, Clark County Senatorial District No. 3, testified:

 

We have a lot of people signed in favor of the bill.  Many of them signed in favor of the bill not knowing exactly how the bill will work, but just knowing that we are in crisis stage here in Nevada.

I would like to take us back to January [2001] for a short chronology.  January 17, this year, I received a call from CalNev Pipeline Company, not a very politically active company, just people doing their work day-by-day, delivering the goods for their customers who are the oil companies who deliver to us as consumers, indicating they were in a serious state of affairs because, at that point, they had already been shut down numerous times because they were on interrupted power suffering the chaos that was occurring in California.  They were, at that point, down to a couple of days of gasoline, totally out of what they call clear gas, which is the non-ethanol-loaded gas, which can be used in rural counties that don’t have containment problems.

 

They were virtually out of diesel for our trucking community, long haul and short haul.  All it was, basically, around town was whatever was in the tanks.  [Las Vegas] McCarran [International Airport] was down, very far down for them, and that began to come to the newspaper, the next day.  That was about the only public notice there really was of how dangerously close to [a] crisis situation we were in [in] January.  It’s almost as if Y-2K had occurred and nobody knew it, but it was a year later.  And that was a total breakdown in our fuel-delivery system, upon which our entire economy rests.

 

It may or may not have been quite as bad in the north, but in the south, with just a couple of days of gasoline at the tank farm near Nellis Air Force Base, if word had gotten out immediately, then there would have been a run to the gas stations, which would have prompted a run to the tank farm, which would have emptied it, totally.  And, then we would have been in serious difficulty.  Truly.

 

Senator Coffin continued:

 

Fortunately, after I heard from the pipeline company, I immediately called Governor Guinn and we spoke about this for 15 or            20 minutes.  He was totally unaware of the situation.  He got on the phone to the CalNev Pipeline people to speak to the right engineering folks so he could be properly briefed.  Then he got on the phone to Governor Gray Davis [of California] and, in what would have to be called a masterpiece of diplomacy,          Governor Guinn worked with Governor Davis for weeks to help get us past this crisis, through a combination of waivers, of suspension of interruptions, in essence, through Executive Orders and through encouraging the ISO [Independent Service Operator] and, I guess, the [Nevada] Public Utilities Commission, they worked us out of that problem. Slowly.

 

It took, in Southern Nevada, almost 6 weeks to build us back up, because our pipelines, while adequate for present consumption in Nevada, are based upon a program-steady rate of growth.  Not a conservative rate of growth, but based on our 6 or 7 percent annual rate of growth, which we’d been experiencing.  So, they’ve been responsible people.  They have been trying to provide fuel, not knowing a crisis could occur to them.  And you can understand the position these pipeline companies were in; they have customers who negotiate with them on the rates for which they pay these common carriers.  So, they fight rate increases.  Naturally, then, the company would want to buy the cheapest possible power, so they bought interruptible power.  And that’s what they first lost.

 

And southern California wasn’t experiencing rolling blackouts during all this; this was just interruptions of service because they were close to blackouts.  At stage-3 alert, I believe.  In the northern California area they were experiencing blackouts, and reserves were dropping at the tank farms here in Reno-Sparks.  They weren’t quite at the danger level we were in Las Vegas.  But, the point was there were a lot of things going on behind the scenes, but nobody calling press conferences, nobody trying to grab the spotlight, just because we didn’t want to panic.

 

But it is time to tell the public how close we are, how much we rely upon three little threads of pipe: one 8 inches in diameter to Las Vegas carrying jet fuel to [Las Vegas] McCarran [International Airport]; one 14 inches in diameter carrying fuel to the rest of the southern Nevada area and surrounding rural counties, and jet fuel to Nellis Air Force Base; and an 8-inch line, lifeline, to Reno-Sparks and the rest of the rural counties around this area.  Those tank trucks you see driving down our streets are carrying that product.

 

Senator Coffin, continued:

 

So, I saw after the negotiations were going on and after we were past the crisis, I couldn’t see a solution on the horizon for this immediately surfacing.  The pipeline company in the south didn’t really know, exactly, what to do except to keep calling the Governor and keep praying for electricity.  So, I decided to request a bill draft because I realized there may be a need for a legislative solution of some kind.

On March 8, I distributed to all of your offices a letter inviting you to co-sponsor legislation on this subject.  And I admitted to you in that letter this was a moving target.  In that letter, I told you I was asking for a $10 million appropriation to help purchase, at that time, what was considered the very best idea, if not what we call a “quick and dirty solution,” at least one solution to the shortage of fuel.  The person who suggested that, because I made more than one or two phone calls the night of the seventeenth [January 17, 2001], one of them was to Bill Bible, who represents the Nevada Resort Association whose casinos would rapidly grow dark because they would not be able to have customers, thereby devastating our    tax base due to the tourist economy that we live on.  Not to mention the fact people would have to start walking to work.

 

Mr. Bible spoke to me and immediately started to think about this, and he got back to me.  And I was thinking about, can we “wheel’ power down.  That’s kind of an old word I remember.  Well, we were rebuffed, to some extent, although the Governor was able to negotiate some trades of power here and there.  That, definitely, was not an option on southern California Edison’s table.  They didn’t want to lose their franchise rights to some alien company.  So, Bill Bible called back and said, “Have you thought about standby generators at these locations where we need to pump this fuel up to Las Vegas?” And, I said, “No, I haven’t.  Let me think about it.”

 

So, I worked with the engineers of CalNev Pipeline Company and they said, “Well, that is, possibly, doable.  Let’s think about it; let’s try it.  So, by early February I was able to, at least, ask for a bill draft and introduced March 7 or 8 the bill that you see before you,  which contains the appropriation.  Now, the names on that  appropriation bill are interesting because, particularly,  Senator Raggio, who knew at that time we didn’t have a lot of money, and a month later we have less.  We are in the hole.  And, yet, he recognized the need, and he also recognized this committee is the committee, while it’s overworked really and has its hands full with a lot of legislation on energy, was the committee probably the highest skilled to handle this issue, because you have thinkers and you have people who can come back with ideas, and question the answers you get from your witnesses.

 

And, I feel, I still feel, by the way, providing standby turbine generators on these fuel lines is a way to keep fuel flowing to us when power fails.  Now, I know you’ve heard that power is getting better here and there in California.  Lots of legislation; there are 200 bills in the California Legislature hoping to make it better.  Everybody is trying to do this, trying to do that.  The California solutions are more than we can count.  But, the point is, not one person, not one company can really guarantee, can really guarantee to us, that our lifelines for our fuel won’t be cut again, and again, and again.

 

Senator Coffin, stated:

 

There are wild ranges of rolling blackouts predicted for the hot summer months coming, anywhere from 24 to 500.  It just depends on who you believe, because you can’t believe anybody anymore because they are telling you the best they can of what they know. But, they don’t know how much it’s going to rain for the northwest power grid.  They don’t know how much it’s going to rain for the western Sierras.  So, here we are facing the consequences of deregulation, not in Nevada, but in California.

 

So, our situation has been out of control because the power supplies to those stations were controlled by two California companies, PG&E in the north and Southern California Edison.  PG&E had just gone bankrupt.  I don’t know what that means to us.  It ought to scare everybody up there.  If one company can go bankrupt, others can too.  We have, I think, and I’m not an expert on this, you are, I think we have 4 or 5 years before we can have a stable power supply guaranteed out of California.  It’s just a shame we can’t make the power here in Nevada and send it down there, although, who knows, over the next year or two or three we might be able to negotiate that.

 

 

 

But, we’re talking about serious problems coming again.  And, I’ve been working with the Governor and his staff on this for 2 months.  And, he’s to be applauded for his swift action, but it’s now time for the Legislature to help out, to come in, to empower the Governor.  You see before you a lot of data.  I’ll go over that fairly quick, but I’m not going to have to repeat, but you can read.         I want to thank, for their cooperation during this time of crisis, the CalNev Pipeline Company, which, unbelievable or not, in the middle of all of this crisis, was purchased by the Kinder Morgan Pipeline Company.  Now, people in northern Nevada are familiar with Kinder Morgan.  Representatives of that company were here; we weren’t.

 

Senator Coffin, said:

 

The CalNev Pipeline was built in 1965, that first 8-inch line.  It serviced Las Vegas very well, and they added the 14-inch line as needs changed.  So, they’ve been helpful.  But, to have a solution is going to require a cooperative effort between all the governments: federal, state, and local.  And, we’re coming close to the deadlines for moving bills, but an even greater deadline is the summer months to come ahead.

 

Despite all the solutions that might have been proposed in California, no one is going to be able to provide a solution when they run out of power.  Even if they have been exempted from the interruptible-power status they used to have, even if government says, “Pipelines are an essential service.”  I can guarantee you the power that is loosed into the grids, and there are hundreds of them, will be contained in California, because California politicians and California government officials are going to take care of California residents first.  And they really don’t care what happens to us.

 

I have attached a copy of a proposed amendment [Exhibit G] to the original bill, as one solution.  There may be others offered.  That solution called for a 1-cent per gallon tax to be placed on fuel.  We won’t call it a fuel tax, because, really, what it is, well, it might be collected as a tax, in fact a surcharge to protect the integrity of a pipeline delivery.  We have precedent.  We have passed legislation like this before to keep the underground tanks alive.

 

Senator O'Connell interrupted, “Does the amendment change the fiscal note in the bill at all?”

 

Senator Coffin answered, “Oh, definitely.”

 

Senator O'Connell confirmed, “It does.  Tremendously?”

 

Senator Coffin responded, “Well, yes.  The amendment would remove the fiscal note, if it was adopted.”

 

Senator O'Connell said:

 

Okay.  Second question: In order to expedite your bill, I see the exempt at the top of the bill, and this would require this committee, in spite of what Senator Raggio said to you, this would require us, either today or Monday, to pass your bill out of committee and then rerefer it to Finance [Senate Committee on Finance]?

 

Senator Coffin replied:

 

You’re correct, so far, Senator.  It’s true, in our rules we are required, we have required ourselves, to pass all this legislation out with some recommendation or another.  This committee, to keep this bill alive, has several avenues of approach.  One, it could ask for a waiver, and I’m not sure if the Chairman approaches leadership, if the committee votes to ask leadership, if I’m supposed to ask leadership for a waiver.  That’s one way.

 

Senator O'Connell stated, “I think the way that works, the leadership on both sides of the houses have to give the okay.  We ask our leader, he asks the Assembly leader, and then they make that decision between them.”

 

 

 

 

Senator Coffin continued:

 

The other way is to, simply, refer it to finance [Senate Committee on Finance] by Monday in order that it could, possibly, be referred right back to this committee with competence to handle this, because this may or may not be a taxation bill when you finish with it.  It probably won’t be an appropriation bill, is my guess.  But, I don’t know where we’re going to find the money unless we tap into the “rainy-day” fund.  But, right now, that’s pretty sacrosanct with most people.  Although, one has to say if you could think of an emergency of greater urgency, I’d like you to tell me which one it is.  It probably would qualify for the emergency declaration required by the Governor.

 

Senator Coffin, continued:

 

The amount of money, by the way, in the bill in front of you would pay for, we believe, all the capital costs required for purchase of generators, the installation of the generators, permitting, the other requirements that are needed to put standby, intermittently-running generators on locations from stations where the fuel is distributed near the refineries, all the way up to the end of the line here at Nellis in southern Nevada, and at Fallon in northern Nevada.

 

There are other complicating factors, some of which were just raised last night by Kinder Morgan to me.  It’s the first time I’d heard about them; however, I think they can be overcome.  You may hear one problem illustrated that we have to have monitoring equipment out there in hard-to-reach areas, or rural areas, or places that are just remote, because, after all, pipelines have safety considerations.  You have to know when there’s a drop in pressure; it means, maybe, a leak beside a failure of a pump.

 

In many places in the country, my research is showing since last night there are solar-powered notification systems and notification systems driven by small generators signaled, or triggered, by drops in flow.  There are ways of coping with this; and, of course, you can ask questions of the people if they’re familiar with that.  They have thousands and thousands of miles of pipeline around the country.  So, I respectfully ask you to hear the bill, to hear the people who are in favor of this bill, to look at the sign-in sheet.  It is a cross-section of our society, our local governments, our military.  Nellis can’t be here today, but they send their support.  I’ve spoken to the Commander and the Vice Commander, they’ve been on board ever since the very beginning.  Fallon Naval Air Station, home of the “Top Gun [school],” is here today, with me, to address this issue and its criticality to their mission.

 

Senator Coffin stated:

 

You saw, by the way, in front of you the toys of the day.     Senator O'Connell’s familiar [with] how I like “Show and Tell.”  That could be Virginia Street, Senator, in your district.  And, I’m just going to tell you, you see a sheet in front of you “Fuels to Nevada Via Pipeline” [Exhibit H].  Do you see the worksheet?  It tells you how many gallons these pipelines bring up each day; how many rail cars would be necessary to transport the fuel consumed, in the north and the south; how many trucks would be needed if trucking was needed to replace the pipeline.  And, it’s pretty darn scary.  These are fairly conservative estimates based on information I have been given by representatives here of the rail industry and the trucking industry: as many as 500 trucks needed just in the southern Nevada region.

 

When I was a kid growing up, we were driving that road, 2-lane, sometimes 3-lane road with fuel trucks on there, constantly.  When there was an accident, and there were lots, there was disaster.  You would have, on any given day, more than 100 fuel-laden trucks running up the hill to Las Vegas.

 

Senator Townsend stated:

 

Well, we’re going to get called to the floor, here, real soon, so we want to get to the issue.  You’ve built a remarkable case.  Thanks for your involvement, your foresighted approach to this.  It’s remarkable, plus your quietness in working behind the scenes because we did discuss how potentially damaging that could be.

Senator Coffin interjected, “Since the very beginning, you and I have talked about this.”

 

Senator Townsend continued:

 

And, I really respect what you’ve done.  I think you’ve built a case.  The answer for this committee is going to be one of how best to address it, and we’re not going to take more than a day or so to do that, because we’re going to give everybody an opportunity over the weekend to try to get it in their own mind how best to do this, whether we send it over to you and make sure it’s exempt, and then you can get it back to us.  However you want to do it is fine by us.  The one question the committee, I know, is anxious to ask, because we’ve taken so much testimony on this is, and I don’t know who is here from the pipeline, but what arrangements have you made to assure Nevadans, and their various users of these products, that we will have a constant source of power given the struggle you face in California?  That’s the key question for us.

 

Mary Morgan, Kinder Morgan Energy Partners, testified:

 

I am here representing Kinder Morgan Energy Partners, which owns and operates Common Carrier Pipelines that deliver multiple types of refined products into the state of Nevada.  And, while we heard earlier, no one can quantify, exactly, the likelihood or the extent of the problems we may experience this summer, we’ve worked very hard within the state of California, where these products originate for delivery to your state, to do everything we can to mitigate the impact on the distribution system.

 

We’ve had members of my staff working, literally, almost around the clock since January:  the California Energy Commission, the California Public Utility Commission, the Governor’s Office, the utilities, as well as all of our shipping customers.  We are a common carrier pipeline.  We are regulated for intrastate by the California Public Utility Commission, and interstate by the Federal Energy Regulatory Commission.  And, while we agree with Senator Coffin that no one can guarantee exactly what the situation’s going to be this summer, [there are] several things we have done.

 

First of all, in the southern California area, which is where the line that goes to Las Vegas originates, fortunately, in the past few years we spent many millions of dollars expanding our pipeline systems and, so, it’s fortuitous this was done when it was so we have spare capacity so that we can operate around interruptions that aren’t of too lengthy a duration.  The situation that happened in January, I really think this is very important for everyone to realize.  I truly believe we will not experience the same type of situation because of the education process we’ve gone through in California, for them to understand this is a just-in-time delivery system.

 

Ms. Morgan continued:

 

We can accommodate interruptions, such as 4 to 6 hours in a day.  We cannot accommodate being down 18 hours a day, which is what the situation was in January.  They were interrupting us every day, 12 to 18 hours a day.  So, what we have now is a situation that’s slightly different because they have all realized this.  The Public Utilities Commission, as well as legislation that’s moving through California now, to change the landscape of the interrupts, if you will, to limit them to no more than 6 hours a day, 4 times a week, 40 hours a month.

 

So, again, while I can’t say we might not experience rolling blackouts, from the interruption situation we’re in a much better place than we were in January.  And rolling blackouts, typically, are also of a shorter duration, perhaps an hour to 2 hours at different locations.  And, another very important point is, while we’ve talked about how much fuel our pipelines bring into your state, we move approximately 1.1 million barrels in a day.  And a barrel is 42 gallons in our Pacific system.  Of that, about 800,000 is in the state of California, compared to the approximately 140,000 coming into your state.  So, this is the lifeblood of California, as well.

 

Since this crisis, there’s been a lot of education and understanding going on as to how to not let this happen again, and I think that’s the key thing California is working on.  While we’re going to have some interruptions this summer, we all know that’s true, but there is a way to do it where we won’t cause the same level of crisis.  We are not sure any extraordinary measures are needed or can be effective, particularly in the short-term, or are convinced they could be implemented in time.  We’re 6 weeks away from June.         Hot weather can come before then, or after then.  We had hot weather a few weeks ago.  Because there’s an awful lot of construction involved in everything, and just the reality of the situation of implementing it, our system is very complex.

 

Ms. Morgan said:

 

And, as Senator Coffin mentioned, we have permit requirements, as well as safety regulation requirements that necessitate not only monitoring of equipment, but remotely operated block valves along the pipeline that would require power in order to be operated, or we cannot operate the pipelines.  These are in our conditions to operate, so we can’t do that without power.  We can’t put generators just at the main pumping sites; we have to have power at many locations.

 

But, be that as it may, talking again about the proposed levy of 1 cent a gallon, we firmly believe that would be passed on to consumers of the state.  There would really be, in the end, regardless of how it’s structured, the consumers will pay that cost.  We are concerned, very heavily concerned, about that type of a levy being placed on only one form of interstate commerce, such as the pipeline.  The 1-cent-a-gallon [levy], which correlates to 42 cents per barrel, in contrast to what it costs now, the people who bring fuel into your state, it costs $1.16 to move it all the way from    Los Angeles refineries to the terminal at Las Vegas.  This is a huge increase in the costs they would bear.

 

 

 

 

Senator Townsend interrupted:

 

We’re not going to concentrate for the moment on the funding.  Senator Coffin’s offered us two options.  He is more than flexible.  He has worked with us and other committees.  He sits on the tax committee.  What we need to know is what we can do.  How we fund it is, you know, we’ll get to that, what do we need to do to help you?  Do you have contracts, now, through the summer?  Are they interruptible rates?  Do you have contracts for separate parts of the pipeline, PG&E in the north, somebody else in the south?  Is it possible to put some of these solar-type facilities on those pumping areas that might, during those peak times, if it goes down, continue to pump?  Those are just the basic things we need to understand.

 

Ms. Morgan responded:

 

Okay.  I can address each one of those, first to describe to you the different power scenarios.  In northern California, our main service provider is PG&E and that’s on the line, you know, which is going up to the Reno area.  We receive power from them under an interruptible-rate tariff.  We have no option to opt out of that until November.  But, on the good side, we just resolved this with PG&E last Friday, we have met our obligation for interruptions under that tariff.  That tariff allowed them to ask us to interrupt up to 100 hours per year.  They have confirmed to us we have met that obligation; we’ve been interrupted that much in northern California.  So, in northern California, the issue for this summer is not interruptions, it’s rolling blackouts, because everyone can be susceptible to those.

 

Fortunately, again, we have done capital projects in years past at our main pumping stations in the Bay Area where the product originates to install equipment so we are on transmission-level power.  That means we receive the power at very high voltages.  And, we also happen to be on circuits with many emergency providers.  We can’t guarantee we won’t have rolling blackouts, but we will be less susceptible to rolling blackouts than, perhaps, other people, simply because of the physical configuration through which we receive our power at those locations.

 

Then, secondly, the difference between rolling blackouts and interruptions, the interruptions, like I said before, were from          6 to 18 hours.  A rolling blackout, typically, is an hour and a half.  And, so, for the most part, again, I can’t say, I mean, if we get a rolling blackout every single day, or more than once a day, that could be a problem.  If we have a blackout every 2 or 3 days, it should be, for the most part, transparent to our customers.  We are expert at rescheduling and scheduling around interruptions, which can be caused by many things other than power.  That’s what I mean.  The generator solution, here, only addresses power.  We have earthquakes.  We have train derailments.  We have floods, fires, and all sorts of other things, which can cause the pipelines to be shut down.

 

Ms. Morgan continued:

 

To go on to answer your question about southern California, where Southern California Edison is our main power provider, there the interruptible-rate tariff allows for up to 150 hours per year of interruption.  There we are still basically, if you will, arguing with them, because after January 19, [2001], they have still called for interruptions many times.  And, we have voluntarily interrupted during that time.  They do not want to give us credit for the times we have interrupted since then.  So, we are somewhere.  Up until January 19, [2001], we’d interrupted about 70 hours.  We would be somewhere around the 100-hour mark at this point in time, if they give us credit.  We just don’t know how that’s going to come out.

 

But, remember again, in southern California is where we have significant spare capacity.  On the pipelines that feed what was the CalNev Pipeline, the CalNev Pipeline, itself, is in a slightly different situation.  The 2 lines today are separate.  The 8-inch line that carries jet fuel is full; it has no spare capacity.  The 14-inch line that carries gasoline and diesels has spare capacity, but it is not piped where you can put jet fuel in that line and deliver it to the airport.  We have been working on a project for 2 years to get approval from our customers and the airline consortium to proceed with the project to make that happen, but again, we have to get the support of our customers in order to make that happen.  And that project has not been built.

 

So, again, there could be problems in southern California, but we are better able to work around the problems there.  And, again,      I can never say there wouldn’t be a situation.  There could be a situation with a train derailment that could put the power thing to shame.  I mean a major train derailment can cause your line to be down for several days.  Typically, there’s several days of inventory here on hand.  And as happened in January, even with all those interruptions while there were some minor outages, and people were worried about outages, it never actually came to pass that the airport was out.  So, there is some flexibility in the system.

 

So, again, I think in northern California the interruptions are over, rolling blackouts.  Southern California, we will still be called to interrupt, but again only up to this limit and only, again, perhaps every other day, 6 hours a day until we reach the limit.  So I don’t think it will be the same situation as in January, not that we’re not very concerned and trying to do everything we can to mitigate the issue.

 

Senator Townsend said:

 

Okay.  We have an officer here from “Top Gun,” and we would like to take his testimony.  We will take this up again on Monday so we can decide what we need to do.  This committee will continue to debate the issue, even if we send it and make it exempt.  Because, understanding this problem helps us get to the solution, and that’s a deep concern.

 

Ms. Morgan added:

 

So, again, while we agree there is a problem, we are, again, not convinced any of the measures that are being discussed can be implemented in time for this summer.  And we also believe a better solution would be to increase the storage in the state, so there can be product already sitting here rather than the power generators, because that protects you against these other things, train derailments, earthquakes, and so on, if the state still believes extraordinary measures are needed.  We would feel a better solution would be to have additional storage tanks and additional product here in storage, enough, so it can be drawn on when needed.

 

Senator Townsend said, “Thank you.  You’ve brought a remarkable insight into this.  Senator Coffin’s been my source of knowledge on this pipeline problem, and this helps bring it into focus.”

 

Commander Edmund Rybold, Jr., Executive Officer, Naval Air Station, Fallon, read from his written testimony (Exhibit I).

 

Ms. Morgan stated:

 

Since we do serve the United States government and the military, as well as commercial users, if there is an emergency situation, which could be caused, we’ve had other things that caused our line to be down for up to 7 days, the military can state it is in the interest of national defense and an emergency, and they can have priority over commercial users.  So, in most cases, they will get first service, but it would impact your other users in the state if that had to happen.  I just want to be sure you were aware of that.

 

Senator Townsend responded, “Sure.  Good point.”

 

Senator Coffin said, “Without revealing any secrets, I can only tell you Nellis’ [Air Force Base] situation is not as good as it is here.”

 

Mr. Hay stated:

 

I just want to indicate our strong support for the intent of     Senator Coffin’s bill.  Obviously, the technological issues need to be worked out, but it certainly is a very high priority, particularly for Southern Nevada.

 

Kurt Segler, Utility Services Director, City of Henderson, said, “We would echo the comments that have been made on the importance, on the need to have an uninterruptible supply of fuel.”

 

Senator Townsend responded:

 

Thank you.  I think what Senator Coffin has done is, sometimes it takes these kinds of unique crises to bring to light the importance of so many parts of our community we take for granted.  That’s an unfortunate way to find out about these things, but nonetheless, it  does not lessen their importance to a community.  When     Senator Coffin brought this to my attention, I was absolutely shocked and amazed at the size, the magnitude, of this situation.

 

Terry E. Page, Lobbyist, representing Environmental Oil Processing Technology, Incorporated, stated:

 

Mr. Craigie and I represent a client [Environmental Oil, Processing Technology, Incorporated] that builds small oil refineries and installs generation facilities.  We would offer, for a nominal cost, we would do some feasibility studies for the state, if the state takes on allocating a large amount of money to solve this problem, to help you sort through what those technical issues are, and what, from a professional’s perspective, it would take to solve those.

 

Mr. Craigie added:

 

Environmental Oil [Processing Technology, Incorporated] is the name of that entity.  We have already supplied, to the group that has been working on this, a lot of information just as backup and background.  We’ve let everybody in that system know this offer of technical support would be there.

 

Senator Townsend remarked:

 

That’s terrific.  We may have to sort through this, senator [Coffin].  I think, committee, it’s important, we will keep this bill available.  By Monday . . . whatever we decide over the weekend, that’s what we’ll get done on Monday.

 

There being no further business, the meeting was adjourned at 10:40 a.m.

 

 

RESPECTFULLY SUBMITTED:

 

 

 

Gayle Nadeau,

Committee Secretary

 

 

APPROVED BY:

 

 

 

                       

Senator Randolph J. Townsend, Chairman

 

 

DATE: