Nevada’s Energy Policy and The Regulation of Public Utilities A Review of the Public Utilities Commission’s Role in the Energy Policy of the State Alaina Burtenshaw, Chairman DISCLAIMER • Any opinion expressed in this presentation is solely mine, not that of the Commission or any other members of the Commission. D 2 2 AGENCY OVERVIEW The Public Utilities Commission of Nevada (“PUCN“) is a regulatory agency that ensures investor-owned utilities comply with laws enacted by the Nevada Legislature. The PUCN’s basic regulatory duties, as defined by the Legislature (NRS 704.001), include: • To provide for fair and impartial regulation of public utilities. • To provide for the safe, economic, efficient, prudent and reliable operation and service of public utilities. • To balance the interests of customers and shareholders of public utilities by providing public utilities with the opportunity to earn a fair return on their investments while providing customers with just and reasonable rates. • The PUCN regulates approximately 400 investor-owned utilities in Nevada, but does not regulate cooperatives or municipal-owned utilities. D 3 3 APPLICABLE NEVADA REVISED STATUTES 701 Energy Policy 702 Energy Assistance 703 Public Utilities Commission of Nevada 704 Regulation of Public Utilities 704A Facilities Placed Underground 704B Providers of New Electric Resources 705 Railroads 707 Telecommunications 455 Pipeline Safety D 4 4 ORGANIZATION OF THE PUCN • Commissioners o The three members of the Commission are appointed by the Governor to 4-year terms. • The Commission has nearly 100 employees in its Carson City and Las Vegas offices that are divided into the follow areas: o Regulatory Operations Staff o Independent investigatory arm of the agency o Comprised of accountants, attorneys, consumer complaint resolution investigators, economists, engineers, and administrative support o Policy Staff o Policy staff assist the Commission with legal and technical advice o Comprised of general counsel and policy advisors D 5 5 COMMISSION AND STATE ENERGY POLICY • Natural Gas Pipeline Safety • Utility Facilities Siting • Rates Charged for Service • Integrated Resource Planning • Renewable Portfolio Standard • Renewable Generations and Solar Thermal Programs D 6 6 GAS PIPELINE SAFETY • The PUCN oversees gas pipelines in a pipeline safety partnership with the United States Department of Transportation Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety • PUCN gas pipeline engineers monitor the design, construction, operation and maintenance of gas systems under the Commission's jurisdiction and Title 49 of the Code of Federal Regulations ("CFR"), parts 191 and 192. • The PUCN's gas pipeline engineers also inspect local natural gas distribution companies ("LDC"), natural gas master metered distribution systems found mainly in mobile home parks ("MHP"), underground piping systems providing liquid petroleum gas ("LPG") service to ten or more customers, again mainly MPHs, and direct sales lateral customers (such as gold mines) whose pipelines are fed directly from large interstate supply lines. D 7 7 CALL BEFORE YOU DIG • Hitting an underground utility line while digging can cause environmental damage and serious personal injury, as well as disrupt service to an entire neighborhood. If you don’t call 811 prior to digging and hit an underground utility line, you could potentially incur fines and be responsible for repair costs • 811 is a national number created by the Federal Communications Commission to help protect homeowners and contractors from unintentionally hitting underground utility lines while working on digging projects. 811 is a free service. • The Commission ensures compliance with Nevada’s 811 law (NRS 455). PUCN inspectors patrol to ensure that excavators and underground facility operators are acting in accordance with the law and to help resolve disputes D 8 8 SITING OF UTILITY FACILITIES NRS 704.865 provides that a person, other than a local government, constructing a utility facility in Nevada must obtain a Utility Environmental Protection Act (“UEPA”) permit from the Commission. The process balances the potential environmental impact of a proposed utility with the public interest served by such facility. The Commission issues a UEPA permit to construct utility facilities once all other relevant permits have been obtained by the developer. UEPA permits granted by the Public Utilities Commission of Nevada ("PUCN") apply to: • Conventional power plants. • Renewable energy power plants rated over 70 Megawatts (nameplate). • Electric transmission facilities rated over 200 kilovolts. • Gas transmission lines and associated facilities. • Water transmission lines and associated facilities. • Sewer transmission and treatment facilities. Exemptions from the UEPA process include (but are not limited to): • Electric transmission lines rated under 200 kV. • Electric transmission lines required to be placed underground (in their entirety) by local ordinance. • Electric and gas transmission lines constructed (in their entirety) within an incorporated city. • Replacement of an existing facility with a like facility. • A utility facility owned by the federal government, a co-operative, or a non-profit corporation. • Water transmission lines and associated facilities constructed for mining operations. D 9 9 SITING OF UTILITY FACILITIES Currently There are 35 UEPA applications related to electricity and renewable energy projects pending. Most are related to renewable energy, projects involving renewable facilities over 70MW or transmissions projects related to delivery of electricity generated by renewable energy 28 UEPA Permits were issued since 2010 for electric and renewable energy projects D 10 10 MAJOR COMPONENTS OF ELECTRICITY RATES Commission ensures that public utility rates are just and reasonable as provided by NRS 704.001 (4) Base Tariff General Rate • Recovers the costs associated with the physical plant, wire, transmission, and labor. • These costs are set through a General Rate Proceeding every 3 years. Base Tariff Energy Rate • Energy expenses are a dollar-for-dollar pass-through to ratepayers. These costs are trued up each year through the deferred energy accounting adjustment (DEAA) • The Commission audits these costs annually D 11 11 MAJOR COMPONENTS OF NATURAL GAS RATES • Gas Commodity Charge: This is the cost of the gas itself. This is expressed in therms, a unit of energy equal to 100,000 BTUs (British Thermal Units). • Delivery Charge: The cost of delivering the gas from a central pipeline to your home or business. This charge includes construction and maintenance costs, depreciation costs, operation expenses, taxes, and the company’s return on invested capital. This charge is based on the amount of gas used. D 12 12 OTHER RATES The Commission will also set rates for recovery of costs associated with energy efficiency and renewable energy programs in this application. • Temporary Green Power Financing (TRED) Electricity Only • Renewable Energy Program (REPR): A fee that helps further development of alternative energy projects and renewable rebate programs. Electric Utilities Only. • Energy Efficiency (EE) Charge: A charge to recover costs and other expenses associated with energy efficiency and conservation programs. Electric Utilities Only. • Universal Energy Charge: A mandated fee that provides money to fund the State of Nevada energy bill assistance and conservation programs. Electricity and Natural Gas Utilities. • Tax or Franchise Fee: A fee imposed by the city or county. The money is collected by the utility and turned over to local government. This is not regulated by the Commission. Electric and Gas Utilities. D 13 13 INTEGRATED RESOURCE PLANNING OVERVIEW • Commission is charged with overseeing safe and reliable service by utilities • Electric utilities must file an IRP every three years for approval by the Commission. [NRS 704.741] • The IRP must include the following: o Forecast of future demands over a 20-year period; o A diverse set of scenarios of the best combinations to increase the supply of electricity or decrease the demand; o One of the scenarios must be one of low carbon intensity; o A designation of renewable energy zones; and o Energy efficiency program for residential customers which includes the use of solar thermal resources. [NRS 704.741] • A natural gas utility files an annual Informational Report with the Commission instead of an IRP. [NRS 704.991] D 14 14 LAST DECADE—REDUCED RELIANCE ON WHOLESALE ELECTRIC POWER MARKETS Peak Demand 2011 • NPC –-5,539 MW • SPPC--1,513 MW Construction of New Generation Facilities • Clark Units Peaking Units 11-22—600 MW • Chuck Lenzie Combined Cycle 1,200 MW • Harry Allen Combined Cycle 500 MW • Tracy Combined Cycle 500 MW Power Plant Acquisition • Silverhawk Combined Cycle 400 MW • Big Horn (Walt Higgins) Combined Cycle 500 MW Increase in expenditures for utility-sponsored conservation and energy efficiency programs. NPC expenditures for energy efficiency was $37.2 million in 2011. SPPC electric efficiency costs were $6,245,000 in 2011 D 15 15 FUEL MIX NPC 2003 AND 2011 2011 2003 MWh % of Total MWh % of Total Gas 11,687,714 54.1% 4,292,701 19.8% Coal Generation 3,346,506 15.5% 5,734,105 26.5% Total Generated 15,034,220 69.6% 10,026,806 46.3% Totaled 6,577,339 30.4% 11,637,000 53.7% Purchased Total 21,611,599 100.0% 21,663,876 100.0% D 16 16 . FUEL MIX SPPC 2003 AND 2011 2011 2003 MWh % of Total MWh % of Total Gas 3,254,453 36.9% 2,515,759 23.3%