OPD Board Approves Intervention In NV Energy Transmission Tariff Filing

By VERNON ROBISON

Moapa Valley Progress

The Overton Power District Board of Directors, in a meeting held Wednesday, June 19, approved the district’s participation in a recently filed NV Energy transmission rate case. This case involves a proposed merger between Nevada Energy in southern Nevada and Sierra Pacific which services northern Nevada.

The two companies, which currently operate as separate entities under the same parent company, have filed a single-system transmission rate increase request with the Federal Energy Regulatory Commission (FERC). The increase could end up costing the OPD over $1 million in additional transmission costs each year, according to OPD officials.

OPD General Manager Delmar Leatham explained that the proposed merger is partially contingent upon the completion of a major north-south transmission project. The new transmission line would be constructed between Ely, Nevada and the Crystal substation, located just west of I-15 near Apex.

“In doing this, they are filing changes to their transmission tariffs, which will directly affect us,” said Leatham. “This as well as their ancillary service charges which might affect us.”

In power delivery, ancillary services address short-term imbalances in electricity markets to ensure that consistent power quality is maintained.

Leatham said that exact numbers had not been determined on how much the increased tariffs would impact the OPD. But preliminary numbers indicated at least $1 million per year in added expense.

“That, all by itself, would represent a 5% rate increase to our customers,” Leatham said.

Leatham recommended that the district join forces with other small electric utilities in the intervention. This would spread the significant legal costs across the different entities. OPD would join with the City of Fallon, Newmont, Lincoln County Power District, Truckee Donner and others in the intervention.

“The most economic way for us to be involved is to work with the attorney representing these entities and file a docketless intervention,” Leatham said. “This will allow us to receive all of the information as it is submitted. We can make comments if we want. But we don’t take an active role in the proceedings. If we feel that our position is threatened then we can still file a full intervention at that point.”

OPD Board member James Pugh asked what justification was being made for the tariff increase in the merger.

“The main thing is that online project being rolled into the transmission costs,” Leatham said. “It’s $600 million which is roughly what they have in their transmission program now so it almost doubles their system. And that cost, while it brings some relief to the north, it gets rolled into the southern rates.”

“So this is not an attempt to prevent the merger from taking place?” asked OPD Board Chairman Larry Moses. “Rather it is an attempt to keep them from passing this transmission cost on to us.”

“Our goal is to keep the least impact to Overton Power by this merger,” Leatham responded. “We don’t think there is any way to avoid those charges. We are a transmission customer. We do take transmission and Nevada Power has built the transmission system to benefit all of their customers and we probably have an obligation to pay a portion of that. So the question is: How do you minimize that?”

Leatham said that there were two areas for OPD to work on, in minimizing the impact of the proposed transmission costs. The first is through an existing agreement which Leatham called the “Tri-party Agreement”.

This agreement was made about 25 years ago between OPD, Lincoln County Power and NV Energy. In this agreement the entities exchanged a number of valuable physical assets, dealing with power transmission, in exchange for certain benefits and rights regarding transmission and ancillary services. OPD officials fear that once the current tariff filing is complete, the next issue will be revisiting the Tri-party agreement. That would mean even higher expenses for OPD.

“We want to avoid having to begin to take ancillary services from NV Energy,” Leatham said. “They would like us to do that. We don’t want to. The Tri-party Agreement protects that relationship. But that could be an additional cost.”

Leatham said that the staff had looked at the possibility of moving those ancillary responsibilities over to another company. But to do that would require another $400,000 in metering infrastructure to make it work, Leatham said.

“Still, if we are faced with paying NV Energy for ancillary services, that investment would pay for itself in two or three years,” Leatham said.

In any case, Leatham said that the OPD should strive to hang on to the Tri-Party agreement.

Leatham said that the other way to minimize the transmission costs is to “make sure that the costs that are built into that formula are appropriate”.

This is an area where the OPD can benefit in its customer relationship with the Colorado River Commission (CRC), Leatham said.

“That is where Colorado River Commission obviously has greater expertise and we will follow that closely as a customer of CRC,” Leatham said.

Pugh made a motion to authorize the district to retain counsel in the action. The motion was accepted with a unanimous vote.