By VERNON ROBISON
Last week the Public Utilities Commission of Nevada (PUCN) threw a real wrench into the works; putting a reality check on what was being billed as the smallest rate increase proposal in more than a decade for southern Nevada’s electric service customers. The PUCN decided to consider the option of paying off NV Energy’s unrecovered investment in Reid Gardner Power Station in Moapa as a component of the current three-year rate filing. If approved this rate increase would go into effect on January 1, 2015.
Of course, the PUCN action got a lot of folks pretty worked up. The Nevada Bureau of Consumer Protection, for example, filed a strong opposition to the recommendation. Their contention was that the $20.8 million revenue increase being originally sought by the utility would have to be increased by as much as $60 million per year in order to recover the unrealized Reid Gardner investment over the next three years.
Ouch!
Of course, all of this got started in 2013 on a bright, sunny, rose-colored day up at the Nevada State Legislature in Carson City. In the last Legislature, Senate Bill 123 was passed into law with very little real opposition from anyone. In it, NV Energy agreed to get itself out of the coal-fired energy business, at least in southern Nevada. And the utility promised to be quick about doing it. Units 1, 2 and 3 at Reid Gardner are expected to be decommissioned by the end of this year. The plant’s unit 4 will be taken down by 2017. And the utility is expected to divest itself of its ownership in coal-burning Navajo Station by 2019. At that point, NV Energy’s southern Nevada division will be entirely coal free. And what about all that coal-generating capacity? Well, it was proposed to be replaced by new solar plants and natural gas facilities.
What a feel-good story! With an easy promise from NV Energy officials that there would be no net job losses (even though the Moapa plant would, unfortunately close down), even the Moapa Valley’s own contingent of legislators got on board with the bill. Everyone seemed happy to gather in a circle with the enviros, the Moapa Band of Paiutes and Senator Harry Reid to hold hands and sing “Kum-Ba-Yah” while casting their votes for the measure.
But with last week’s PUCN recommendation the ratepayers may be just starting to wake up to the ‘morning-after’. And what a headache they will have! Here is the problem: the utility has about $300 million of old investment in environmental retrofits and other recently-made improvements to Reid Gardner. They aren’t just going to write all of that off and throw those expensive improvements into the trashbin. No! That investment will have to be recovered from (guess who?) the ratepayers.
Of course, none of that payback had been factored into the current rate increase package before last week. Heavens no! After all, it’s an election year. It might become unpleasant if the voters started making connections between this Senate bill and their own power bills. So it had been decided to just quietly carry that expense over into the next three-year rate package. By that time the short attention span of voters would have expired and no one would remember it. Then the huge expense could be spread out over a decade or so. That way folks wouldn’t feel so much of the unpleasant pain; at least not all at once.
Trouble is, the Reid Gardner payback won’t be the end of it. Not by a long shot! There is still that little problem of replacing all that coal-generated capacity that is in high demand in the region. To do that, the utility is proposing several major construction projects and plant acquisitions for new solar and gas plants. The cost of those could come to nearly $1 billion. That expense is due to start hitting in the next few years as well. And guess whose pocket it is going to come from: that’s right, the ratepayer….again.
Unfortunately, even that isn’t all of the story. None of this is considering what might happen once the coal plants are all torn down and thrown into the scrap heap. What if natural gas prices, currently relatively low, suddenly decide to spike back up again. At that point, left with expensive and unreliable solar sources and no real market diversity that would have come from coal generation, the ratepayers could be ravaged by a perfect storm. They will have high costs pelting them from every side.
The likelihood of that perfect storm is probably the reason why the PUCN felt uncomfortable with the idea of just putting off the Reid Gardner retirement expense for another three years. After all, that expense isn’t going anywhere. It’s just waiting there for the day when it can be strapped onto the backs of ratepayers, along with everything else. But a higher rate increase now might stave off a more catastrophic rate increase later when everything might hit at once. So, given the expenses inevitably coming down the pike, the commissioners no doubt thought that it might be better to get Reid Gardner off the ratepayers’ backs sooner than later.
Of course, that provides very little comfort in the bleak future of ratepayers. They either pay it now or they pay it later. Nothing in life comes free; certainly not ill-advised, enviro-whacko energy policies. Eventually the bill always comes due.
But maybe this should also be true for Senate Bill 123. It seems that this is another type of bill that should be coming due…due for a change, anyway. The fact is, SB123 was a bad piece of legislation back in 2013, and it is only going to get worse for southern Nevadans.
It is true that we Moapa Valley residents have some cushioning against its affects. After all, our power is supplied by Overton Power District. We are not direct NV Energy ratepayers. Well, don’t bury your head in the sand just yet. The local economy will certainly be affected by the closure of Reid Gardner. And what’s more, don’t think for a moment that SB123 won’t affect our power rates here too. The rising tide of higher rates in the region will inevitably affect even the small rural boats like OPD. Rest assured, we’ll pay.
We can only hope that, once the ratepayers in southern Nevada realize what is about to happen to them, there will be a mighty push for needed reforms to SB123 at the next State Legislative session. That is, if it is not already too late.
