OPD Board Approves Agreement With NV Energy

By VERNON ROBISON

Moapa Valley Progress

The Overton Power District (OPD) Board of Directors approved a major agreement last week aimed at improving its reliability of service and containing costs for OPD customers. The landmark agreement which was forged between OPD and regional utility giant NV Energy, has taken several years of negotiations to reach a settlement between the two parties.

“It has been a long process to get to this point,” said OPD General Manager Mendis Cooper. “But I think we have reached a place that both sides can live with and that will be very beneficial to our ratepayers.”
The agreement renegotiates the terms by which NV Energy will continue provide power transmission services to OPD well into the future.

The OPD has been working with national power brokerage Morgan Stanley since 2016 in securing its power resources on the national energy markets. But the district has long depended upon NV Energy transmission lines for delivery of its power across the region into OPD’s Tortoise substation in Moapa.

Since 1989, that transmission service has been governed by a grandfathered contract, called the “Tri-party Agreement,” which has existed between OPD, NV Energy and Lincoln County Power District. But over the past 30 years, regulations on power transmission services have changed, Cooper explained.

“A whole series of regulations went into place in the late 1990s and early 2000s after the ENRON scandal,” Cooper said. “It changed the rules of the game and required NV Energy to pay certain regional energy imbalance charges and to hold a certain amount of resources in reserve.”

An extensive range of complex calculations were implemented by the large utility to recover those additional costs from their transmission customers. But OPD, as a member of the pre-existing Tri-Party agreement, should have been excluded from those changes, according to Cooper.

“In recent years, NV Energy seemed to be getting things mixed up in their calculations and lumping us in with their other customers who were not in the Tri-party Agreement,” Cooper said. “We kept insisting that we should not be subject to the new Federal Energy Regulation Commission (FERC) rules. But they had their system and, I think unintentionally, kept putting through charges on us that we didn’t feel belonged there.”

As a result, OPD has seen a ballooning in its transmission rates in recent years.
“Of course, there was a concern on both sides,” said Cooper. “NV Energy saw a need to simplify things, phase out the old agreement and bring us in under the current regulations. But at the same time, we felt we were already under this legacy agreement that had real value to us.”

Finally, OPD hired an attorney specializing in energy regulatory issues, to represent its interests. Cooper said that this was what turned the tide in the process for reaching a fair deal for the district.

The agreement which has resulted has NV Energy essentially buying the district out of the Tri-party Agreement, and making it whole for the old agreement’s fair market value, Cooper said.

The central element in making the district whole is a second transmission line to be built feeding into the OPD system. According to the agreement, NV Energy would fully fund and construct the new line which will extend from the Reid Gardner switchyard, across 2.3 miles of BLM land, to connect in at the OPD system at Tortoise substation in Moapa.

This new line would finally provide an element of redundancy to the OPD system. Currently, the district is fed by a single line into Tortoise. A second line is expected to prevent system-wide outages due to difficulties on that single line, like the one that occurred on January 21 of this year.

Up to now, the OPD has not been able to construct a second line because of the high cost associated with such a project. While the exact cost of the line is not available, it is estimated to be in the millions of dollars.

“This second line into Tortoise substation is something that we have known we needed for a long time,” said Cooper. “This agreement will now make it possible at no cost to our customers. There will be no change to our rates directly because of it. That is a great benefit to our ratepayers.”

But in bringing the district in line with other transmission customers under existing FERC rules, OPD transmission costs are expected to increase. Cooper told board members that after the agreement is fully in effect, the district would be facing transmission costs of around $200,000 per month.

To ease the shock of such an increase, the agreement grants OPD two transition periods to allow time to adjust to the new conditions.

The first of these begins immediately and continues throughout the construction period of the new line. During that time, the agreement gives OPD a total of $1.4 million in credits which can be used to offset transmission costs. These credits are viewed as refunds for transmission costs that have been billed in recent years, over and above what the district should have paid under the Tri-party Agreement. OPD can claim as much as $35,000 per month in those credits.

Then, after the new transmission line is completed, a second transition period would gradually phase out a number of other prior benefits that the district had derived from the Tri-Party Agreement. This phase-out would occur over a period of an additional four years.

After that, the OPD would be brought up fully to current existing regulation and would have reached the same status as any other NV Energy transmission customer, Cooper said.

Board members were generally pleased with the terms of the agreement and what it meant to the district.
“I am excited about this agreement!” said OPD Board Chairwoman Judy Metz. “In my view it covers two things. First, it will resolve these ongoing issues that have arisen around our transmission costs. And secondly, we will get the additional transmission line taking us close to full redundancy. I am all for having that redundancy and having that backup into our system.”

Cooper emphasized that the Board’s approval of the agreement is not the final step in its implementation. The agreement is still subject to review by the Public Utilities Commission of Nevada (PUCN) and by FERC. In addition, filings must be made to the Bureau of Land Management to grant rights of way on which to build the new transmission line.

“There is a lot of field still to plow to make this a reality,” Cooper said. “But this was a very big step. We are happy to be to this point now, and to see things move forward from here.”