MINUTES OF THE ASSEMBLY COMMITTEE ON GOVERNMENT AFFAIRS Sixty-eighth Session June 15, 1995 The Committee on Government Affairs was called to order at 8:00 a.m., on Thursday, June 15, 1995, Chairman Joan A. Lambert presiding in Room 330 of the Legislative Building, Carson City, Nevada. Exhibit A is the Agenda. Exhibit B is the Attendance Roster. COMMITTEE MEMBERS PRESENT: Mr. Douglas A. Bache, Chairman Mrs. Joan A. Lambert, Chairman Mrs. Deanna Braunlin, Vice Chairman Mr. P.M. Roy Neighbors, Vice Chairman Mr. Max Bennett Mr. Pete Ernaut Mrs. Vivian L. Freeman Mr. William Z. (Bill) Harrington Ms. Saundra (Sandi) Krenzer Mr. Dennis Nolan Mrs. Gene Wines Segerblom Ms. Patricia A. Tripple Mr. Wendell P. Williams COMMITTEE MEMBERS EXCUSED: Mrs. Marcia de Braga GUEST LEGISLATORS PRESENT: Senator Dean A. Rhoads, Northern Nevada Senatorial District; Assemblyman Joseph Dini, District No. 38, Co-Speaker of the House. STAFF MEMBERS PRESENT: Ms. Denice Miller, Senior Research Analyst OTHERS PRESENT: Mr. Robert L. Seale, Treasurer of Nevada; Mr. Brad Lawrence; Mr. Darrel Daines, State Controller, State of Nevada; Mr. Ken West, Chief Deputy Controller, State of Nevada; Ms. Mary Sanada, Certified Public Accountant; Ms. Marsha Berkbigler, American Consulting Engineers Council of Nevada; Ms. Ande Engleman, Freedom of Information; Mr. Don Ham, Nevada Press Association; Mr. Lauren House; Ms. Nancy Brown; Commissioner Galen Denio, Public Service Commission; Mr. Joe Johnson, Toiyabe Chapter, the Sierra Club; Mr. Dave McNeil, Energy Program Specialist, State Energy Office; Ms. Marilyn Skibinski, Administrative Assistant, Office of the Consumer Advocate, Attorney General's office, State of Nevada; Mr. Frank McCrae, Nevada Power Company (see also Exhibit B attached hereto). SENATE JOINT RESOLUTION NO. 21 - Proposes to amend Nevada constitution to provide that state controller is appointed by and serves at pleasure of state treasurer. Senator Dean A. Rhoads, Northern Nevada Senatorial District, testified by reading from prepared text (Exhibit C). He explained S.J.R. 21 proposed the State Controller no longer be a constitutionally elected officer and that the position of State Controller be made an appointive office within the State Treasurer's office. He advised, if enacted, the measure proposed by S.J.R. 21 would become effective in the year 2,000 and would meet Nevada's 21st century needs for fiscal efficiency and streamlined government. He acknowledged the key role played by Assemblyman Douglas A. Bache in formulating the proposal contained in S.J.R. 21. Senator Rhoads asserted when Nevada's state constitution was first adopted, in 1864, there was good reason to have both an elected state treasurer and an elected state controller, that reason being to provide a check and balance designed to safeguard public monies. He advised certain procedures and safeguards which did not exist in 1864 had since been incorporated in state government and contended the checks and balances now in place were "...triplicative and quadruplative..." and were inefficient and costly to taxpayers. He maintained approval of S.J.R. 21 would permit the state to conduct its financial operations with greater efficiency and would save a great deal of money. He advised testimony given before the Senate Government Affairs Committee indicated nearly $1 million per biennium could be saved by the consolidation proposed by S.J.R. 21. Senator Rhoads said the State Treasurer testified before the Senate Government Affairs Committee that he could support moving the treasurer's position into the controller's office as easily as he could support moving the controller's position into the treasurer's office. He pointed out, in the private sector, most large businesses placed their controllers and treasurers in the same department. Senator Rhoads urged the committee to pass S.J.R. 21. Assemblyman Ernaut asked the rationale for not placing the position of State Controller in the Department of Administration. Senator Rhoads replied he did not know the rationale. Mr. Robert L. Seale, Treasurer of Nevada, testified by reading from prepared text (Exhibit D). He advised he supported consolidating the functions of the State Treasurer and State Controller within one executive department, headed by a single elected constitutional officer. He indicated, if the constitutional amendment proposed by S.J.R. 21 was passed by the voters in 1998, the 1999 legislature would need to enact a considerable number of statutory changes and pointed out S.J.R. 21 provided for a two-year transition period. Mr. Seale enumerated the primary responsibilities of the treasurer and those of the controller. He said he supported consolidating the related financial functions of the treasurer and controller because time, modern accounting practices, technological advances and the establishment of checks and balances had made election of both a treasurer and a controller an obsolete practice. He contended consolidation of the two offices would save taxpayers approximately $1 million per biennium at a minimum. He maintained consolidating the functions of the State Treasurer and State Controller within one department would not remove the internal controls of that department and additional checks and balances which had been developed over the past 131 years would remain in effect. Mr. Seale discussed various costs to the state which would be eliminated by consolidating the offices of State Treasurer and State Controller. He asserted retaining both offices, under separate elected officials, was inefficient, unnecessary and costly to the taxpayers and urged the committee to approve S.J.R. 21. Assemblyman Bennett referred to the language in Section 2 of S.J.R. 21 which read "The state treasurer shall appoint a state controller." and pointed out that language mandated the State Treasurer to appoint a State Controller. He contended, therefore, the position of State Controller would not be eliminated but merely changed from an elected office to an appointed position and said he could not see any savings from such a change. He asked whether, if the controller's position was consolidated into the treasurer's office, the controller would not have staff with which to fulfill his duties. Mr. Seale replied, "The staff that is in place, Mr. Bennett, is already adequate, and I would foresee that a position within the controller's office would be moved, in effect, to the controller's position. If you have an elected official, I foresee two deputies, one in charge of the controllership function, one in charge of the treasury function. Both of those functions, in my opinion, need to have legislative controls as to their qualifications. In effect, both of those positions already exist within the treasurer's office and the controller's office, i.e., the Chief Deputy Controller, the Chief Deputy Treasurer. So, those savings are in fact there." Mr. Ernaut asked Mr. Seale the rationale for not placing the position of State Controller in the Department of Administration. Mr. Seale responded it was done frequently (incorporating the position of controller into a department of administration) and was a viable alternative to incorporating the controller's position into the treasurer's office. Mr. Ernaut asked what Mr. Seale perceived to be the most immediate check and balance against having both the controller and the treasurer in the same office. Mr. Seale replied, "...moving the internal control mechanisms that we currently have and putting them in place in a consolidated office is the most significant thing that we must do." He contended it would not be difficult to create a system of internal controls which would provide adequate financial protection for the state if the treasurer and controller were under one elected official. Mr. Ernaut suggested such internal controls should be established prior to the legislature voting on S.J.R. 21. Mr. Seale contended such internal controls presently existed and cited the things he believed comprised those internal controls. He gave examples of malfeasance of office which had occurred in the past and asserted maintaining separate offices of controller and treasurer did not insure against such malfeasance. Mr. Ernaut asked Mr. Seale to describe some of things the treasurer did with respect to investments and asked whether much of what the treasurer did in that regard was done prior to 9:00 a.m. Mr. Seale advised much of what the treasurer did was done early in the day. He said the treasurer's office opened for business between 6:15 a.m. and 6:30 a.m. because of the need to deal with Wall Street. He described the procedures the treasurer followed in determining which investments to make and advised the majority of those investments were made before 9:00 a.m. He said the treasurer submitted information concerning his investments both to the controller and to the Department of Administration for approval. Mr. Seale reiterated his belief there were many checks and balances by which to safeguard state monies and declared he would not propose the offices of treasurer and controller be combined if, in his professional opinion as a Certified Public Accountant, it was not safe to do so. Assemblyman Segerblom pointed out if the office of controller was consolidated into the office of the treasurer Mr. Seale would appoint the controller and at such time as a new treasurer was elected that treasurer would appoint his own controller. Mr. Seale responded regulations established and laws created during the transition period S.J.R. 21 would provide should address the various aspects of the situation Mrs. Segerblom described. Assemblyman Bache advised in those 36 states and the District of Columbia in which a state controller was not elected the controller was under the governor's authority in one manner or another. He asked why Mr. Seale believed it would be better to have the state controller under the authority of the state treasurer than under the authority of the governor. Mr. Seale replied the functions of both the controller and the treasurer were fiscal functions and those functions were similar in nature and correlated with one another. He indicated, in Nevada, both the office of state treasurer and the office of state controller had relatively little authority and said he believed combining those offices and creating one senior fiscal officer would strengthen Nevada's financial position and would create a fiscal officer who "...in effect, is a watchdog in large part..." Mr. Brad Lawrence testified. He advised he was a voluntary representative of the State Treasurer and asked if he might respond to Mr. Ernaut's question regarding the rationale for incorporating the controller's position in the treasurer's office rather than in the Department of Administration. He said it was believed it would be best if the chief financial officer of the state was an independently elected official, whether that officer was the treasurer or was the controller. He suggested the citizens of Nevada would feel more comfortable if that was the case. Mr. Darrel Daines, State Controller, State of Nevada, testified. He stated there was a "line" between the office of State Treasurer and that of State Controller which neither crossed. He contended neither the State Treasurer nor the State Controller attempted to run the other's office and declared, "...that's the check and balance that exists there right now." Mr. Daines referred to Mr. Seale's testimony regarding the State Treasurer's investment program and advised the State Controller had the last say as to whether or not a warrant would be written to pay for the State Treasurer's investment and the fact that he had that say was part of the system of checks and balances. He advised, likewise, the State Controller wrote 600,000 checks a year which would not be valid if the State Treasurer did not sign them and that situation was also a part of the system of checks and balances. He indicated he did not know what could be substituted for those safeguards. He suggested Nevada had a history of not changing things which worked. Mr. Daines said he had been a controller in the state of Nevada for 27 years and, during that time, had earned seven certificates for achievement of excellence in financial reporting while controller for Clark County and six such certificates while State Controller. He advised he was currently president of the National Association of State Auditors, Controllers and Treasurers and had served as president of the National Association of Controllers. He said, "...in present day dollars, the budget in the controller's office is the same as it was in 1927..." Mr. Daines declared he believed there was reason to have an active and effective system of checks and balances and contended the people of the state of Nevada had the right to be able to "...speak to their elected official and to know that they're being represented in that capacity." He advised in four years he would no longer be State Controller but he felt an obligation to speak for the continuation of that office. He suggested the people of the state of Nevada intended there be such an office and deserved to have there be such an office. Mr. Ken West, Chief Deputy Controller, testified. He suggested the legislature should review the functions of the State Controller and those of the State Treasurer to determine what controls should be in place should those offices be combined and to weigh the adequacy of those controls against the risk of what could occur if those offices were combined. Mr. West maintained there were different degrees of internal controls. He suggested independent controls, in which one official could not influence the decision of another, were more costly than "...controls of replication within the same department..." He discussed current procedures for processing claims against the state and advised the State Controller had the last word as to whether or not such claims would be paid. He pointed out only claims against appropriations or authorizations by the legislature underwent the state's pre-audit process and said investments did not constitute such claims. He discussed the controls involved in the State Treasurer's investments and advised only the State Controller audited the State Treasurer's investments on a daily basis. He explained the State Controller conducted an "...interest allocation check and balance..." on the State Treasurer's office on a quarterly basis, at which time the State Controller reviewed the State Treasurer's investment policy to ensure his investments were reflected in that policy, and prepared an annual financial statement listing those investments by risk. Mr. West suggested establishing adequate controls over the State Treasurer's investments would probably be the greatest problem involved in combining the offices of State Treasurer and State Controller. Mr. West suggested, with respect to saving money, it might be possible to eliminate eight positions within the State Treasurer's and State Controller's offices by using a new accounting system or a different means to process information, and said "...that onus would be switched out to the agencies where they originate the data..." He contended that could be done without combining the offices of State Treasurer and the State Controller. He advised the State Controller's office worked with the State Treasurer's office in attempting to streamline government. He contended there was a greater opportunity to save money by streamlining processes than there was by combining the offices of the State Treasurer and the State Controller. Ms. Mary Sanada, Certified Public Accountant, testified. Ms. Sanada advised the committee of her involvement in government finance and of her professional affiliations. She said she was present when the committee held a hearing on Assembly Bill 407, which proposed responsibility for the Unclaimed Property Division be transferred from the Department of Business and Industry to the State Treasurer's office. She reminded the committee the Director of the Department of Business and Industry testified in opposition to A.B. 407 and, in her testimony, asked what problem was attempted to be solved by transferring the Unclaimed Property Division to the State Treasurer's office. Ms. Sanada contended the same question was relevant with respect to S.J.R. 21. Ms. Sanada indicated she had heard two arguments given in support of S.J.R. 21. She said the first argument revolved around the fact other states were doing what S.J.R. 21 proposed be done. She said the same argument was used to support transferring the Unclaimed Property Division to the State Treasurer's office and contended the argument was not very effective when given then and was not a good argument with respect to S.J.R. 21. She declared the fact other states were doing something did not necessarily provide a good reason for Nevada doing likewise. Ms. Sanada discussed what occurred when a previous Nevada State Treasurer made a risky investment. She explained the legislature determined the type of investment made by that State Treasurer was not an appropriate investment for Nevada, despite the fact other states were making such investments, and directed such investments no longer be authorized as an investment option for Nevada. She suggested, in doing so, the legislature recognized that sometimes the adverse effects of shortsighted decisions might not become apparent for years. She reiterated the fact other states were consolidating the offices of treasurer and controller did not provide a good reason for Nevada to do so. Ms. Sanada stated the second argument she heard in support of consolidating the offices of State Treasurer and State Controller was that doing so would save money. She said it was suggested such consolidation would eliminate eight employee positions and contended if both offices were currently staffed to meet their work requirements that suggestion implied the work of the two offices overlapped. She maintained the work of the two offices did not overlap. She said the only overlap in their work pertained to such things as the fact staff in the State Controller's office reviewed the State Treasurer's transactions. She declared such reviews were essential to maintain the integrity of the state's financial records and should not be eliminated. She contended S.J.R. 21 did not guarantee either the elimination of any employee positions or the saving of any money. She advised she conducted an analysis of those departments affected by the "...Governor's reorganization...", which she said was touted as a means to streamline government and to save money. She said her analysis showed, overall, the expenditures of those departments which were consolidated and reorganized increased by four percent between 1993 and 1994. She stated, in addition, attempts to consolidate audit functions resulted in Nevada losing federal reimbursement funds because it was not in compliance with audit requirements. Ms. Sanada declared the offices of State Treasurer and State Controller were established as independent and equal positions in order to effect a system of checks and balances and maintained that system was still important. She suggested that system was not satisfied by either the Department of Administration or the Legislative Auditor. She contended no large problem existed which would be solved by S.J.R. 21 being passed by the legislature nor was there any other overwhelming reason why it should be passed. She urged the committee to reject S.J.R. 21. Mr. Bache asked Ms. Sanada her opinion of placing the office of State Controller under the authority of the Governor's office. Ms. Sanada replied it would be much better to do that than to place the State Controller under the authority of the State Treasurer. She asserted the State Controller's functions should be independent of those of the State Treasurer. Assemblyman Freeman asked whether Ms. Sanada believed the State Controller should be independent of both the Governor's office and the State Treasurer's office or, rather, she would advocate placing the State Controller under the Governor's authority. Ms. Sanada replied, "In a political environment, it is probably better to have the controller independent because the controller reports the state's financial condition." She suggested if the State Controller was appointed by the Governor the Governor would have the right to tell the State Controller what to say. Chairman Lambert closed the hearing on S.J.R. 21. SENATE BILL NO. 427 - Revises provisions governing public records which contain copyrighted material. Ms. Marsha Berkbigler, American Consulting Engineers Council of Nevada, testified. She advised S.B. 427 would make changes to state laws governing public records. She said, under current law, Nevada allowed anyone to have access to and to copy any document filed with the state and to use the information obtained from such document in any way advantageous to him. Ms. Berkbigler indicated a question arose as to whether Nevada's law conflicted with federal copyright laws and advised the Nevada Department of Environmental Protection (NDEP) sent a letter to all groups in Nevada who filed documents with it that it would no longer accept copyrighted documents (Exhibit E). She said, unfortunately, any document created by an architect and a consulting engineer which set forth a design or plan for highways or buildings was a proprietary document and was copyrighted pursuant to federal law. She said, therefore, the state had placed architects and consulting engineers in the position of being unable to determine what documents they should file with the state. She suggested it was possible NDEP was impinging on citizens' rights to copyright their proprietary designs. Ms. Berkbigler provided a copy of a letter an attorney hired by the American Consulting Engineers Council of Nevada (hereinafter referred to as the Council) had written (Exhibit F). She advised that attorney concluded "...although this kind of language exists in statutes in other states, perhaps Nevada's statute goes a little bit further and may question whether or not, in fact, that there is some conflict with federal copyright laws." She said the Council proposed a disclaimer be added to Nevada law and pointed out such disclaimer was included in the first reprint of S.B. 427 on page 1, commencing with the last word on line 10 and continuing through line 14. She advised, in essence, that disclaimer said nothing in Nevada's laws was intended to conflict with federal copyright laws. She said, in addition, language had been added in lines 15 and 16 of S.B. 427 which provided an agency could not reject a copyrighted document solely on the basis it was copyrighted. Ms. Ande Engleman, Freedom of Information, testified. She said, in its original form, S.B. 427 gave rise to doubt as to whether anything in a public repository which was copyrighted could be copied. She said that caused her concern that teenagers and young people who used libraries and who sometimes copied information from encyclopedias would be unable to copy such information. She advised the language of S.B. 427 in its present form constituted a compromise which addressed all concerns. She indicated S.B. 427 would add language to Nevada's public records law which provided the mere fact a copyrighted document resided in a public repository did not remove its federal copyright. Ms. Engleman provided "...a copy of a case from CyberLaw..." (Exhibit G). She described the actions which gave rise to that case and advised those actions violated federal copyright laws. She referred to page 2 of Exhibit G and pointed out, under federal copyright law, it was permissible to copy something which was copyrighted but was not permissible to use such a copy to make money. Ms. Engleman contended Nevada's copyright law was very weak and the purpose of S.B. 427 was to remind people if an individual held a copyright it meant the item copyrighted belonged to him and should be treated accordingly. Mrs. Segerblom asked, "Would this affect art?" Ms. Engleman replied it would not. She advised Nevada's law contained statutes which protected artists and art. Mr. Don Ham, Nevada Press Association, testified. He said the Nevada Press Association supported the compromise represented by the first reprint of S.B. 427 and believed copyrighted material should be protected. Mr. Lauren House testified. He stated he was President of L. R. House Insurance, Inc., an affiliate member of the American Consulting Engineers Council of Nevada, and expressed support for S.B. 427. He said the potential existed for unauthorized reuse of engineering documents and advised that potential presented design engineers with serious exposure to professional liability. He contended, without either statutory or contractual protection against unauthorized and indiscriminate use of professional design documents, engineers incurred a serious exposure to liability which might "...fall outside of insurable parameters." He advised that situation would have a negative effect with respect to engineers entering into contracts with the state to do designing and suggested S.B. 427 would remedy the situation. Chairman Lambert closed the hearing on S.B. 427. ASSEMBLYMAN FREEMAN MOVED DO PASS S.B. 427. ASSEMBLYMAN BENNETT SECONDED THE MOTION. THE MOTION CARRIED. Chairman Lambert assigned S.B. 427 to Mrs. Freeman for the purpose of making a floor statement. Chairman Lambert turned the gavel over to Vice Chairman Braunlin for her to conduct the hearing on Senate Bill No. 503. SENATE BILL NO. 503 - Authorizes program of optional pricing for electricity derived from renewable energy resources. Ms. Nancy Brown testified by reading from prepared text (Exhibit H). She said she was an intern for Senate Minority Leader Dina Titus and was present to speak in support of S.B. 503. She provided a packet of information concerning "green pricing" (Exhibit I). Ms. Brown advised S.B. 503 would permit utilities to apply for permission to use a pricing program known as "green pricing." She explained "green pricing" was a program in which utility companies offered their customers the opportunity to pay higher monthly rates to help finance production of electricity from renewable energy sources. She said the program had three goals: to encourage increased development of renewable energy sources; to provide electricity customers a choice in the source of their energy consumption, while allowing utilities flexibility to choose the renewable energy source best suited to their locals, cost restraints and environmental barriers; and to improve "...the planning processes and resource options considered by utilities." Ms. Brown stated, although renewable energy resources had exited for decades, only about 12 percent of the nation's electricity was produced from such resources. She said utility companies claimed use of renewable energy technologies would cause too great an increase in the retail price of energy. She contended the voluntary pricing program proposed by S.B. 503 would help alleviate that problem. Ms. Brown pointed out Nevada's Public Service Commission required utility companies to charge the same rate for power regardless of its source. She suggested, if passed by the legislature, S.B. 503 would change that situation but pointed out utility companies would still have the option to decide whether or not they wished to ask the PSC for permission to use "green pricing." Ms. Brown advised other states were investigating the option of "green pricing" and discussed some of the programs being used in other states. Ms. Brown referred to a graph included in excerpts from a study conducted in southern Nevada (Exhibit I) and discussed the percentages of the general population willing to pay higher utility prices, in varying amounts, to support use of solar energy. Ms. Brown asserted "green pricing" was one of the best means to promote large scale (development of) renewable energy resources. She stated S.B. 503 would amend NRS to permit electric companies to apply (to the PSC) for permission to implement "green pricing" as part of an optional pricing program. She contended even small participation in such a program would generate a positive effect and urged the committee to support S.B. 503. Mr. Bennett asked whether he was correct in his understanding a utility company would be required to offer its customers the option described in subsection 2 of Section 1 of S.B. 503, however, a customer could elect not to avail himself of that option and the utility company then would have no option other than to charge that customer its normal rate. Ms. Brown replied affirmatively. Mr. Bennett asked for what purpose the money a utility company obtained through charging those customers who agreed to participate in its "green pricing" program a higher rate for electricity would be used. Ms. Brown replied that would depend upon the utility company's approach to the program. She indicated a utility company either could use such money to create a fund through which to acquire renewable energy resources or could purchase such resources or the means to produce them, initially, and then rely on monies generated by customer participation in its "green pricing" program to reimburse itself. Assemblyman Nolan asked, if a utility company chose to develop a renewable energy source and initially had a sufficient number of customers paying higher rates to use that energy source to support such development but the number of those customers then declined, what would prevent that utility company from increasing the rates it charged the remaining users of that energy source or from increasing the rates it charged all its customers, including those who relied on traditional energy sources. Ms. Brown replied the situation Mr. Nolan posed in his question exemplified a risk associated with "green pricing" and one which utility companies should assess and said that risk was the reason many utility companies chose to use monies obtained through "green pricing" to establish an investment fund "...so when that resource is brought on line it is substantially paid for..." She reiterated S.B. 503 only provided the option for utility companies to apply to the PSC for permission to use optional pricing programs and did not mandate them to do so. Mr. Nolan commented he would feel more comfortable with S.B. 503 if it included provisions which would prevent utility companies from shifting the costs they incurred to provide energy from renewable energy sources to customers who had chosen not to become involved in an optional pricing program designed to support development of such an energy source. Assemblyman Tripple referred to the fact S.B. 503 discussed public utilities who had an annual operating revenue in Nevada of $2,500,000 or more and asked which specific companies were being discussed. Ms. Brown replied Nevada Power Company and Sierra-Pacific Power Company were the two utility companies in Nevada which would be affected by S.B. 503. Ms. Tripple said S.B. 503 was based on the premise the cost of energy obtained from wind, solar energy and geothermal energy would be higher than that of energy obtained from traditional sources and asked, "...are we always going to keep perpetuating this idea that they are to be more expensive? Aren't we ever going to get them organized so that they will not be more expensive?" Ms. Brown called Ms. Tripple's attention to an article contained in Exhibit C regarding prices of various renewable energy resources. She advised, although it was often more costly to commence doing so, ultimately it was less costly to supply energy from renewable energy resources than to supply energy from traditional resources and indicated it was not the intent of S.B. 503 to disseminate the misconception it was not less costly to do so. Assemblyman Harrington expressed support for S.B. 503. Mrs. Freeman said she wished to respond to Ms. Tripple's question regarding the cost of renewable energy resources. She advised, over the past four years, a company had made efforts to move into Nevada with the intention of burning shredded tires and selling the power generated by doing so to a power company. She declared the PSC refused to allow the company to do so "...because of the up-front costs." She contended it might take time to arrive at the point where such services could be used efficiently and suggested S.B. 503 might assist in that regard. Commissioner Galen Denio, Public Service Commission, testified. He provided a handout summarizing the PSC's position on S.B. 503 (Exhibit J). He advised the PSC supported S.B. 503 because it would enable the PSC to establish "green tariff" provisions. He pointed out, pursuant to S.B. 503, a utility's tariff would have to be approved by the PSC. He advised "cost shifting" was an issue with which the PSC was very familiar and with which the PSC would deal. Mr. Bennett indicated he shared Mr. Nolan's concern about the possibility of cost shifting and asked how the PSC handled that issue when it was brought before the commission in the past. Mr. Denio replied, under the provisions of S.B. 503, revenues a utility obtained from the higher rate paid by its customers would be "...dealt with separately from the regular revenues." He explained accounting procedures would be in place to ensure those revenues were used "...toward the particular renewable resource." Mr. Bennett asked whether Mr. Denio perceived those revenues would be used to reimburse utility companies for research and development and start-up costs incurred in making energy from renewable energy sources available and that, when such costs had been absorbed, utility companies would then establish competitive prices for such energy. Mr. Denio replied, "That may very well be true." He said it was important to note many renewable energy resources were developed not by utility companies but by other entities. He explained payments made to those entities by utility companies would flow through the deferred energy account and would be easy to keep track of, thereby making it possible to ensure the revenues a utility company received through "green pricing" were used for that specific purpose. Mr. Joe Johnson, Toiyabe Chapter, the Sierra Club, testified. He declared, as an environmentalist, he wished to go on record as supporting S.B. 503. He said he would be interested to see what percentage of that 80 percent of the general population quoted as viewing "green pricing" favorably would actually participate in such a program. He suggested, based on experience gained from recycling programs, that percentage would be fairly large. Mr. Dave McNeil, Energy Program Specialist, State Energy Office, testified. He stated the State Energy Office supported S.B. 503. He advised the packet of information provided by Ms. Nancy Brown (Exhibit I) would reflect the price of electricity generated from renewable energy resources had decreased significantly over the past 10 years and said the price was expected to continue to decrease. He contended, in many cases, the price of such electricity was very competitive with the price of electricity generated from conventional, fossil fuel resources. Mr. McNeil declared the State Energy Office believed utility customers should be entitled to purchase electricity generated from renewable energy resources regardless of the cost of that electricity. He maintained, by allowing utility companies to offer their customers both the freedom of choice and the ability to support investment in renewable power sources, "green pricing" had the potential to provide a customer relations benefit to utility companies. He contended an additional benefit to be derived from optional pricing for energy from renewable power sources was assistance in further reducing the cost of such energy through creation of larger markets for that energy which, in turn, would allow the use of "...enhanced economies of skill..." which would help to achieve lower power production costs. Ms. Tripple pointed out S.B. 503 said a higher rate would be charged for electricity generated from renewable power sources and asked why S.B. 503 could not be limited to providing for a program of optional pricing without dictating that pricing be at a higher rate. Mr. McNeil replied, in many parts of the country, power derived from renewable energy sources was cheaper than power derived from conventional energy sources, however, with respect to Nevada, the cost of generating electricity from renewable energy sources was greater than the cost of generating electricity from conventional sources. He reiterated the cost of power from renewable energy sources was rapidly decreasing. He suggested S.B. 503 provided an optional pricing structure which would permit those utility customers interested in promoting the "...renewable power industry..." to pay the cost of promoting that industry as opposed to that cost being imposed on utility consumers as a whole. Ms. Brown gave further testimony in response to Ms. Tripple's last question. She said, currently, a sizeable start-up cost was involved in generating power from renewable energy sources and contended there was a need to offset that cost in order to encourage utility companies in Nevada to bring such power on line. Ms. Tripple commented she supported both use of renewable energy sources and the concept of optional pricing but resisted the assumption optional pricing must necessarily be at a higher rate. She contended the federal government had spent a great deal of money on energy conservation and, at the present time, utility companies "...must have a certain percentage that comes from renewable resources." Ms. Brown responded many utility companies were currently using renewable energy sources for purposes such as research and development projects, however, it was her understanding there was no statutory mandate which said a utility company must obtain a certain percentage of its power from a renewable energy source. Mr. Bennett proposed S.B. 503 be amended to replace "higher rate" with "proportional rate" and to define proportional as meaning "...as compared to current generating practices." He suggested such an amendment would allow rates to fluctuate with the market. Ms. Tripple pointed out hydroelectric power was considered a renewable energy source and was one of the main sources of electricity in the state of Washington. She asked, "...so, you mean that I'm going to pay more in Reno for electricity that is generated from hydroelectric when in the state of Washington that is the least expensive?" Ms. Brown advised Nevada bought a lot of its power from sources outside Nevada and said the intent of S.B. 503 was to provide for investment in development of domestic power resources and to make it known Nevada supported development of renewable energy sources on a regional level. Ms. Marilyn Skibinski, Administrative Assistant, Office of the Consumer Advocate, Attorney General's office, State of Nevada, testified. She said Mr. Frank McCrae was present with her on behalf of Nevada Power company. She said she and Mr. McCrae would attempt to address some of the questions raised by the committee. Ms. Skibinski said she did not believe S.B. 503 mandated a higher rate be charged for energy derived from renewable energy resources than was charged for energy derived from conventional energy sources. She asserted if it did not cost a utility more to generate such energy the utility would have no reason to apply for a special tariff and said the PSC would not approve a higher rate "...for a fuel source that didn't cost more." Mr. Frank McCrae, Nevada Power Company, testified. He indicated he wished to expand on Ms. Skibinski's testimony. He advised if renewable energy resources did not cost more than conventional energy resources Nevada would acquire such resources without the need for the provisions of S.B. 503 because there would be no need for the opportunity to charge a higher rate for energy generated from renewable energy resources. Mr. McCrae said Nevada Power Company supported S.B. 503, as written, because it provided Nevada Power Company the option of acquiring energy resources which might be more costly (than conventional resources) and to recover those extra costs from customers who wished to participate in utilizing those more costly resources. Mr. Bennett said, "This is for the record, so be careful of your answer. What you're saying is this is your gamble. It's your gamble that you feel enough customers will want this that you will take the financial risk to supply it through a totally customer voluntary program?" Mr. McCrae replied, "There's different ways that we can manage the risk associated with going out and acquiring resources given the acceptability of that resource choice on the number of customers. We can contract for that power and the length of that contract could be dependent upon the ongoing support of acquiring renewable resources from our customers. In other words, Assemblyman Nolan asked the question `Well what about if the number of customers that wants to contribute to the acquisition of renewable resources declines over time?'" Well, we could structure a contract with a third party supplier that would be dependent upon -- the revenues to him would be dependent upon our customers participating in that program. So there's different ways that we can manage the risk. And, I'm sorry, I can't give you a simple yes or no answer because there's a lot of assumptions that we'd have to make about the marketability and the market acceptance of those types of resources." Mr. Bennett asked whether utility consumers would "...assume any of the risk of this bill?" Mr. McCrae asked whether Mr. Bennett's question referred to those consumers who chose not to participate in a program of optional pricing. Mr. Bennett replied affirmatively. Mr. McCrae said he would not support nor did he believe Nevada Power Company would support those customers who did not participate in a program of optional pricing assuming any greater risk than they assumed as a result of any other decision Nevada Power Company made regarding energy resources. Vice Chairman Braunlin closed the hearing on S.B. 503 and turned the meeting back over to Chairman Lambert. SENATE JOINT RESOLUTION NO. 11 - Urges Congress to investigate utility of importing water to Nevada from sources outside Nevada. Assemblyman Joseph Dini, District No. 38, Co-Speaker of the House, testified. He advised the first time the resolution contained in S.J.R. 11 was introduced in the legislature was during the 1929 legislative session. He advised the legislature continued to send such resolutions to Nevada's congressional representatives in the hope they might eventually determine a means to import water into the northern portion of Nevada. He contended Nevada would never be able to stabilize it ancient lakes, such as Pyramid Lake and Walker Lake, due to insufficient water. He indicated a resolution such as that set forth in S.J.R. 11 had been passed each legislative session and forwarded to congress with no result, however, he believed it demonstrated to Nevada's congressional delegation that Nevada was interested in preserving its northern lakes and in having water for domestic use. Mr. Harrington asked whether Nevada contemplated getting water from the Snake River. Mr. Dini replied the legislator who proposed the original resolution contemplated obtaining water from the Columbia River. Ms. Tripple asked Mr. Dini why Lake Tahoe was not named in S.J.R. 11. Mr. Dini replied Lake Tahoe had adequate water resources and was well protected. He suggested bringing water "...downstream..." to the Truckee meadows, Pyramid Lake, Walker Lake and Lake Lahontan would lessen the demand for water from Lake Tahoe. Mr. Bennett expressed support for S.J.R. 11. He commented, for the first time in many years, water was flowing into Walker Lake and asked Mr. Dini how many years it had been since that last occurred. Mr. Dini replied it had been approximately eight years. Mr. Joe Johnson, Toiyabe Chapter, the Sierra Club, testified. He pointed out a number of resolutions had been proposed, during the current legislative session, which discussed states' rights and tenth amendment issues and contended, through S.J.R. 11, the legislature was asking for federal funds for the benefit of the state of Nevada. He asserted the issue of supplying water was a political issue which involved "... the downstream states of the Columbia River system and Nevada..." and suggested Nevada would take offense if Oregon's legislature passed a resolution seeking to be supplied with water from the Humboldt River system. He maintained water from the Columbia River system was over-allocated and the system was "...environmentally constrained with various economic factors..." He contended the Nevada legislature was passing a resolution the purpose of which was to gain water from the Columbia River system but the legislature would take offense if "they" attempted to obtain water from Nevada. He declared his objection to S.J.R. 11 was based on the fact Nevada's legislature was asking Congress for money when, during the current legislative session, the legislature had systematically claimed state sovereignty and states' rights. He suggested if the legislature wished to pursue importing water into Nevada it should appropriate state funds to do so. Assemblyman Neighbors commented he had always wondered why water from the Columbia River could not be diverted to the south, at a point just prior to the point at which the river emptied into the ocean, and be used to refill dry lakes. He suggested doing so might eventually change the climate. He declared he supported S.J.R. 11. Mr. Johnson reiterated his previous testimony that the issue which was the subject of S.J.R. 11 was a political issue and that the legislature was requesting assistance from the federal government after having demanded state sovereignty. Mr. Bennett observed the federal government obtained millions of dollars each year from Nevada's mineral rights and contended S.J.R. 11 merely asked for quid pro quo. Chairman Lambert closed the hearing on S.J.R. 11. The committee held a work session. SENATE BILL NO. 456 - Authorizes local government to establish certain funds for local financial administration. Chairman Lambert provided proposed amendments to S.B. 456 (Exhibit K). She advised the provision contained in the third proposed amendment to S.B. 456 (set forth in Exhibit K) paralleled what was being done with respect to the state's stabilization fund. She stated Mr. Bache suggested S.B. 456 also be amended to incorporate the provisions of A.B. 48 and indicated Senator Porter supported doing as Mr. Bache proposed. ASSEMBLYMAN BACHE MOVED TO AMEND S.B. 456 BY INCORPORATING THE PROVISIONS OF A.B. 48 AND AS SET FORTH IN THE WRITTEN PROPOSED AMENDMENTS (Exhibit K) AND DO PASS S.B. 456. ASSEMBLYMAN SEGERBLOM SECONDED THE MOTION. THE MOTION CARRIED. ASSEMBLY BILL NO. 9- Authorizes governing body of county or city to restrict location of residential facilities for adult care. Mr. Bache provided proposed amendments to A.B. 9 (Exhibit L) and explained those amendments incorporated the amendments proposed by Assemblywoman Giunchigliani, those proposed by Ms. Kelly Caccamise and those proposed by Ms. Madelyn Shipman. Discussions were held among committee members. Chairman Lambert advised she discussed A.B. 9 with Ms. Shipman and Ms. Shipman believed, with respect to the 1,000 feet restriction discussed in A.B. 9, that distance should be measured from the property line of the property on which a residential facility for adult care was located. She said Ms. Shipman indicated she was not certain the provisions of A.B. 9 were consistent with the Fair Housing Act. Further discussions ensued. Chairman Lambert suggested the committee refrain from taking action on A.B. 9 until answers could be obtained to certain of the committee's questions. ASSEMBLY BILL NO. 602 - Defines "action" for purposes of open meeting law. Mrs. Braunlin provided a report of the subcommittee on A.B. 602. ASSEMBLYMAN BRAUNLIN MOVED DO PASS A.B. 602. ASSEMBLYMAN TRIPPLE SECONDED THE MOTION. THE MOTION CARRIED. Chairman Lambert assigned A.B. 602 to Mrs. Braunlin for the purpose of making a floor statement. Chairman Lambert adjourned the meeting at 10:54 a.m. RESPECTFULLY SUBMITTED: Sara Kaufman, Committee Secretary APPROVED BY: Assemblyman Douglas A. Bache, Chairman Assemblyman Joan A. Lambert, Chairman Assembly Committee on Government Affairs June 15, 1995 Page