MINUTES OF THE

SENATE Committee on Commerce and Labor

 

Seventy-second Session

May 2, 2003

 

 

The Senate Committee on Commerce and Labor was called to order by Chairman Randolph J. Townsend, at 7:30 a.m., on Friday, May 2, 2003, in Room 2135 of the Legislative Building, Carson City, Nevada. The meeting was videoconferenced to the Grant Sawyer State Office Building, Room 4412, 555 East Washington Avenue, Las Vegas, Nevada.  Exhibit A is the Agenda. Exhibit B is the Attendance Roster. All exhibits are available and on file at the Research Library of the Legislative Counsel Bureau.

 

COMMITTEE MEMBERS PRESENT:

 

Senator Randolph J. Townsend, Chairman

Senator Warren B. Hardy II, Vice Chairman

Senator Ann O'Connell

Senator Raymond C. Shaffer

Senator Joseph Neal

Senator Michael Schneider

Senator Maggie Carlton

 

GUEST LEGISLATORS PRESENT:

 

Assemblyman David R. Parks, Assembly District No. 41

Assemblywoman Valerie E. Weber, Assembly District No. 5

Assemblyman Jason D. Geddes, Assembly District No. 24

Assemblywoman Christina R. Giunchigliani, Assembly District No. 9

Assemblyman Lynn C. Hettrick, Assembly District No. 39

Assemblyman Peter (Pete) J. Goicoechea, Assembly District No. 35

 

STAFF MEMBERS PRESENT:

 

Scott Young, Committee Policy Analyst

Courtney Wise, Committee Policy Analyst

Kevin Powers, Committee Counsel

Lynn Hendricks, Committee Secretary

Laura Adler, Committee Secretary

 

OTHERS PRESENT:

 

David Noble, Assistant General Counsel, Public Utilities Commission of Nevada

Michael R. Alastuey, Lobbyist, Clark County

Russell Fields, Lobbyist, Nevada Mining Association

Joseph Guild, Lobbyist, Newmont Mining Corporation

Michael J. Brown, Lobbyist, Barrick Goldstrike Mines, Incorporated

Patrick Barney, Owner, World Renew

Jolene M. Supp, City Manager, City of Wells

Jon Wellinghoff, Lobbyist, Power Light Corporation

Gary D. Wayne, Lobbyist, Power Light Corporation

Helen A. Foley, Lobbyist, Pardee Homes

Timothy Hay, Chief Deputy Attorney General, Bureau of Consumer Protection, Office of the Attorney General

Joseph L. Johnson, Lobbyist, Sunrise Sustainable Resource Corporation, and Toiyabe Chapter/Sierra Club

George Sterzinger, Executive Director, Renewable Energy Policy Project

Danny Thompson, Lobbyist, Nevada State American Federation of Labor‑Congress of Industrial Organizations

Ernest E. Adler, Lobbyist, International Brotherhood of Electrical Workers No. 1245

Judy Stokey, Lobbyist, Nevada Power Company

Kathleen Drakulich, Associate General Counsel, Nevada Power Company

K. Neena Laxalt, Lobbyist, Natural Lighting Company, Incorporated

Carl Linvill, Administrator, Nevada State Office of Energy, Office of the Governor

Thelma Clark, Lobbyist, Nevada Silver Haired Legislative Forum

Pat Wilson, Lobbyist, National Silver Haired Congress

Samuel J. Routson, Chief Administrative Officer, U.S. Food-Winnemucca Farms, Incorporated

Tom Hoffert, Utilities Operations Manager, Carson City Utilities Operation, City of Carson City

Fred J. Schmidt, Lobbyist, ORMAT Nevada Incorporated

Daniel N. Schochet, Lobbyist, ORMAT Nevada Incorporated

William S. Davidson, Wind Energy Consulting

Andy Belanger, Lobbyist, Las Vegas Valley Water District

 

Chairman Townsend:

Let us start with Assembly Bill (A.B.) 32.

ASSEMBLY BILL 32 (1st Reprint): Revises certain provisions governing public utilities, alternative sellers, providers of discretionary natural gas service, providers of new electric resources and eligible customers. (BDR 58-626)

 

Assemblyman David R. Parks, Assembly District No. 41:

I will read my testimony (Exhibit C) in favor of A.B. 32.

 

Chairman Townsend:

I would like to know the thought behind “eligible customer,” on page 2, section 2, line 20. Are you saying an eligible customer needs to pay the franchise fee that otherwise was not going to be collected?

 

Assemblyman Parks:

It is a term arrived at to describe a collective group of consumers who might go with an out-of-state provider. These are large customers such as the mining industry, and we did not want a too descriptive term to describe that customer.

 

Chairman Townsend:

Go to page 3, section 4, line 17, where it talks about examining the books of any public utility doing business in this State. This is being changed to accommodate the tax issue. Was it the intent to allow all the governments or the commission to get into the books of eligible customers?

 

Assemblyman Parks:

In the interest of time, I think experts in this field are better able to answer your question.

 

Chairman Townsend:

When looking at Nevada Power Company numbers, I want to be sure we are not going to double collect a franchise fee. This is important to protect existing customers.

 

David Noble, Assistant General Counsel, Public Utilities Commission of Nevada (PUCN):

The reason for the term “eligible customer” was new providers of electricity were not licensed in Nevada, and the State has no real authority over them, which was a policy decision of the Legislature in the last session. From the commission’s standpoint we need to verify the truth of mill assessment, 1/10 of a cent on annual assessment of gross operating revenue derived from intrastate operations, reports, and that is the only reason. The commission could do a regulation to tailor to that narrow issue.

 

Chairman Townsend:

I think you only want to make sure they are paying the appropriate franchise fee, but the language says the records would have to be open to the world.

 

Michael R. Alastuey, Lobbyist, Clark County:

I was privileged to sit as a member of the technical advisory committee to the Legislative Committee for Local Government Taxes and Finance. The intent of the bill was to level the playing field to make sure out-of-state energy providers do not have a competitive advantage over Nevada-regulated public utilities. No unnecessary access to records should be permitted.

 

Russell Fields, Lobbyist, Nevada Mining Association:

I will read from my prepared text (Exhibit D) in support of the proposed amendments.

 

Chairman Townsend:

Have the others seen the proposed amendments?

 

Mr. Fields:

Yes. Mr. Guild can fill you in further.

 

Joseph Guild, Lobbyist, Newmont Mining Corporation:

Yesterday was the first time I had a chance to review the proposed amendments (Exhibit E), and I talked to as many people as possible. Where the words, “eligible customer” appear in the bill, we propose substituting the words, “provider of new electric resources.” In subsection 1, add subsection 5 to define “provider of new electric resources” as ascribed to in Nevada Revised Statutes (NRS) 704B.130. The amendments clarify the reports and records that must be made available to the applicable business transacted in the State and not outside of the State where the customer has other business dealings.

 

Sections 8 and 9 place the remittance burden on the provider not the customer. In section 15 the commission orders the eligible customer to pay its portion of the assessment and pay any other tax, fee, or assessment due. The person or entity responsible for billing the eligible customer must tell them in the billing how much they owe. The provider is responsible to ensure the amount to be paid is paid by the eligible customer.

 

In subsection 3 of section 15, if the governmental entity finds out they are not getting what they are supposed to get, they can petition the commission. The commission can require the eligible tax be paid, and the consequence of not paying the tax to the appropriate entity is the loss of the eligible customer’s right to buy from the provider. It makes sense to us that the eligible customer would pay the necessary tax. Therefore, it appears the remedy is available without first going to the books of the eligible customer by petitioning the commission. Once the commission is petitioned, then that is the appropriate time to inspect the books, if at all. I agree with Chairman Townsend’s assessment of the broad nature of the language.

 

Senator Carlton:

Was this plan presented and discussed by the task force?

 

Senator O'Connell:

As a member of that committee, I can answer the question. Mr. Guild’s testimony was the aim of the committee. The committee did not discuss the specific circumstance. The committee’s concern was proper taxes and fees were collected by any business outside the State providing power to any industry within the State. It was not anticipated nor the language of the bill discussed as far as the end-user or the eligible customer. The overall concern was there be a means for collecting the tax and for the PUCN to have the option of access to the books and reports.

 

Michael J. Brown, Lobbyist, Barrick Goldstrike Mines, Incorporated:

With A.B. No. 661 of the 71st Session there was an understanding that if a company left the Sierra system, we would take with us our renewable obligations, our deferred obligations, the system would not be harmed, and local government would be held whole. It was never the intention that taxes would not be paid. We support the proposed amendments to the bill.

 

Chairman Townsend:

Assemblyman Parks, I want to make sure you do not misunderstand what the committee was trying to accomplish. Under section 4, the commission may examine, during regular business hours, the books, etcetera; the PUCN already regulates that utility and has access to that information. When the language is changed to add, “an officer or employee of an affected government entity designated by the affected government entity can look at an eligible customer,“ is a different mindset because they do not regulate an alternative seller. That is why I brought up the issue. We want to make sure of the crafting of the language.

 

Assemblyman Parks:

We are trying to capture the taxes and franchise fees due from sellers outside the State, and use other means to bring in the utility.

 

Chairman Townsend:

I agree.

 

Mr. Noble:

On first read it appears keeping “eligible customer” in section 15 is probably all the PUCN needs. However, I would like our people to go over it again.

 

Chairman Townsend:

I will close the hearing on A.B. 32 and open the hearing on A.B. 296.

 

ASSEMBLY BILL 296 (1st Reprint): Provides multiplier for electricity generated by certain renewable energy systems for purpose of calculating compliance with portfolio standard for renewable energy. (BDR 58-1163)

 

Assemblywoman Valerie E. Weber, Assembly District No. 5:

I am pleased to present the bill, and will let Dr. Geddes explain it.

 

Assemblyman Jason D. Geddes, Assembly District No. 24:

It was sought to bring clarification to the portion of the portfolio standard dealing with biomass in regard to tires. Originally it was going to be a ban on tires, but we ended up with a partial credit based on the natural rubber content in tires, and economic benefits to rural Nevada. We are all right with the proposals.

 

Patrick Barney, Owner, World Renew:

We are putting in a reverse polymerization process in Wells. It is a very low temperature microwave process with no incineration or combustion because it is oxygen deprived. The material is purged with nitrogen so the tires do not burn, making this process environmentally friendly with emissions 99.9 percent free. We are in support of the bill as written.

 

Senator Hardy:

My family is in the automotive business, particularly tires. I remember 10 or 15 years ago discussing the catastrophic problem of what to do with all the used tires. In a great country like America we have figured it out economically and environmentally friendly. My thanks to you for getting involved in the process.

 

Mr. Barney:

Thank you. There are 5.5 billion waste tires in America today. Nevada alone produces 2 million waste tires a year, and this plant alone will process just over 2 million waste tires a year without incineration. It took 20 years for the process to prove itself and gain a patent to go commercial as the first plant in the world. What remains of the byproduct can be used in other industries. The oil and gas will be used to run the plant and 50 percent of the energy produced can go out on the grid to supply electricity.

 

Chairman Townsend:

In the bill it says, “at least 50 percent of the electricity generated by the system is utilized by the retail customer on the premises.” Are you the customer, and are you putting the plant on someone else’s property?

 

Mr. Barney:

I am my own customer, and a retail customer of Wells Rural Electric Company who will be purchasing the excess electricity the plant produces. The plant will produce 5.5 megawatts of electricity each year. The plant will use 3 megawatts to run the microwaves, and the remaining electricity will go on the grid.

 

Senator O'Connell:

How is the current market for using old tires in home or commercial construction?

 

Mr. Barney:

I am not up to date in that area, but I believe the market is small. Most waste tires go into illegal landfills or just dumped anywhere. California uses them as crumb rubber for playgrounds. Arizona uses waste tires in asphalt, but because of Nevada’s extreme temperature variations, that use does not work as well. Among the uses for the carbon black byproduct is it makes an excellent binder for paving; it does not expand, and also is used to manufacture new tires.

 

Senator Neal:

The renewables portfolio standard (RPS) would only allow 5 percent generated, but this would allow for exceeding the requirements by having returned 2.4 kilowatt-hours for each 1 kilowatt-hour generated. What is the public benefit from this arrangement?

 

Assemblyman Geddes:

The 5 percent applies to what Nevada Power Company and Sierra Pacific Power Company must purchase as part of their overall power percentage in meeting the RPS. The alternative energy generation multiplier is 1.0 for credits to meet the portfolio standards. So if 1 megawatt of electricity is generated with wind, it is worth 1 megawatt of credit to meet the total 5 percent that Nevada Power and Sierra Pacific must meet. In A.B. 296 the 2.4 multiplier applies to solar photovoltaic (PV) systems. To make the solar photovoltaic system cost equivalent on a megawatt basis there is a 2.4 credit so Nevada Power and Sierra Pacific can purchase these megawatts and get additional credit toward the 5 percent based on the increased cost of photovoltaic. The 0.7 kilowatt‑hour credit for tires is a lower credit than the current 1.0 kilowatt‑hour. They would receive a little less than what is currently given to all the other biomass.

 

Senator Neal:

How would the public benefit?

 

Assemblyman Geddes:

As alternative energy systems continue to expand and offer other options, more energy becomes available on the grid to Nevada Power Company and Sierra Pacific Power Company. The 2.4 multiplier on the PV side allows them to achieve the RPS standard without the ratepayer incurring most of the cost. It develops PV as one of the alternative energies with great development potential in Nevada.

 

Senator Neal:

Do you anticipate reaching a point where the portfolio standard credits are no longer needed?

 

Assemblyman Geddes:

Currently solar photovoltaic energy cost is high to build and utilize at 16 cents to 18 cents per megawatt versus 4 cents to 6 cents per megawatt for natural gas. Once the solar photovoltaic technology is developed, comes on line, and is expanded the price would continue to come down until it matches the current rate of petroleum-derived energy. Various states have PV percentages. New Mexico found 3.0 kilowatt-hours works in that state for development, whereas 2.4 kilowatt-hours works for Nevada. As prices come down, the credit can be reevaluated.

 

Jolene M. Supp, City Manager, City of Wells:

On a similar line, we believe the renewable credit for the reverse polymerization process will add an additional revenue stream to help pay for the plant. According to the State’s economic development model the plant will produce an additional ad valorem of about $16.8 million in our community. Phase one will contribute an additional 60 to 68 jobs, increase population of 229 people, and add 76 new students in our schools.

 

Senator O'Connell:

Does anyone have an idea how much the other customers are subsidizing these companies and what are the rates?

 

Jon Wellinghoff, Lobbyist, Power Light Corporation:

I believe A.B. 296 is a technical amendment to RPS passed last session. The bill has two sections for tires and solar that recognize some renewable systems provide more benefits than others. The tires’ 0.7 kilowatt-hours and the photovoltaic centralized systems’ 2.4 kilowatt-hours, whereas other renewable systems including geothermal, wind, and central system solar remain at 1.0 kilowatt-hour credit under the bill. I have a proposed technical amendment (Exhibit F) to section 2 adding subsection 1, paragraphs (a) and (b). The amendment addresses the solar systems must be on the premises of a retailer, and at least 50 percent of the electricity generated by that system must be used by the retail customer on that premises. Subsection 2 of section 3, inadvertently left out of the bill, is the same language to cover the various electricity generation aspects. This is the amendment Assemblyman Geddes supports.

Gary D. Wayne, Lobbyist, Power Light Corporation:

We have a presentation (Exhibit G) that may answer a lot of your questions. The issue with the 2.4 multiplier has almost nothing to do with the subsidy to photovoltaics. Almost all the power in Nevada is generated in central facilities, meaning they are remote sites transmitted to customers via long transmission distribution systems. Widespread acknowledgment of industry experts concluded by mixing on-site generation, putting the power where it is used, offers many potential benefits. An obvious one is reducing line loss. Another one is if it is used on-site, the transmission capacity actually increases because electricity does not need to be piped to the site.

 

Another example is security. The transmission system is highly vulnerable to disruption. By placing power on-site at hospitals and police stations the overall security of the system can be increased. Five utilities studied the average benefit of $2500 per kilowatt for on-site generation. The issue is current Nevada tariffs do not recognize the benefit. Another issue is because most of the power Nevada Power and Sierra Pacific now buy is central, there is an implicit transmission subsidy provided to central plans.

 

The Open Access Transmission (OAT) Tariff specifies the actual cost of wheeling electricity outside and inside the State. It is what utilities use to do their own internal accounting of the wheeling of power. Since all the power purchased is usually wheeled, it is not included, but if you do things on-site and do not need this transmission, it represents in the case of a 100 megawatt facility, an explicit $3 million subsidy to central plants. The 2.4 multiplier effectively is a mechanism to recognize economic benefits the distributed transmission (DT) provides and to level the playing field for the subsidy that central plants have with respect to others?

 

How the 2.4 multiplier was arrived at is purchase of energy costs 5 cents a kilowatt-hour. As the energy is moved from a power plant to a customer, it goes up in price to 6 cents to cover cost of transmission, and by the time the energy gets to the distribution system, that 5 cents of energy now costs 12 cents a kilowatt-hour. Now take the ratio of delivered energy divided by the bulk undelivered energy for all the commercial classes of power delivered by Nevada Power, it is a 2.4 multiplier across the line. If the same exercise is performed for residential customers, it comes out to a 2.8 multiplier.

 

A critical part of the 2.4 multiplier is it does not affect the rate base. Although it makes it more affordable for the utilities to buy this energy, it also lowers the requirement to buy renewables by the exact same amount. At worst it is revenue neutral, and we believe it will save the ratepayers money. The mechanism to add the 2.4 multiplier is trivial to administer because there is a multiplier already in the existing rules and regulations for distributed systems to cover only for line loss. From the administrative point of view they would only have to amend the 1.1 to 2.4 and the rules and regulations would be set for this.

 

Senator O'Connell:

Your testimony is that the ratepayers are not subsidizing this system, as it is revenue neutral because we already require a certain amount of renewables. Therefore, the amount that will be dropped down by the rate is approximately 5 cents from the 17 cents. Is that the total price?

 

Mr. Wellinghoff:

The proposed multiplier will make the renewables portfolio standard less expensive than it is now for the ratepayers by functionally requiring a utility to buy less solar. Right now a utility has to buy a full amount at one credit per kilowatt-hour. With the new incremental solar they would buy less than half the amount they buy now with a 2.4 multiplier. For example, they are now paying 17 cents a kilowatt-hour; this will take that cost down to the utility to below 10 cents. Those costs are all passed on to the ratepayer, and would cost them less under this bill than it does now.

 

Chairman Townsend:

In your opinion, does this have a huge potential for schools or for bigger projects like the convention facility in Las Vegas or the Sands Expo Center? Where do you see the best application?

 

Mr. Wayne:

The 2.4 multiplier is a little more than needed on large projects to make them work. There is a competitive bidding process for those jobs, which is why we believe the cost will be reduced. With the 2.4 multiplier there is an economy of scale so small businesses and local schools could afford to develop these resources.

Chairman Townsend:

A large portion of the flexibility in the government budget has been absorbed by those rising costs. Anytime those costs can be controlled, that frees money to be put toward something more productive.

 

Mr. Wellinghoff:

Because this is distributed solar, it will have an added benefit for schools and other small businesses in that you can couple it with energy efficiency at the same time. In fact, that is what Mr. Wayne’s company does. They bundle energy-efficient projects with solar to make the total package more cost‑effective. That cannot be done with a central system somewhere in the desert.

 

Chairman Townsend:

This committee is so frustrated dealing with the administration of the universal energy charge as opposed to dealing with the issue of whether we should have it or should not have it. What we did have drove us up the wall. I think your proposal has huge potential for that to become more efficient whether it is in a mobile home park, or apartments, or whatever with regard to demand-side management component. I get frustrated for everyone in southern Nevada because of the challenges they face.

 

Senator O'Connell:

You do not have a plant because you do this onsite?

 

Mr. Wayne:

That is correct.

 

Senator O'Connell:

Who pays for the cost of the initial installation?

 

Mr. Wayne:

The plant would be customer owned. They would finance the project in the public sector through a bond, or the private sector through their own means. The system would be paid back in two ways. One would be the sale of the renewable energy credits (REC) by a contract between the utility company who has to fulfill the portfolio standard. By buying the RECs they are providing some offset to the cost of the system. The other offset is because they are reducing their energy use.

Senator O'Connell:

The government would have to pay for the installation if the system were used in schools or other public buildings. What is the price range?

 

Mr. Wayne:

The price per kilowatt for large systems is about $6 per kilowatt. It is high with respect to an oil-fired plant, but the typical life expectancy of the system is 25 to 30 years and there is no fuel cost, so there is a high capital cost, but extremely low operating cost.

 

Senator O'Connell:

On cloudy days there would be no credit for the last provider and they would have to provide the power to that facility?

 

Mr. Wayne:

The installation would be parallel to the existing service. Typically, the system would make up some fraction of their energy, but they would still be consuming energy and buying energy from the grid. One thing that is nice about solar energy with respect to other renewables is a lot of the utility’s costs are driven by peak demand, and the sun in Nevada drives peak demand. There is a high correlation between peak air-conditioning demands and peak output of the system, making them well-matched resources.

 

Senator O'Connell:

You are working on a credit. Do you charge the utility at the peak price or average it out?

 

Mr. Wellinghoff:

The payment is a contractual issue between the utility and the owner of the system. The utility would put out a request for proposal (RFP) for bids from solar providers who would indicate how much they charge, and the utility would pick the lowest price in fulfilling the portfolio standard. The price would be factored in along with how many credits are given. Because 2.4 credits per kilowatt-hour would be given, that would lower the overall amount the utility would take to fulfill its portfolio requirement, but the price would be negotiated within a contract and there will actually be a payment, not just credit, as presently done with alternative energy contracts now.

 

Senator O'Connell:

The major question with solar is it has been around as long as the earth, and we have yet to fully utilize this energy source efficiently and cost-effectively.

 

Mr. Wayne:

The cost of any new technology is high in the beginning and over time it drops. The price of solar energy has been declining at a steadily rapid rate for the past 25 years. Once it was only affordable to power satellites, now it is used on roadside call boxes, outdoor lighting, wristwatches, and many other things. The price is still high by conventional energy prices. Theoretically, there is almost no limit on how low the cost of solar photovoltaics can go, and the industry is continually heading toward lower costs at a steady rate.

 

Senator Neal:

Are you asking electricity generated by this process to be electricity not generated by renewable resources?

 

Mr. Wayne:

No. Photovoltaics are squarely in the definition and the current rule implemented by the local portfolio standard. Solar energy is clearly renewable, and we are not asking for any action defining it as a renewable.

 

Senator Neal:

Where do the tires fit in?

 

Mr. Wellinghoff:

As I understand the current portfolio law, it defines biomass as renewable. Solid waste is defined under law as a renewable source of fuel, and tires are part of municipal solid waste. The reason we want tires defined in the bill, is there are other components in the tires such as steel that cannot be extracted during the process, so they cannot be given a full credit.

 

Senator Neal:

Are we dealing with two groups?

 

Mr. Wellinghoff:

Two groups of people, two different sections; one section on solar, and one section on tires. They come together in that the bill recognizes certain renewables should be given a different level of credit than just one. Tires should be given 0.7, and solar should be given 2.4. This makes the bill a technical amendment to the renewable portfolio standard recognizing there are certain renewable fuels that should be given a different level of credit than the standard one for geothermal, wind, central solar, and other biomass systems are given. The bill has unity as a technical amendment to the existing renewable portfolio standard by changing credit amounts for the tire polymerization process, and solar photovoltaic distributed systems.

 

Senator Neal:

Why would it be necessary to install this system on the premises of a retail customer?

 

Mr. Wellinghoff:

A retail customer could also be a residential customer. Under the law, a retail customer is any customer of a utility company. The reason for that is to make sure it is within the local distribution grid, therefore, all benefits will apply. If it is a big system in the desert, there are line losses, not supporting the local grid, and not getting all the benefits of the 2.4 multiplier.

 

Senator O'Connell:

I am familiar with pool maintenance and all the sand, so I would like to know about the maintenance of the system.

 

Mr. Wayne:

Photovoltaic systems are crystals that do not degrade over time. There are no moving parts. They are the single most reliable inter-electrical energy source there is; that is why they are used on spacecraft. In states where it rains more often, maintenance is not a problem. Arizona Public Service Company has a number of our solar electric systems and they do get dusty. We had been hosing them down, but recently we went to pressure cleaners using warm water, and only have to clean twice a year with one-twentieth the water we had been using.

 

Senator O'Connell:

When it is coated with dust, it is not as effective?

 

Mr. Wayne:

A dusty system will drop to three-quarters of its power output. We see them at their peak after it rains, and then they gradually begin to diminish, so regular maintenance is important.

 

Helen A. Foley, Lobbyist, Pardee Homes:

I want to share good news with the committee. Pardee Homes is developing a complex in the town center area of the city of Las Vegas to open in May 2003. They are offering solar trellises and patio covers. This is part of the Living Smart program. Last year the Environmental Protection Agency (EPA) gave Pardee Homes an award as the first major builder to have gone 100 percent Energy Star in all products. The solar program has been working effectively in the San Diego area for quite a while. A 1.2 multiplier trellis would cost $7000 to $8000. A 2.4 multiplier patio cover would cost between $12,000 and $13,000. It is expensive, but it can be rolled into the mortgage, and the savings offset the cost of a traditional system. The accrued energy savings for 1.2 kilowatts is from 20 percent to 30 percent, and the larger unit from 40 percent to 60 percent reduction in energy costs.

 

Timothy Hay, Chief Deputy Attorney General, Bureau of Consumer Protection, Office of the Attorney General:

I would like to follow up on Ms. Foley’s comments. The 2.4 multiplier for PV solar generation also allows a residential customer to achieve some financing advantages of such a system because the next present value of the credits at the 2.4 multiplier level effectively reduces the cost of the system to residential or small commercial consumer. We also support the 0.7 multiplier for the tire microwave process. The 0.7 was derived from the 35 percent to 40 percent natural rubber content of tires, which is a renewable resource. With half of that consumed on the premises the 0.7 multiplier acknowledges the fact that only the renewable component of the process is being given credit. We support Mr. Wellinghoff’s amendment (Exhibit F) that applies parallel language to both the tires and the distributed solar systems.

 

Joseph L. Johnson, Lobbyist, Sunrise Sustainable Resource Corporation, and Toiyabe Chapter/Sierra Club:

We would like to go on record in support of the 2.4 multiplier as a significant enhancement to the existing portfolio standard. It may reduce the cost to the consumer and be a stimulus to those customers who have them installed. The microwave process is not a combustionless process. It produces an oil product that is burned to produce the electricity. This process will come under air‑pollution control and, hopefully, Nevada’s regulations are adequate to address the health and safety issues. For the record, I would like to make it clear the production from tires, a free product, may be low temperature and an admirable technology, but the production of electricity associated, is indeed a combustion process.

 

Senator Neal:

I am trying to visualize putting a tire in a microwave oven and heating it for energy. Is that basically it?

 

Mr. Johnson:

That is pretty much what happens. I used to be a chemist and ran a small microwave facility, but I would defer to the expert.

 

Mr. Barney:

As you know, if you put something metal in your kitchen microwave, there will be sparks and heat. The way this process works is the system is purged with nitrogen so there is no oxygen in the system. Throughout the system as the tires are being reduced, there is no combustion at that point. The microwaves are tuned and focused so there is no sparking, and that is the reason for purging the system with nitrogen. The steel from the tires will turn red and glow and get hot, but does not spark. The microwaves in the kitchen appliance are shot throughout the whole box.

 

Mr. Noble:

I would like to point out section 6 of A.B. 429, has the same multiplier provision, so the same change would need to be made. Also A.B. 431 has a multiplier giving the potential that some projects would be equal to a 4.8 multiplier.

 

ASSEMBLY BILL 429 (1st Reprint): Makes various changes relating to net metering and renewable energy. (BDR 58-779)

 

ASSEMBLY BILL 431 (1st Reprint): Establishes program to provide incentives for installation of certain solar energy systems. (BDR 53-723)

 

Chairman Townsend:

We need to keep consistency throughout all the bills.

Senator Neal:

Does the 4.8 multiplier apply to residential customers?

 

Mr. Noble:

My understanding is it would apply to projects and the demonstrations approved in the demonstration project under A.B. 431, which were also solar PV systems. You may want to clarify the 50 percent of the electricity generated would be on an annual basis. Some of these projects done at schools may not use 50 percent onsite during the summer months when schools are usually closed.

 

Chairman Townsend:

It is my understanding most of the administrative contracts are for 12 months. We will close A.B. 296, and open A.B. 431.

 

Assemblywoman Christina R. Giunchigliani, Assembly District No. 9:

I see this bill as complementary to previous legislation dealing with energy‑saving considerations. Nevada is one of the best states for solar whether passive or photovoltaic or whatever the approach, yet has not gotten it off the ground. Partly because it is a little more expensive to build, but the cost savings are there.

 

This bill deals with two issues. One is the contractors’ board does have licensing called the C-2 standard. This bill would require solar installers to apply for that license. The key is the consistency this type of license would require of the industry so home owners do not have improperly installed equipment, and possible construction defects.

 

George Sterzinger, Executive Director, Renewable Energy Policy Project:

There are three sections of the bill covered by the proposed amendments (Exhibit H). Strike subsections 4 and 5 of section 14, requiring a person to be approved by the PUCN before they could propose a project, then subsequently defined as a participant selected for the program. The unintended consequence of the language is to create a “catch 22” situation putting unnecessary burdens on participants and the commission.

 

Section 16 contains a potentially misleading statement that could cause confusion on when to apply. Applicants can apply in the first 3 years and then do not need to reapply for the 10-year duration of the pilot program. Strike, “for the following program year.”

The biggest change is in section 19, referring to multiple credits. This can be confusing as the intent of the bill was to offer the multiple of credits to residences, small businesses, schools, and public buildings. The amendment is to add those omitted and to clarify the multiples greater than two. Should the 2.4 multiplier be enacted into law, it would be necessary to make it equal across all the programs so there are no unintended consequences from the differential multiples.

 

Danny Thompson, Lobbyist, Nevada State American Federation of Labor‑Congress of Industrial Organizations (AFL-CIO):

Last year I had a conversation in my new office, which is near a storage facility. The conversation turned to solar energy and that it would make sense for the storage facility with a large amount of flat roof area to have a photovoltaic system. The businessperson could make money while performing a service for the people of the State. The reason there was no system on that roof is because the issue has been convoluted by conflicts. Southern Nevada is one of the best places for these systems. I decided to do something about it by asking Assemblywoman Giunchigliani to request this bill. The International Brotherhood of Electrical Workers (IBEW) now has a 5-year module for master electricians in photovoltaics and photovoltaic systems.

 

Last year Senator Townsend and I looked at a system the IBEW installed on their union hall in San Jose, California. The $.5 million demonstration project supplies 80 percent of the energy for the building. In addition to the roof, the PV units were architecturally incorporated into the building as shades, awnings, and other enhancements. A contractor in the area, in order to encourage usage, made parts available at cost to interested union members to install on their homes. We toured these homes and were impressed about how well the system works. If it works well in San Jose, it should work great in southern Nevada.

 

I serve on the Southern Nevada Water Authority’s drought committee, and it looks like we will be issuing a drought alert later in the year because the lake is so low the pumps cannot get the quantity of water needed. It takes a certain quantity of water to generate each kilowatt of power, and is cause for serious consideration of running pipelines to remote areas to access those little amounts of water, which is not an abundant resource in Nevada. This bill represents taking action to make something positive happen, and be a leader in this country in renewable energy resources, and that will bring the cost down to home owners.

I noticed the Reno-Tahoe International Airport is installing a beautiful shade unit with glass panels. I inquired if they were installing a PV system, and they did not even know what I was talking about. The installation is funded by a government subsidy and they were not taking advantage of the opportunity to be more energy efficient. I believe A.B. 431 will help to change that type of mentality.

 

Chairman Townsend:

I had the same reaction to the airport. It is sad.

 

Senator O'Connell:

Section 20 seems to suggest only units installed under the demonstration program will meet the net metering standards.

 

Mr. Sterzinger:

Section 20 says if you are a selected project for the demonstration program, you are eligible for net metering and for net metering on a time-of-day tariff basis that is not the case now. This is a pilot program intended to offer benefits to make the program financially attractive.

 

Kevin Powers, Committee Counsel:

Let me clarify for Senator O'Connell. What the provisions in section 20 do is ensure that the demonstration project can participate in the net metering provisions, but it doesn’t exclude any of the other types of renewable energy systems that can be attached to a home and participate in the net metering system under the existing provisions. This does not make the demonstration project the exclusive type of renewable energy system that may be used for net metering. It just ensures that it’s one of the systems.

 

Chairman Townsend:

We have tried to put things in context. We have all gotten the questions, and I am amazed at the nonsense going on in the media, so when someone stops you and screams at you, and you slow them down and walk them through the big picture, they are willing to listen. We should probably put a chart on the wall showing the 12 months’ demand with the peak loads in southern Nevada. Under the certificate that is granted to Nevada Power they are required to keep the lights on. It is not always easy to forecast a particular day. Those are tough things we have all wrestled with in this committee, particularly about what is recoverable. Anytime we can find the opportunity to shave the peak, it takes a huge burden off the power company because it is not easy to buy the needed energy. That is why there is a regulatory process to help sort through that. In the big context it is not about appropriate environmental things, but also the bigger picture of energy in general.

 

Senator O'Connell:

Is anything happening on the national front because Nevada is piecemealing things right now?

 

Mr. Sterzinger:

There is good news. The research and development issues with Department of Energy funding continue to systematically address how to lower the cost of a PV module. All of these technologies are subject to incremental changes and complete reversals. I think there is progress and room, and I also think we are stalemated on national energy policy. I think it is time for aggressive state efforts to develop things that bring whatever federal level resources available to the state, and as a result could lead to breakthroughs. My impression is the real risk takers saying to themselves, “How long do we want to continue to sit here and worry every hot day about how much we are going to have to pay for resources before we start to do something to take care of it, and also boost the local economy?”

 

Senator Neal:

The military has used these systems for quite some time, and now we are seeing them coming to the public.

 

Senator Schneider:

Is our congressional delegation on board with this?

 

Mr. Thompson:

The technology is there and improvements continue to be made, but what is still hurting is the initial price. It is the old supply and demand thing that will eventually bring down costs. An electrical engineer had commented that if the Luxor Hotel and Casino in Las Vegas had built the exterior out of PV instead of just glass, they would have been out of the system. If I remember, he said the surface area of the Luxor would have produced something like 3.2 megawatts of energy had they used a photovoltaic system.

Senator Schneider:

I hate to say it, but when our representatives get back to Washington, D.C., they might forget what we are doing here. I would suggest we send them a letter encouraging our representatives to support what we are doing in Nevada regarding renewable energy programs.

 

Chairman Townsend:

I have spoken to U.S. Senator Harry Reid about this and he is working on being proactive. I like your suggestion and will get with counsel to draft a letter to our representatives.

 

Assemblywoman Giunchigliani:

Section 20 of the bill is key to this project working. I have hopes Clark County would take advantage of the pilot program when rebuilding some of their older schools. It is the critical mass that will drive the cost down.

 

Chairman Townsend:

Every 2 years in Las Vegas there is a charitable event called, “Street of Dreams,” where they build fabulous homes filled with the latest technological advances, but none of them have yet to include renewable energy systems. It will be when there is public demand for it such as cell phones.

 

Ernest E. Adler, Lobbyist, International Brotherhood of Electrical Workers (IBEW) No. 1245:

The IBEW has about 25,000 members in northern Nevada and northern California. They have been active in the solar movement and believe in high standards for installation of these facilities, and support this bill.

 

Judy Stokey, Lobbyist, Nevada Power Company:

We support the concept of the bill, but are concerned about section 20. If the projects qualify under the net-metering statute, then that is the section where they would be placed.

 

Senator Hardy:

Have proponents of the bill seen the amendments?

Ms. Stokey:

We have talked with Mr. Sterzinger and are in agreement with some parts, and still working on the rest. Assemblywoman Giunchigliani did not agree with some of our issue, but did agree to work with us on those points.

 

Kathleen Drakulich, Associate General Counsel, Nevada Power Company:

The amendments proposed are simple (Exhibit I). In section 20, subsection 1, after inclusive add, “provided the solar electric system meets the specific statutory criteria contained for net metering.” We did talk to Mr. Sterzinger about this because the units described in the bill in section 18, have the potential of exceeding the net metering kilowatt maximum, which currently is 10 kilowatts, and A.B. 429 proposes 30 kilowatts. My understanding of Mr. Sterzinger’s comments was that is what they intended and would not object to that type of amendment.

 

Mr. Powers:

I would add, I believe this is just a technical correction to make the language clear. There’s an ambiguity here as to whether the demonstration project has to comply with the other standards for net metering. The way the language reads with the “is entitled” just creates an ambiguity. So, this will make it clear the demonstration project is entitled to participate in the net metering program if the demonstration project qualifies with the statutory standards already existing for the net metering program.

 

Ms. Drakulich:

If it were phased the way Mr. Powers made the technical correction, we would agree with that change. The other change discussed with Mr. Sterzinger was the entire deletion of subsection 2 of section 20. We have time-of-use rates in Nevada that we currently do not use for the net metering customers. My understanding from today’s discussion is this type of process is in place in California, but technically we wonder if there are barriers to it, if it would involve the installation of an additional meter. We cannot change the terms and conditions of the tariffs with a change in the law; the tariffs themselves would have to change. We ask for some additional time to work through the amendment with the bill’s sponsors.

Mr. Thompson:

We agree to the first proposed amendment; we do not agree to the second proposed amendment. I personally have seen these systems are in place. The net metering is a key component to making the program work, and I am willing to discuss it.

 

Mr. Noble:

Regarding section 19, subsection 2, I would like to know if you were going to make that exclusive or make the RECs more marketable in these demonstration projects? That would also apply to subsection 3 of section 19. Section 18, subsection 2, paragraphs (b) and (c), where the word “additional” appears in each sentence. We want to be clear that it is not accumulative, but in addition each year. For example, paragraph (a), subparagraph (1), “100 kilowatts of capacity for schools.” Paragraph (b), subparagraph (1), “An additional 450 kilowatts of capacity for schools.” We want to be sure they will be getting a total of 550 kilowatts at that time.

 

Mr. Powers:

“I think the easiest way to resolve that issue is to specify the number of kilowatt-hours allocated to that category.”

 

K. Neena Laxalt, Lobbyist, Natural Lighting Company, Incorporated:

Throughout some of the bills there has been reference under renewable energy system to solar and thermal energy. I have been trying to take the word “thermal” out because the company I represent uses solar energy but does not generate electricity, it is not thermal or photovoltaic. I want to make sure their systems were not excluded from some of the credits should they qualify. The system simply generates light through the use of mirrors. In section 12 the definition for “solar energy system” would eliminate the Natural Lighting Company. Senate Bill 489 contains a definition for “solar lighting system” and “thermal energy system” that would be more appropriate to include as a definition for “solar energy system.”

 

SENATE BILL 489: Makes various changes to provisions governing exemption from local school support tax for systems that use renewable energy to generate electricity. (BDR 32-1135)

 

Senator Carlton:

As I understand, this bill deals with the generation of electricity, net metering, and getting people off the grid. This product would take people off the grid but would not fulfill the other part as far as actually generating electricity to be used onsite?

 

Ms. Laxalt:

They would still have to comply with everything required in the program. I am concerned that by putting the definition of solar energy system elsewhere, it would exclude the company’s product since their product is an energy-saving product, not an energy-generating product.

 

Mr. Powers:

“May I clarify then? If I understand you, you don’t want to be qualified as part of one of these demonstration projects?”

 

Ms. Laxalt:

They would like to be referred to and qualify as a renewable energy system. Right now it is saying, “solar thermal,” which is fine with everyone, but as regards generation systems, they do not generate electricity.

 

Mr. Powers:

This is a matter of statutory construction. That is why I need to clarify for the committee. The removal of the word “thermal” from the renewable energy subhead in chapter 704 [of NRS] will accomplish your purpose. There doesn’t need to be a change to any of these definitions dealing with the demonstration project to accomplish your purpose. The reason being is the definitions for the demonstration project relate only to the sections that deal with the demonstration project.

 

Ms. Laxalt:

The issue is it also falls under S.B. 489, and we do not want any conflict under renewable energy with the definitions.

 

Mr. Powers:

“There would only be a conflict if the definitions were applicable across NRS. They’re not. They’re applicable to specific provisions that are in each of the bills that won’t go beyond that scope of application.”

Chairman Townsend:

How big is this company?

 

Ms. Laxalt:

They are a growing business in Arizona handling schools, supermarkets, and other facilities.

 

Senator Schneider:

I do not understand their windows. They do not create electricity; they create light. How does it work?

 

Ms. Laxalt:

They use a reflective system through mirrors. The light goes through a filter system that collects the light and then reflects it out. My understanding is the system can only be used in one-story buildings because of the distribution method.

 

Chairman Townsend:

We will close the hearing on A.B. 431 and open the hearing on A.B. 429.

 

Assemblyman Lynn C. Hettrick, Assembly District No. 39:

This bill was originally requested for small ranchers with irrigation dams who wanted to use waterpower to generate electricity. In discussion with the PUCN, it was indicated they had some money to advance conservation and alternative power, and that money was put into this bill. With funding already included in the bill, there seems to be no obstruction to it moving forward.

 

The director in section 3 is the director of the Nevada State Office of Energy, Office of the Governor, who will develop the program for distribution of the money to promote alternative energy and renewable energy sources. Most of the bill is technical cleanup. It includes the multiplier for solar photovoltaic that is identical wording in all the bills. In section 9, waterpower has been added and defined. We also included water pumped from a low level to a high level as capable of generating energy. This will help mines that expend energy to pump the water out, but not utilizing it after that. This says that water is to be used exclusively for irrigation. There is a proposal to amend that, and I have no objection.

 

There are several proposed amendments, but I believe the basics of this bill are important enough that it needs to pass. My only caveat is if the committee decides to add amendments and, for any reason, the Assembly does not agree when it goes to conference, I would ask the committee to remove those amendments so the bill would be in the form originally passed by the Assembly and would pass this Legislative Session. I have spoken to everyone who proposes an amendment, and they have agreed to that arrangement. I believe this bill is good for everyone, and I do not want to see it fail.

 

Senator O'Connell:

Section 12 addresses transferring $250,000 from the PUCN reserve account. How much money is in the PUCN reserve and what is the chief use?

 

Mr. Noble:

Currently, there is approximately $5 million in the reserve account. The reserve is primarily used for the operation of the PUCN. Each year the commission decides the assessment of 2.0 mill to 3.5 mill, assessed against the operating revenues of utilities operating in Nevada.

 

Senator O'Connell:

Is this going to add cost?

 

Mr. Noble:

No. In fact, we are trying to bring the reserve down.

 

Chairman Townsend:

How did all of the other things in the bill come up?

 

Assemblyman Hettrick:

I think you heard some of it already such as wanting to remove words like “thermal.” When people saw the money in the bill, everyone said the likelihood is the bill would move forward, because there was a way of offsetting costs. Everyone saw the bill as a “Christmas tree” to hang everything on because it stood a good chance. Most of the things added are good, and I would have no problem if the bill passed, but I do want to see this bill pass and the money go for renewable energy.

Senator O'Connell:

I would like background on how it was determined to increase the megawatts from 10 to 30 in section 9, subsection 3, of the bill.

 

Assemblyman Hettrick:

The 10 megawatt number seemed too low. The mine where the water was running down had an existing system they could move across, if they so chose, that would generate just under 30 megawatts. It made sense to use this system, and 30 megawatts is not a huge amount of power. The number also fits most of the situations to be addressed by use of hydro.

 

Senator Neal:

How much is in this fund?

 

Assemblyman Hettrick:

There are two different funds. The PUCN has a $5 million reserve generated by its mill assessment. It is part of their operating budget they are trying to reduce.

 

Chairman Townsend:

Usually there is not $5 million in reserve. The reason is when the cost of energy goes up, the mill assessment also rises. The PUCN usually does not have such a large reserve.

 

Mr. Noble:

That is correct. Also we anticipated the possibility of going to five commissioners during last session, and adjusted the mill assessment accordingly. Additionally, the economic indicators did not turn out.

 

Senator Neal:

Is it anticipated the money coming in would pay for these projects in total?

 

Assemblyman Hettrick:

It says in section 3, at the top of page 2, “rebates to persons to pay or defray, in whole or in part, the costs for those persons to acquire, install or improve net metering systems, if the Director determines that the distribution ¼ will encourage, promote or stimulate.” The director is with us to answer your questions.

 

Carl Linvill, Administrator, Nevada State Office of Energy, Office of the Governor:

We support this bill. We think these programs would meet a need identified through working with farmers, ranchers, and small businesses in the State that would like to install distributed-generation, renewable systems, and there are different barriers in the way of doing that. The $250,000 would not be used for paying of the installation of the programs in full.

 

Senator Neal:

It says in the bill, “in whole or in part.”

 

Mr. Linvill:

The definition of projects that could be supported by this is quite broad. When I see this, I think of a farmer with a pump irrigation system who may want to put in a windmill to help pay for the cost of energy, and having a metered system to allow them to sell energy back to the utility when energy is not needed. The intent of this legislation is to help a quantity of these projects to get off the ground; to perform a feasibility study to decide if a project is reasonable and economic for the farmer, rancher, or other entity. It may be a small amount of money used to help pay for the net metering system that might otherwise be a burden.

 

Senator Neal:

Is there a limit on the number of projects and regulation? I do not see it in the bill or in statute. How many times has this been done in the past?

 

Mr. Linvill:

No limit. It is $250,000 regardless of how many projects.

 

Assemblyman Hettrick:

The money would be expended until it is gone. The intent is to stimulate projects and get some demand to move forward. The PUCN normally does not have a $5 million reserve. Part of the allowed use of excess funds is conservation projects or renewable energy projects. This is one way of reducing the excess funds in a positive way that, hopefully, will give back to the State in the long run.

Mr. Noble:

Last session there was a $250,000 assessment against the PUCN’s reserve for the renewable energy task force. That is the only other time I can recall.

 

Senator Neal:

But not for these types of projects? Are we establishing a precedent?

 

Mr. Noble:

Correct. This is the very first time.

 

Chairman Townsend:

The precedent is one I happen to like. This is actually money that goes to people.

 

Senator Shaffer:

Is it possible to get a report on how the $250,000 was dispensed, by the next session? It would relieve a lot of minds as to what happened to the money.

 

Mr. Linvill:

Yes.

 

Chairman Townsend:

Three of us sit on the government affairs committee, and have tried to balance the interests of the State versus local government, and it has not always been easy. I am as frustrated as Mr. Thompson was with the Reno-Tahoe International Airport, and I am shocked that schools are built in southern Nevada without passive and active solar, and everything else, or for that matter any government building. They are doing a huge add-on to the convention center in Las Vegas, and I hope they are considering incorporating a renewable energy system. I tried to get a renewable energy system for the Legislature Building, and public works looked at me as though I was out of my mind.

 

Senator Neal:

The bill makes it permissive for the director to adopt regulations and carry out the project. What are the director’s intentions regarding adopting regulations?

 

Mr. Linvill:

I am the director, and it would be my intention to adopt regulations on implementation, eligibility, application, and the competitive selection process.

Chairman Townsend:

You had mentioned how you would like to see more of these types of projects, to the maximum extent possible, we would like to use federal money to help do that. The convention center project you mentioned was funded by federal money we helped to obtain. Another use of funds is to help leverage additional federal funds to help projects like this happen.

 

Thelma Clark, Lobbyist, Nevada Silver Haired Legislative Forum:

I am interested in schools getting these solar panels. We had a crisis in Las Vegas last year with a chemical plant explosion. There was a 450-space mobile home park across the street from the plant.

 

Chairman Townsend:

Was that Aerotech?

 

Ms. Clark:

Yes. All the seniors had to be evacuated to a local school. Some of the seniors were on oxygen and had to be transported in ambulances. Because of this use the school’s electric bill was much higher than usual.

 

Pat Wilson, National Silver Haired Congress:

I am Thelma’s friend. Good morning Thelma. I do not know if you know why I am here, but I will let the Senator go first.

 

Chairman Townsend:

In a few days this lady will celebrate her 85th birthday. Thanks to Ms. Clark’s good friend, Pat Wilson, we were notified, and knowing you were going to be here we wanted to congratulate you. We have a dozen red roses from all of us thanking you for being a wonderful advocate on multiple issues. There are five of us, in particular, who want to congratulate and thank you on behalf of the public at large in Nevada; Mr. Craigie, Mr. Wellinghoff, Mr. Schmidt, Mr. Hay, and myself. The five gentlemen have all been “mothered” by this lady. Mr. Wellinghoff was the original consumer advocate when that office was first created. Mr. Craigie was the original PUCN chairman when we went to five members, and joined by Mr. Schmidt who subsequently became the second consumer advocate. Mr. Hay is the current and only third consumer advocate. This young lady has a relationship with the five of us going back to the mid‑70s. We have something special, it is a photograph of the five of us with our signatures. It says, “To Thelma. Happy 85th Birthday from 5 guys whose butts are still hurting from all the times you kick-started them into action over the past 25 years. We love you.”

 

Ms. Clark:

Thank you. You all look so handsome here. I do not know what to say. I am shocked. Thank you.

 

Chairman Townsend:

We thank you on behalf of everyone in Nevada because without people like you involved, and thank God it is Nevada, because it is a public process. Not all states are like that. You have made a huge difference to a lot of people on a lot of issues, particularly the energy issue.

 

Ms. Wilson:

I have been listening to all the testimony on renewable energy, and I think it would be very important to get the seniors involved in this solar energy pilot program.

 

Chairman Townsend:

I would also like to thank Joan Thran our unofficial legislative photographer, assistant to our Lieutenant Governor, and former assistant for many years to Senator Jacobson.

 

Assemblyman Peter (Pete) J. Goicoechea, Assembly District No. 35:

We have agreed with Assemblyman Hettrick not to impede the passage of his bill, but we believe our amendment (Exhibit J) is worthy and fits well with the bill. There are five major loads in northern Nevada that have come together to form distribution generation. Three of them are in my district, and they are U.S. Gypsum, Nevada Cement, and U.S. Foods-Winnemucca Farms. Our amendment addresses coming up with a rate the PUCN would establish to put in place for long-term, avoided costs, standby rates, and a rate for the transmission and distribution lines. The companies I mentioned presently use natural gas for heat and steam for their facilities. With very little increase, if any, to that base load of fuel, they could generate between 8 megawatts and 10 megawatts of power at each facility. They would capture waste heat off the generation and provide steam heat needed for their process.

Senator O'Connell:

I know the idea of capturing heat to generate electricity is relatively new, but can you give an idea of cost?

 

Assemblyman Goicoechea:

I do not want to mislead you. We are not capturing waste heat. We are going to take the same fuel of about 1400 decatherms a day that it takes to run the boiler, which is one of the largest boilers in the northwest for U.S. Foods. They generate approximately 8 megawatts to 10 megawatts of power, and use the waste heat to accomplish heating the steam and water for their facility. It truly is a conservation measure.

 

Samuel J. Routson, Chief Administrative Officer, U.S. Foods-Winnemucca Farms, Incorporated:

I am a part of a group with common interests and goals. We comprise both public and private entities, rural and urban, among which are Carson City, Washoe County, Churchill County, Winnemucca Farms, and other businesses and industry groups.

 

We made copies of a Department of Energy study (Exhibit K) of 65 types of distributed energy projects. They are located nationwide and involve qualified facilities considered as renewable energy facilities; solar, wind, biomass, geothermal, etcetera. The study found issues, problems, and barriers to these types of projects. At the end of the study summary it deals with reducing those barriers to distributed generation (DG).

 

I believe the State of Nevada and the Legislature have gone on record in supporting renewable energies and distributed generation as a whole. Our proposed amendment is asking for rules to be established by the PUCN allowing a private or public entity that wants to be involved in the distributed energy project to have rules by which they could achieve the goals. Winnemucca Farms and other entities such as U.S. Gypsum, Nevada Cement, RR Donnelley, and several casinos have been working for the last 4 years to develop projects with very little energy increase, and requiring no capital investment on the part of the utility. We could have put into the net between 50 megawatts and 60 megawatts of energy that would have been available to consumers but for rules lacking legislative direction or policy guidance dealing with distributed energy.

 

I have a letter (Exhibit L) from the Nevada Renewable Energy and Energy Conservation Task Force that identifies the existing barriers for DGs. They urge the Legislature to provide policy guidance to the PUCN to establish ground rules so that DG projects can move forward more expeditiously than in the past.

 

Tom Hoffert, Utilities Operations Manager, Carson City Utilities Operation, City of Carson City:

Carson City is in the process of its economic development goals. It has issued a request for quote (RFQ) to bring research and manufacturing endeavors to our area to help create northern Nevada into a center for renewable energy. Our partnership is with the private sector, and the funding is proposed at-risk private capital. The partnership includes Carson City School District, Western Nevada Community College, Washoe County, Churchill County, and State of Nevada. Fifty-nine firms submitted proposals, and through interviews we have it down to three firms. Our project is economic viability that will bring jobs and create renewable energy projects for western Nevada and benefit other areas around us.

 

The proposed amendments will help move this process forward by setting the guidelines by which these projects can be funded. Long-term, avoided cost to be able to help the financial picture is needed.

 

Senator Carlton:

I look at the bill as a renewable energy bill, but then I read this and see it more as the conservation aspect. I am concerned how these pieces will fit together, and if we would dissuade all the hard work by adding this to the bill. I would like to see how they fit together.

 

Mr. Routson:

The executive summary (Exhibit K) provides a quick overview of the barriers placed in front of all types of renewable energy or energy conservation.

 

Senator Carlton:

Is it possible to do this through the regulatory process at the PUCN rather than adding to the bill?

 

Mr. Routson:

As private businesses we have attempted to resolve these issues in any number of ways. The study (Exhibit K) indicates these are issues that appropriately fall under the purview of the Legislature in providing policy guidance to a regulatory body. The PUCN has dealt with avoided-cost issues in the past, but not to any extent distributed generation.

 

Senator Carlton:

I read the proposed amendment as you are not applying for any of the money, you just want the option of having the quality factors and the conservation measures considered.

 

Mr. Routson:

We are not asking for anything other than establishing a public policy framework that allows DG, to include all five facilities under federal law, as well as renewable energy types of projects, to go forward expeditiously. We are looking for an establishment of rules we can all play by.

 

Senator Carlton:

Would you want to apply for the credits that would be available?

 

Mr. Routson:

If the different projects would fit under present law, we would assume their proponents would take advantage of them.

 

Senator Neal:

Do you presently have a system to recapture the heat source you would use to generate electricity, and then credit back to the main utility?

 

Mr. Routson:

A number of the business entities with which we work have the opportunity to put in place a combined heat and power system. They presently use heat for their different processes, whether it is U.S. Gypsum, Nevada Cement, or Winnemucca Farms. For our processing and growing purposes, almost 9 megawatts of electricity, plus about 1400 decatherms of energy a day is used in our process.

 

Under a distributed-energy project scenario we would put in a turbine that also provides heat for the process presently generated through a boiler. At the same time it allows for the capture of heat or the burning of that energy to generate electricity. It is a double energy savings with very little, if any, increase in energy input.

Senator Neal:

If we put this in place, you develop this system, and credit back to the power company, would that have any effect on the residents of Winnemucca in terms of high electric bills because of the credits you would get for your heat source?

 

Mr. Routson:

I do not see a scenario concerning energy credits for this type of activity. This project would not qualify for net metering. Under federal law we would be a qualified facility, as established by Congress through the Public Utility Regulatory Policy Act (PURPA), and regulated through the Federal Energy Regulatory Commission (FERC) and other federal entities. Under federal law a utility is required to acknowledge a qualified facility in terms of a combined heat and power system.

 

Senator Neal:

If you do have a connection with an existing utility, then why would you need this legislation?

 

Mr. Routson:

We would either transmit electricity through the present grid system to a utility or to a customer or other consumers. The benefit to the utility and other ratepayers and the public as a whole, is a group of businesses with the ability to bring on-line 50 megawatts to 60 megawatts of additional power that was not there before. It does not require a utility to invest in additional generation systems. It provides the energy where the usage is in a local sense, and that is the beauty of distributed generation. There is a savings in the cost because there are no additional transmission or distribution lines required and no transmission loss over long distances.

 

Senator Neal:

I understand your company would benefit, but who else would benefit?

 

Mr. Routson:

The executive summary (Exhibit K) lists the recognized benefits of distributed generation as examples in other areas around the country. The companies would benefit from receiving reduced costs for their energy, but they would also produce energy at a competitive rate available for purchase by others. This benefit is part of the reason for the Legislature to establish a basic policy framework for the PUCN to follow for long-term, avoided cost. The PUCN has dealt with these issues in the past. For instance, I saw a 1986 docket that the PUCN, utilities, and distributed energy projects worked through to establish long-term, avoided cost and other tangible and intangible aspects.

 

Senator Carlton:

How many qualifying facilities would this apply to?

 

Mr. Routson:

I know of half a dozen in northern Nevada. I would assume there would be more in southern Nevada that could also qualify.

 

Senator Carlton:

Is the original energy these facilities use based on fossil fuel?

 

Mr. Routson:

The types of projects we have a direct interest in would be natural gas, because of our process. These types of facilities have a far greater efficiency dealing with natural gas than present central generation.

 

Fred J. Schmidt, Lobbyist, ORMAT Nevada Incorporated:

ORMAT is the company that built the first renewable geothermal project in northern Nevada about 20 years ago. They now operate two other projects, and recently contracted to build two more. They are a Nevada-based company doing what we were trying to do with this RPS standard in earlier legislation. Now they would like to take that waterless, emissionless technology system and apply it to waste energy, manufacturing, and industrial processes. They apply a closed-loop system to heat what is otherwise lost up the stacks of industries. This is not cogeneration; it is not broad-based, distributed generation.

 

The proposed amendment (Exhibit M) was recently developed and not heard on the Assembly side. The amendment would provide one of the first real changes to do meaningful projects in the Las Vegas and Clark County area qualifying for portfolio standard credits. Under section 8 is language to define a qualified energy-recovery process, and would include the system just mentioned, as well as pressure reductions, and water and gas pipelines. This language was developed in conjunction with the PUCN, the consumer advocate, and the renewable energy task force, all of whom are in agreement.

 

The amendment was also shown to the utility, and they think it is beneficial because it allows them to get renewable energy credits from within their system, and without having a multiplier; the credit is one for one. The benefits Mr. Wellinghoff talked about occur and benefit the utility directly without paying extra. They also get to meet some of the portfolio standard credits. Assemblyman Hettrick has no problem with the amendment, and we have agreed to not being included should that become a problem in passage of the bill by the Assembly. We are not seeking any of the money, special multipliers, or to change the portfolio standards.

 

Daniel N. Schochet, Lobbyist, ORMAT Nevada Incorporated:

I would like to add that the attributes of the electricity this technology would generate is base load and competitive with all other renewables. It does not add anything to ratepayers, in fact, it could lower overall the cost of renewable purchases.

 

Ms. Stokey:

We have concerns with Assemblyman Goicoechea’s amendment (Exhibit J). We do not consider the DG process a renewable. The PUCN is going through so many rules and regulations of that.

 

Mr. Noble:

We have several dockets open dealing with these issues. As soon as we get through the resource planning regulations, we anticipate dealing with these issues, and having hearings in early summer.

 

Ms. Drakulich:

We are participating in distributed generation. This goes to the point that Senator Carlton made with the sponsors of the amendment; that is, the regulatory process is currently undergoing an investigation, the docket has been opened, and the utilities are preparing the standby tariffs. The commission has long been looking at DG, white papers have been filed and docketed. We have some concerns with Assemblyman Goicoechea’s amendment (Exhibit J). The way we interpret highest possible cost is it is in contradiction with federal and State definitions of avoided cost. There are proposals for creating incentive rates for standby charges, transmission, and distribution. If these entities are not paying what the other customers are paying, the other customers pick up the discount. We want to know how the sponsors of the bill intend for that to happen.

We are concerned about the definition of distributed generation. We are concerned about the proposal that we have enough generation in the State to meet or exceed the requirements of all electric customers. We do not understand the meaning of “incentive rate for standby charges” or “create a special category of transmission and distribution charge.” We think these things will be dealt with in the regulatory process.

 

Chairman Townsend:

Some of us have sat through these issues and know the PUCN is very thorough, and that is their job. That is where issues should be considered because those dockets can be open for a long time.

 

William S. Davidson, Wind Energy Consulting:

I want to speak to Senator Carlton’s comment that we seem to be drifting away from renewable energy to recycling and energy conservation. Although they are laudable, I think it would be a mistake to reduce or allow the renewable portfolio standard to be reduced by production or generation that is not renewable. To that end, if it were to go through, we ultimately wind up having renewable projects constructed in rural areas supporting subsidies to a large mining company, and others. It could unnecessarily penalize true renewable energy development in the State.

 

Chairman Townsend:

As you know this committee agonized over every ounce of that RPS for a long time. You have to be careful what you do because it was a tough issue.

 

Ms. Stokey:

The way A.B. 429 reads as it came from the Assembly, the company supports.

 

Chairman Townsend:

We will close the hearing on A.B. 431 and open the work session with A.B. 32.

 

I asked the question of the commission about the eligible customer. When the bill was amended, other language was added allowing a local entity to look at the books of an eligible customer, which appears not to have been the intent. As a result, another amendment was brought forward to clear up the issue and took out “eligible customer,” and put in “provider of new electric resources.” In section 9 it refocused the issue of collecting and how it would elect to go to a plan of alternative regulation, and how to collect from each customer.

SENATOR O’CONNELL MOVED TO AMEND AND DO PASS AS AMENDED A.B. 32.

 

SENATOR SCHNEIDER SECONDED THE MOTION.

 

THE MOTION CARRIED UNANIMOUSLY.

 

*****

 

Chairman Townsend:

We will go to A.B. 296. This bill deals with two issues, the tires in the reverse polymerization process, and the multiplier effect with the provider deemed to have the 2.4 kilowatts. The proposed technical amendment to the 2.4 kilowatts also puts it in section 3. Another amendment was to make it annual so it would not cause a problem for school districts.

 

SENATOR NEAL MOVED TO AMEND AND DO PASS AS AMENDED A.B. 296.

 

SENATOR CARLTON SECONDED THE MOTION.

 

THE MOTION CARRIED UNANIMOUSLY.

 

*****

 

Chairman Townsend:

We will now go to A.B. 81. There was substantial debate on this bill. The one thing everyone did agree on was section 4.

 

ASSEMBLY BILL 81 (1st Reprint): Revises remedies available in certain actions relating to intellectual property. (BDR 52-366)

 

Senator Neal:

I would eliminate sections 1 through 3, and renumber section 4 as section 1.

 

SENATOR NEAL MOVED TO AMEND AND DO PASS AS AMENDED A.B. 81.

 

SENATOR O’CONNELL SECONDED THE MOTION.

Chairman Townsend:

We are going to delete sections 1, 2, and 3, and renumber section 4 as section 1.

 

THE MOTION CARRIED UNANIMOUSLY.

 

*****

 

Chairman Townsend:

I open A.B. 230 that deals with two issues.

 

ASSEMBLY BILL 230 (1st Reprint): Revises provisions regarding mobile home parks. (BDR 40-202)

 

One issue is representation on boards in mobile home parks. The second issue is water meters to make sure when they expand to public housing, they would not be required to use individual meters, because it kept the park at a cost level where they could not afford to expand. Mr. Belanger, Management Analyst, Las Vegas Valley Water District, proposed, “in counties with a population of 400,000 or more, each mobile home park constructed after October 1, 1995, unless it is operated by a public housing authority, nonprofit corporation, or cooperative, must provide direct water service ¼ .” Nothing in this section prohibits a mobile home park constructed on or before October 1, 1995, from expanding if the expansion can be accommodated under the capacity of the existing master meter.

 

Senator O'Connell:

The water district representative told me the problem is solved with the new language in the latter part of the amendment. Does that take care of it, Mr. Powers?

 

Mr. Powers:

“If I understand your request, are we removing the entire “unless” clause shown in the beginning of subsection 3?”

 

Senator O'Connell:

Right. We are just looking at the last three lines.

Mr. Powers:

The effect that will have is that it will allow parks constructed before October 1995 from expanding without complying with the water meter requirements. Any new parks that would be constructed would have to comply with the water meter requirements. If that’s your goal, then it would be accomplished.

 

Ms. Clark:

The amendment would help the housing authority, and it would help any other builder.

 

Chairman Townsend:

Your issue is to make sure you can still do master-meter, mobile home parks?

 

Ms. Clark:

Right. That is why I support the bill as it originally came to you.

 

Chairman Townsend:

Not just housing authority things, but to create competition to lower the cost to do a master-meter park.

 

Ms. Clark:

People are paying from $200 to $700 per space in mobile home parks for monthly rent, and if more people would build, then the competition would help the cost of rent.

 

Senator Hardy:

What if we removed “or cooperative,” because I agree it could be a lot broader than the policy issue we are talking about.

 

Senator O'Connell:

It also covers people who would not be living in these areas; it goes further. I have no problem with the nonprofit and public housing, but I do not think a cooperative is applicable to this situation.

 

SENATOR HARDY MOVED TO AMEND AND DO PASS AS AMENDED A.B. 230.

 

SENATOR CARLTON SECONDED THE MOTION.

Chairman Townsend:

We have a motion and a second to amend and do pass as amended A.B. 230 with the water district’s amendment, but taking out the term “or cooperative.”

 

Senator Schneider:

The thrust of this bill would add to creating a board of directors. This park is in my district. This is a nonprofit project by the Jaycees. The government put up the land, and the Jaycees did the improvements. I am wondering if we change the makeup of how that is run, do we affect their loan? Since it is Assemblywoman Buckley’s district and her bill, I do not want to stop it, but I have questions.

 

Chairman Townsend:

We can always pull it off the file if we pass it. I suggest you or Assemblywoman Buckley contact the Jaycees to find out if the language in the bill affects the ability to continue the loan, or will it be called instantly.

 

Senator Schneider:

I know the federal government put up Bureau of Land Management land for the project, and that raises a question.

 

Senator Neal:

This is new language. If it is removed, it does not affect what is already in existence.

 

Chairman Townsend:

Senator Schneider and Senator O’Connell have concerns about the amendment language. The goal to individually meter a mobile home park is now becoming so expensive that no more are being built. The goal was not to have any more debates about rents and other things by stimulating investment and competition so rates would come down. You are saying for mobile home park purposes not to have the requirement of individual meters?

 

Ms. Clark:

That is right.

 

Chairman Townsend:

You are satisfied with removal of the language in the first reprint of the bill that was subsection 3 of section 2.

Ms. Clark:

Yes, I am.

 

Senator Hardy:

Unless there are other changes, my motion stands, amend and do pass as amended with removal of “or cooperative.”

 

Chairman Townsend:

Does anyone know what a cooperative means in Nevada?

 

Mr. Powers:

I think one of the concerns is that the term cooperative is very broad. It can include a variety of business entities or organizations. If there was an attempt to just allow this to apply to cooperatives that are made of members who also reside in the mobile home park, the language could be changed to, I believe it is, a corporate cooperative park in the existing statutes as it is now.

 

Chairman Townsend:

Andy Belanger, Lobbyist, Las Vegas Valley Water District, is the goal to make sure the conservation methods in southern Nevada are retained? Is that why you have this amendment?

 

Mr. Belanger:

Yes. The purpose of the amendment (Exhibit N) is to ensure parks that cannot expand because of this law that are public housing authority parks and nonprofit parks, can expand, but that it does not impact the overall effort to ensure individual meters remain in place. There is a conservation impact on that. The second part of the amendment, the part dealing with, “nothing in this section affects parks before October 1, 1995,” applies to all parks. Parks that are for profit and nonprofit can expand if they were constructed before October 1, 1995. The language at the top, “unless it is a public housing authority, nonprofit, or cooperative,” exempts them from the individual metering requirement. Those are the two purposes of the amendment.

 

Chairman Townsend:

Did you present this amendment or a concept of this amendment to the Assembly side, because I do not want you to be at odds with Assemblywoman Buckley?

Mr. Belanger:

This amendment went through the same way on the Assembly side. The committee did not approve it, but Assemblywoman Buckley testified she could go either way. Our original amendment had the words, “unless it was operated by a public housing authority,” and she recommended, “nonprofit or cooperative,” which I added for the Senate side.

 

THE MOTION CARRIED UNANIMOUSLY.

 

*****

 

Chairman Townsend:

There being no further business, the meeting is adjourned at 11:33 a.m.

 

RESPECTFULLY SUBMITTED:

 

 

 

                                                           

Laura Adler,

Committee Secretary

 

 

APPROVED BY:

 

 

 

                                                                                         

Senator Randolph J. Townsend, Chairman

 

 

DATE: