NV Energy Proposes Legislation to Close Coal Plants, Invest in Renewables and Natural Gas


The Las Vegas Sun reported yesterday on NV Energy's proposal to begin decommissioning its existing coal-fired power plants and to accelerate its investments in renewable energy and natural gas generating capacity. Interestingly, NV Energy is seeking to implement the plan legislatively, as opposed to having it approved by Nevada's Public Utilities Commission (PUC). This is not surprising considering the difficulty the utility had in getting three renewable energy PPAs approved in 2011 (as we blogged about here). According to the Sun article, the PUC would not be able to reject the plan if approved by the legislature.

NV Energy's plan calls for the closure of (or divestiture from) all the utility's coal plants, beginning in 2014 and completed by 2025. The coal generating capacity will be replaced by 600 MW of renewable generation and 1,000 MW of natural gas capacity over the next five years. The bill would require that the utility own or operate at least 25% of the new renewable resources, a new role for NV Energy. According to the Sun article, the construction projects would bring about 4,700 construction jobs to Nevada and would result in about 200 permanent operations and maintenance jobs at the facilities.

NV Energy estimates that the proposed legislation could result in a 4% increase in rates over the next 20 years. At least part of this will be used to pay for the costs of closing existing coal plants; for example, payments for terminating contracts associated with the plants and the cost of unused coal. The plan would also apparently change the way costs are incorporated into rates. Currently, utilities in Nevada must pay their expenses and then ask the PUC to allow them to recover the costs from ratepayers. Under this process, utilities cannot begin recovering their costs or earning a return on their investments until their next general rate case which could be several years later. This is known in the industry as "regulatory lag". Under NV Energy's proposal, it would be able to start recovering its costs at the start of the next fiscal quarter without prior PUC approval. The PUC would be able to review the rate increases retroactively during the next general rate case.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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