Energy pact could avert outages

Monday, July 16, 2001 | 11:01 a.m.

Nevada Power wants to change the way it forecasts peak electricity demand, a move company officials say will help avoid forced power cuts.

The company forecast expected peak demands at 4,300 megawatts -- enough power for about 2 million Southern Nevada homes during the summer. The revised formula will put the forecast peak at 4,900 megawatts.

Changing the forecast for peak use would give Nevada Power more flexibility to purchase long-term power contracts, company officials said.

More long-term contracts would guarantee access to electricity even in a tight market, such as July 2, when record high temperatures swept the West and electricity shortages sparked blackouts in the Las Vegas Valley.

Jack Motter, director of strategic development for Sierra Pacific Resources, Nevada Power's parent company, said revising the forecast will help forestall similar blackouts.

If record high temperatures hit again under the current peak forecast, the company would have to buy power on the spot market -- and that isn't always going to be there, or can cost much more than power available through long-term contracts, Motter said.

The company blamed the July 2 blackouts, which affected about 10,000 customers, on the inability to buy power on the spot market and a pullback of short-term power contracts.

The difference in the forecasts -- 600 megawatts -- would cover about 300,000 Las Vegas homes in the summer.

In addition, with long-term contracts, Nevada Power has the ability to sell off extra electricity that customers do not use, Motter said.

The Nevada Public Utilities Commission must approve the forecast change. The company last week formally presented its Refiled 2000 Resource Plan, which includes the new forecasts, to the commission, which has scheduled an August public meeting on the plan.

One of those likely to argue against aspects of the resource plan is Tim Hay, Nevada's consumer advocate. Hay said the company's forecasts have historically been too low -- and the July 2 blackouts were the fallout.

"They acknowledge that their forecast was about 600 megawatts short -- That's a huge disparity," he said.

Hay said the company's forecasting adjustment is "sensible," but the company errs by failing to stress energy conservation and efficiency rather than simply providing more power to the market, Hay said.

It would be cheaper for Nevada Power's customers to cut consumption rather than buy more power, he said.

"There are economic tradeoffs that have to be looked at."

Hay also criticized the company's resource plan for relying on much of the new power from independent power producers, instead of building its own generating plants.

Buying the power with long-term contracts could put electricity consumers at risk for high prices if market prices should fall, he said.

Building more of its own generators "gives Nevada folks a safety net, an insurance policy," Hay said.

And because only so many plants will be allowed in Clark County -- a restriction based on the amount of air pollution those plants would be allowed to produce -- it is important for Nevada Power to build now, while it can, Hay said.

Motter said the company hasn't ruled out building more plants, but right now prices are good for the long term.

That is because about a dozen new generators are planned by independent power producers, and those companies are pre-selling much of that electricity before the plants are built, Motter said.

"There's a very competitive market right now," he said. "Right now our customers will pay less as a result of power purchases."

But the company does plan to expand its own generating capacity, "certainly by 2007," Motter said.

Hay also criticized a third component of the company's revised plan: a $300 million investment in new and expanded power transmission lines to and from Southern Nevada.

Motter said the lines are critically needed both for customers, who need access to imported energy in the summer, and for the expected new producers, who need the lines to export power to parts of the country that need it.

But Hay said the company would be better served by producing more power here in Southern Nevada for local consumption. Then the new transmission facilities wouldn't be as important.

Both Hay and Motter agreed on one thing: The resource plan is the essential blueprint that will guide electricity development for the coming years.

The resource plan is delivered to the PUC every three years, but electricity shortages, including blackouts here and in California, and spiraling prices for all kinds of energy products have made this document particularly important.

"The resource plan is far more than compliance with a statutory requirement," Motter said. "It is the forum for our customers needs, and how we are going to meet those.

"It is the strategic plan for power resources in the region."