PUC OKs plant purchase, seeks ‘green power’ rate

Kevin Rademacher

Monday, Sept. 20, 2004 | 10:41 a.m.

Along with approval to purchase and complete a 1,200-megawatt power plant, Nevada Power Co. received a new directive supporting renewable energy resources.

The state Public Utilities Commission on Friday approved the Las Vegas electric company's request to spend about $550 million to purchase and complete construction on a power plant abandoned two years ago by Duke Energy.

Before approving the order, Commissioner Carl Linvill successfully added a requirement that the utility must, in its 2005 general rate case, include a proposal for a "green power" pricing tariff.

That tariff would allow customers to pay potentially higher rates for power generated through renewable energy resources, such as wind and solar power.

Linvill also said that those green power ratepayers should be at least partially insulated from volatile natural gas prices. Power plants, such as the one being purchased -- named Moapa -- are fueled by natural gas.

PUC Chairman Don Soderberg agreed, pointing out that Nevada Power was just granted a waiver after failing to meet the state's renewable energy standards this year.

"It's time to cut through the talk and get to some action," Soderberg said.

Included in the purchase and construction plan is a 2 percent return on equity incentive for $367.6 million in construction costs. Soderberg had originally proposed a 3 percent incentive, but it was reduced during deliberations with fellow commissioners.

Also approved was an additional 1 percent incentive for timely completion of the plant. That would mandate that the plant's two units are on line by March 31, 2006, and June 30, 2006.

For each month that the units are late, the incentive will be reduced by 0.085 percentage points.

Soderberg said the new plant qualified for the incentive because it met new criteria as a "critical facility." The power from the plant, located about 20 miles north of Las Vegas, will increase the utility's internal generation levels to about 60 percent, from 40 percent today. That will mean the utility will have to buy less power on the volatile open market.

"I am very concerned about being caught short in the summer of 2006," Soderberg said.

Linvill was less concerned about 2006, but he said the additional generation capacity would protect state consumers from a federal regulatory system that is currently supporting $336 million in claims against the state utilities on behalf of Enron Corp.

"It protects us from, unfortunately, a Federal Energy Regulatory Commission that has chosen not to protect Nevada," Linvill said. "This is buying some insurance."

While Commissioner Adriana Escobar Chanos ultimately voted in favor of the plan, she expressed reservations about the incentives.

"I look at this as something (Nevada Power) should be doing in the normal course of business," she said.

Nevada Power officials said the purchase will be completed by Oct. 15, and construction will begin "promptly" after the closing. Roberto Denis, Nevada Power's vice president for energy supply, said the plant will be complete by the summer of 2006.

"We will finish this facility on time or ahead of time," he said.