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April 24, 2014

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Reid: Ushering compromise, powering green industry

Senator’s influence helped seal rival utilities’ deal to build transmission line

Harry Reid

Harry Reid

The news conference was made for the cameras: The proud senator. The rival businessmen who had struck a deal. The towering construction equipment as backdrop.

But last week’s announcement that Nevada’s long-desired north-south transmission line would be built jointly by competing power companies barely hinted at the harrowing negotiations throughout the Christmas holiday to seal the deal.

At stake was the future of the project that is the cornerstone of Nevada’s emerging green energy economy — and whether it would ever be built, at least anytime in the near future.

Days earlier, the two sides were still at the negotiating table wrestling over the $550 million venture, nudged along indirectly by Senate Majority Leader Harry Reid.

At the news conference, Reid noted the “fierce rivalry” between the two men, Michael Yackira of NV Energy and Mike Segal of LS Power, saying he was “grateful for their perseverance, their commitment.”

“As this transmission project begins to unlock Nevada’s abundant renewable resources, it will unleash the economic growth we need and have been waiting for,” Reid said. “Years from now, when Nevada is truly the leader in tomorrow’s clean energy economy, we will be able to point to the progress being made behind me and say this is where it all began.”

By joining forces, the transmission line will likely be built sooner — with groundbreaking possible this year, bringing hundreds of construction jobs — at potentially lower costs to Nevada ratepayers.

Charles Benjamin, Nevada director of Western Resource Advocates, called the deal “a very positive development for moving renewable energy forward in Nevada.”

“It’s good to see NV Energy and LS Power cooperating with each other rather than competing.”

For years the two companies have competed to build what sometimes sounded like nothing more than a mythical power line to link Northern and Southern Nevada.

For NV Energy, the power line is part of its new business model as an energy producer rather than a company that buys power from out of state for its Nevada customers.

It would also help the company more easily shift resources from the energy-rich northern part of Nevada to the power-hungry south.

For the New York-based LS Power, the line could allow it to move and sell energy throughout the Western corridor. The company eventually has plans to continue building the line north to budding Idaho wind farms.

And for Nevada, the transmission line is central to the green-energy future — the missing link to carry power from the state’s emerging solar, geothermal and wind energy developers up and down the state, and eventually for export.

With Nevada devastated by the recession, policy leaders are increasingly seeing the value of a diversified economy that relies not only on tourists hitting the casinos but also good-paying green-energy jobs that could make the state a leader in renewable energy development.

Initially, the battle between the two companies was over coal. NV Energy and LS Power proposed coal plants in Ely, in eastern Nevada, as part of an overall strategy to finance the transmission lines from Ely to Las Vegas.

But in summer 2007, Reid stunned many in Washington and Nevada by announcing his opposition to the proposed “dirty coal-fired plants.”

The transmission line projects indirectly suffered a serious blow.

Then in 2009, Reid again stepped in, this time not with a bullet, but a lifeline.

Reid tucked $3.2 billion worth of low-interest loans for transmission line development into the economic recovery act — the stimulus bill President Barack Obama signed into law last February.

Under the recovery act, for the first time, the Western Area Power Administration would have the ability to finance transmission-line development for Western states.

Piqued by the prospect of low-interest government financing, more than 200 projects submitted requests for funding last spring, including NV Energy and LS Power.

Yet even with the new money available, each company faced additional problems that the other could solve. They would have to work together.

For nearly six months both sides have been at the negotiating table. Talks crept into December. Reid checked in throughout the holidays to keep both sides talking.

The problems were twofold.

LS was further along in the permitting process for its line, but lacked one key ingredient — customers.

This is a typical chicken-egg problem: Renewable energy developers in the state were reluctant to commit to putting their products on the transmission line until LS could guarantee the line would be built. LS, in turn, could not pencil out the project until it had commitments from customers to use the line.

Meanwhile, NV Energy needed to show Nevada’s Public Utilities Commission that its line was also warranted, despite the bust of Nevada’s growth economy.

Approving the line would set the stage for an eventual rate hike for customers, and the commission might have looked skeptically at the need for two power lines. NV Energy’s July filing with the commission had been kicked back with questions, and the utility faced a new Feb. 1 deadline.

Reid nudged the two companies to find a deal. What they crafted would work like this:

NV Energy would take on 25 percent ownership of the proposed LS line and LS would sign up NV Energy as its first customer — with the option for NV Energy to access additional space once the line was expanded into Idaho and farther into Southern Nevada.

LS Power can now show investors it has a ready customer in NV Energy, giving the project a needed boost.

NV Energy will be able to connect its northern and southern operations at a fraction of the investment cost it faced building its own line. Yackira, president of NV Energy, estimated that joining forces would save Nevada ratepayers $10 million in interest payments alone because of the government-backed financing in the stimulus bill.

“This project has a great deal of potential for the citizens and electric customers of Nevada,” according to Yackira’s prepared remarks for the event.

“It’s kind of a win-win-win for everyone,” said Mark Milburn, an assistant vice president at LS Power.

What do Nevadans get?

An investment with only a fraction of the $550 million price tag borne on the backs of customers.

With NV Energy just owning 25 percent of the project, Nevada ratepayers are only responsible for that portion, rather than the full $500 million NV Energy’s line would have cost.

“The LS Power-NV Energy joint venture is a huge win for both Nevada consumers and the ongoing development of the renewable energy industry in the state,” said Timothy Hay, a former public utilities commissioner in Nevada and former state consumer advocate.

And Reid, what does he get?

Neither company has contributed much money to the senator’s re-election bid.

NV Energy executives give mainly to Republicans, and Yackira gave $1,000 to Reid’s campaign over the past two years, according to Center for Responsive Politics.

LS and its top executives have not given any financial contributions to the senator’s campaigns, according to the center.

Instead, Reid gets a transmission line for Nevada — an election-year trophy, no doubt, perhaps with a photo op of hundreds of workers building the power line, and the start of the state’s the green energy future, just in time for Election Day.

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