Nevada’s Utilities: Fueling the State’s Energy and Water Needs

As movers and shakers in Nevada’s utilities industry plan for the future, they share a number of common bonds in the challenges they face.As movers and shakers in Nevada’s utility industry plan for the future, they share a number of common bonds in the challenges they face. Future strategies are likely to make provisions for such factors as increased regionalization, new regulations, enhanced customer satisfaction, state-of-the-art technologies, alternative energies, drought conditions, greater management efficiencies and economic growth. Decision makers at six of Nevada’s major utility entities are optimistic as they approach the eclectic opportunities presented by the future.

The Drought

To John Entsminger, general manager of the Southern Nevada Water Authority (SNWA), there’s no question about what the most compelling challenge is to his company. “The drought on the Colorado River. It represents 90 percent of the water supply for our customer base and we’ve seen 14 years of drought,” he says. “We’ve asked people to use less water and they are using 30 percent less in spite of a 25 percent increase in population.”

Just using less water, however, isn’t enough to combat the severity of the drought. In 2005, when the SNWA board of directors realized something prodigious was needed to tackle this situation, they approved the design and construction of a third intake into Lake Mead. This intake will protect against a significant loss to Southern Nevada’s water supply should the drought continue and the lake level go down even more.

By almost any standards, the Lake Mead Intake No. 3 project is impressive. The $817 million undertaking includes construction of a new opening at elevation 860 feet with a three-mile long tunnel that connects to an existing pumping station. “It’s an extremely complex mining operation,” Entsminger says. “By the end of 2015 we should be able to draw on it.”

Entsminger is also concerned about regulations that could negatively impact SNWA’s bottom line. “Water quality regulations keep getting stricter, which affects our costs,” he says. In addition, federal regulations aimed at decreasing carbon and carbon dioxide emissions from coal-fired power plants will change the energy equation when many plants go off line. “What affects electrical energy can impact our costs. It takes a lot of electrical power to pump and move water,” he says.

Although he’s bullish on the continued use of renewable energy, he says that pending rulings to protect sage grouse could negatively impact the development of wind power in certain locations. The use of photovoltaic energy will continue to grow, however. “We’re seeing some solar projects almost break even,” he says.

His wishes for the future include the safe and successful completion of the third intake and a return to steady growth. “We want to see a more mature growth pattern of two or three percent,” he says.

Water Up North

The ongoing dry cycle that has impacted many parts of the West is also a concern in Northern Nevada. Managing water resources during drought years is a continuing challenge for companies like Reno-based Truckee Meadows Water Authority (TMWA), according to Mark Foree, TMWA general manager. “What we plan for is a nine-year dry water cycle. The longest dry water cycle on record is eight years between 1987 and 1994, which was the worst in the past 100 years. We add one year to that,” he says.
With upstream water storage at Independence Lake, Donner Lake and Stampede Reservoir banked for future use, Foree says TMWA water users are in pretty good shape to ride out some lean water years. “We only draw on it if we need it. The last time was in 1993,” he says. “We’re not sure if we have to draw on reserves this summer. We should have river flows into September with normal precipitation.”

The amount of electrical generation obtained from plants along the Truckee River is carefully monitored, especially in drought times, to help TMWA control their electrical costs. “We have hydroelectric plants on the Truckee River and we try to maximize the generation of those plants. Water systems use a lot of power and that offsets our cost of power,” Foree says. “We’re always looking for ways to save on power, such as putting in solar panels.” Through efficient management the company has been able to reduce its power costs from $7.2 million in 2008 to $4.8 million in 2013.

The company is eagerly looking forward to its long-anticipated merger with the Washoe County Department of Water Resources (DWR) which will be finalized at the end of the year. “We started work on it in 2008. There’s a lot of due diligence to be done. It’s a good thing to do so no customer group is negatively impacted,” Foree says. The merger is expected to enable TMWA to maximize the use of surface water, improve resource management, utilize long-term economies of scale and introduce consistent rules that apply equally to all water users. “We’re always improving the system and trying to work with other utilities,” Foree says.

Power Shift

Since its acquisition by MidAmerican Energy Holdings Company for $5.6 billion last year, NV Energy has welcomed Paul Caudill as president to work with CEO Michael Yackira on transitioning the company in the coming months. Caudill, who was previously president of MidAmerican Solar, emphasizes that NV Energy will continue to be a local company. “We bring a very large company to Nevada, but we’ll remain a local company. We’ll manage and lead locally and be involved in local communities,” he says.

Immediate priorities are safety and customer service, according to Caudill. “The number one goal is to improve our personal safety performance. It’s my top operational priority,” he says. A close second is improving customer service, which is a requirement of the merger. “A lot of customers are in a fact-finding mode. Everybody is interested in how this will affect them,” he says. “We are focused on communicating totally and often.”

Caudill points to smart meters as one of the more useful ways to enhance the experience of the end user. “We want to improve how customers can manage their own usage,” he says.

With impressive credentials in the solar industry, Caudill is zealous about the future of alternative energies. “The potential is here for renewables. The challenge is to find a buyer. It’s a very competitive market,” he explains. “We’re focused on economic development opportunities for renewables.”

A recent game changer for NV Energy was the passage of SB 123 by the Nevada State Legislature last year which will cause the company to close the 557-megawatt Reid Gardner coal-fired power plant by 2017. The 522-watt plant near Valmy is scheduled for closure by 2025. As a result NV Energy will be looking for other sources to make up for this lost energy. “I see both challenges and opportunities,” Caudill says.

The Other Power Company

As one of 900 electrical cooperatives in the country, Valley Electric Association (VEA) is a member-owned nonprofit that supplies electricity to more than 45,000 people living over a 6,800-square-mile area along the California-Nevada border. The company has experienced steady growth since its founding in 1965, despite economic ups and downs. “We have a great business model. We’re a cooperative that allows us to move forward,” explains CEO Tom Husted. “Our main concerns are reliability and affordability. We’re part of a solution and not part of a problem.”

Over the years, the company has strived to be in the forefront of new technologies and business practices that allow customers to manage their own accounts. “Through specific apps members can look at what’s happening at their location,” Husted says. “We also have a pre-payment program where you can actually manage your electricity to fit your revenue. It eliminates the need for a big deposit.”

In planning for increased load demand and member growth down the road, the company has joined the California Independent System Operator Corporation (CAISO), a wholesale power system that brings new economic opportunities and efficiencies to VEA. “We joined CAISO because we’ve had a lot of alternative energy companies apply to connect to us,” Husted says. “We believe in regionalization.”

The company also believes in casting a wide net when looking for new customer bases. Recent acquisitions include the Nevada National Security Site and Creech Air Force Base. “We’ve been very proactive in promoting our brand outside our traditional business plan. We’ll continue to look for more opportunities,” Husted says. “We’re going to have to be creative.”

A Cleaner Fuel

With so many coal-fired energy plants facing obsolescence, the future for natural gas appears incredibly bright, according to John Hester, executive vice president of Southwest Gas Corporation. Executives at the company continue to diligently follow regulations that will impact the natural gas industry. “We’re always mindful of legislation at the federal level, such as for carbon emissions,” Hester says. As coal falls out of favor, the spotlight is being turned on natural gas as a cleaner fuel. “Natural gas is a carbon-friendly fuel,” he says. “A natural gas company is relatively well-situated to thrive in this environment.”

The interest in natural gas is also being fueled by increased exploration and development of shale gas. “There’s dramatic expansion in the shale gas revolution. It’s an exciting time to be a natural gas distributor. We have lots of supply,” Hester says. “A lot more is coming from on land rather than in the gulf. They will be reliable resources. It’s an important game changer. There’s a lot of regulations for it and the record indicates that it’s very safe.”

Hester doesn’t seemed worried about the environmentalists who are opposed to shale gas extraction because fracking is used. “This creates energy independence and creates jobs. I don’t see turning this back. It’s an incredible economic engine,” he says.

Another plus in the natural gas column is the increased interest that’s being shown in the natural gas vehicle market, particularly from transportation fleets and long-haul truckers. “We’re in a first inning in the natural gas vehicle market. There’s interest from fleets that are diesel fueled,” Hester says. “There are number of engine manufacturers that have products to replace the diesel engine.”

Like many other energy companies, Southwest Gas strives to embrace technologies that can enhance the customer experience and bring greater efficiencies to management and product delivery. “The technology for pipes changes over time. We’re developing a system where we can use cameras to inspect the inside of our piping systems,” Hester says. Because of the nature and type of delivery of natural gas, employing smart meters, which are useful for monitoring electrical usage, isn’t practical. “We don’t have smart meter technology in gas companies because natural gas does not change price during the day like electricity,” he says. Southwest Gas does use advanced technology to read its meters, however. “We have electronic meter reading which uses a device on the meter. A truck can drive by and collect the reads.” Eliminating meter readers who walk through neighborhoods increases safety and speeds the process up.

Powering Nevada

One of the most critical areas of neglect in the overall energy picture is the aging energy delivery system that has served the country for decades, according to Alaina Burtenshaw, chairman of the Public Utilities Commission (PUC). “The biggest challenge across the country is the need to replace infrastructure. A lot of it is 50-100 years old,” she says. “Transmission is always a challenge since there are lots of stakeholders and the transmission lines are capital intensive.”

Burtenshaw is pleased, however, with the recent dedication of the One Nevada Transmission Line (ON Line) which runs 231 miles from the Harry Allen Substation north of Las Vegas to the Robinson Summit Substation 20 miles west of Ely. With a capacity of 600-800 megawatts, it is destined to bring new efficiencies to the transmission of electricity as well as enable the development of a number of renewable energy projects.

Nevada remains positioned to be an energy leader in the coming years, according to Burtenshaw. “We have a business climate where people can try new technologies,” she says. Although solar may not continue to enjoy the same incentives in the future as it has in the past, it will claim a growing share of the energy mix. “The big decision is going to be how to create a regional marketplace. This conversation will get more traction,” she adds.

Burtenshaw also says that new regulations that will affect coal-fired electric plants will change the mix of energy in the future. “The Environmental Protection Agency (EPA) is putting out guidelines for greenhouse gas emissions. It will be set at a level that many coal plants can’t meet. Many plants could close which could cause us to use more natural gas,” she explains.

As the economy in Nevada appears to be in slow recovery, utility companies are enthusiastic about the challenges and opportunities they will face in the next few years. In the spirit of a positive business climate, company executives continue to embrace new processes and technologies that will help them improve management efficiencies, protect the environment and increase customer satisfaction. Nevada’s utility companies have a major role to play in the economic recovery of the state and appear to be ready, willing and able to fulfill it.