The Silver State’s utilities, like almost every other industry, have seen some rocky times. New competition, shrinking customer bases and fewer move-ins have all resulted in Nevada’s utilities having to make some tough choices.
“Utilities” is a catchall phrase for services everyone needs every day: water, power, natural gas. The Public Utilities Commission of Nevada (PUC) oversees the agencies that provide those services to Nevadans.
The commission is divided into two sections, commission policy/administrative, which houses the three commissioners, the executive director, administration, general counselors, hearing officers and policy analysis. The second section, regulatory operations, handles enforcement and is the commission’s analytical staff.
Part of the PUC’s responsibilities includes getting involved in the conservation efforts of the utilities to the extent of overseeing those efforts. When a utilities company determines a new initiative or program that could work for conserving power, water or another resource, the utility in question brings the proposed program before the PUC. Typically there’s a hearing in which the utility company presents a demand side management report breaking down the program and requesting acceptance by the commission. A large number of such hearings center around conservation efforts.
Conservation has become the norm. The trend across the country is for reduced use of resources. That coupled with businesses closing their doors, buildings standing vacant and people moving away from Nevada translates into smaller demands on utilities companies, coupled with smaller fee bases from which to draw operating expenses.
The economic downturn that’s affected utilities companies has also affected the commission. The PUC is not a general fund agency, so it hasn’t been impacted by the budget crisis, but it is a fee-based organization that charges utilities companies it regulates on the growth operating revenues of the utility, set annually by the commission and paid annually by the utility, according to Crystal Jackson, executive director.
And though the PUC is not a general fund agency, the outgoing governor’s administration had the entity operate like one, subject to one day a month furloughs for employees, frozen benefits and the renegotiation of internal contracts down 10 to 15 percent.
Southwest Gas isn’t quite the same as other Nevada utility companies. For one thing, it’s not solely a Nevada company. It also serves customers in California and Arizona. According to Jeffrey Shaw, CEO, there’s been a general slowdown for the past two to three years, and no indication that it’s turning around yet.
“We have a situation where many homes in the three states we serve are inactive, probably due to foreclosure or homes being held by investors and not yet occupied,” said Shaw. Southwest Gas has caught up from rapid growth in the early part of the decade, and has adequate facilities in the ground to absorb growth going forward for some time before needing to start extending new facilities.
With the customer base shrinking rather than growing, Shaw says the company has focused on the fundamentals of the business and tightened its belt without sacrificing service or safety. In order to set a budget that allows Southwest Gas to keep their level of safety and service, rates are adjusted.
“We go through rate cases in all of the jurisdictions we serve and through the rate case process you have rates that are authorized which will result in certain levels of revenues. Based upon that certain level of revenues and taking such things as service and safety into consideration, we establish a budget,” said Shaw. “We have seen some pressure on the budget, but we’ve made the necessary adjustments so that we can continue to remain healthy as a utility.”
The company has also seen some impact from the new growth of alternative energy in Nevada, but remains confident that natural gas, a clean-burning fuel, abundant and reasonably priced, remains a product customers desire and which is economical for them.
Nevada is abundant in solar, geothermal and wind energy and now energy customers can install their own energy-generating devices. Through the NV Energy program RenewableGenerations, customers can receive rebates for reselling what they’ve generated to the utility company.
“Since its creation in 2004, the program has provided more than $23 million in rebates for more than 800 customer-installed renewable projects,” said Michael Yackira, president, CEO, NV Energy. “Statewide customer-installed projects now total more than 6 megawatts.”
NV Energy is working for energy conservation across the state. According to Yackira, the cheapest and cleanest kilowatt hour is the one that is never produced.
“We have invested millions of dollars in energy efficiency and conservation programs for our residential and commercial customers, and achieved positive results. We expect to have reduced energy usage statewide by about 500 million kilowatt hours this year, enough energy to power more than 30,000 homes in Las Vegas for a year.”
Through the American Recovery and Reinvestment Act of 2009 funds, NV Energy received a federal grant for $138 million to implement a statewide smart meter/smart grid network. Smart meters are digital kilowatt counters that allow customers and utility employees to track energy usage.
NV Energy is also moving forward with the One Nevada Transmission Line (ON Line), which will complete a statewide transmission connection and allow transmission of currently undeveloped renewable energy resources while allowing better management of all energy resources statewide.
Renewable energy has long been important to NV Energy, which has a goal of producing 25 percent of Nevada’s energy through renewable sources by 2025, and which currently has more than 1,200 megawatts of renewable energy in production or under development.
Last month NV Energy opened the Goodsprings Energy Recovery Station, Southern Nevada’s first non-solar renewable energy project. According to Yackira, this collaborative project between NV Energy, Kern River Gas Transmission and Ormat Technologies uses waste heat from a gas compressor station to create power. Eventually it will generate about 7.5 megawatts of energy, enough to power 4,500 homes in Southern Nevada.
Southern Nevada Water Authority
Water in the desert is always an issue, especially in Southern Nevada. Southern Nevada Water Authority (SNWA) General Manager Patricia Mulroy called the current winter critical.
“It’s pretty dicey what the snowfall is going to be. We’ve had some good early snows, but that can be deceptive,” Mulroy said. “If we have another bad winter and only get minimum (water) releases from (Lake) Powell, we will probably break that first line of shortage, the elevation the State has agreed to in Lake Mead, at which point the Secretary of the Interior will declare shortages.” The good news, she said, is the shortages were anticipated and the community has taken measures and is ready.
Those measures have been in place for a while. The turf removal program, or Water Smart Landscapes Rebate offered by SNWA pays homeowners $1.50 per square foot of grass replaced with desert-friendly landscaping. The payment is annual and covers the first 5,000-square-feet per property, and the program is doing well.
Meanwhile, the Instate Water Project pipeline meant to bring groundwater to Southern Nevada across federal lands is on hold. The Nevada Supreme Court decided in January of last year that the state engineer had made a procedural mistake and the almost 300-mile-long pipe that would have run across central eastern Nevada to Las Vegas stopped moving forward.
If SNWA got a record of decision and water rights were re-granted, said Mulroy, the approvals and the project would be put on a shelf and not taken down again unless the drought became so bad SNWA had to start building it. “This has become a complete drought-response project at this point,” said Mulroy. “If Lake Mead conditions get to the critical level, we will begin design and construction of phase one. That’s what resources call for right now.”
Another resource that is slim in Nevada is funding. Utility companies have dedicated sources of funding from customer bases, so the Nevada budget shortfall hasn’t affected SNWA, but the economic downturn has. The capital program was mostly dependent on connection charges; 57 percent of all revenue came from connection charges, which have dropped significantly since the economy went south and foreclosures started hitting heavily, said Mulroy. Fortunately for SNWA, the utility has reserves as well as a voter-granted quarter-cent sales tax.
The question, Mulroy said, is how much is the economy and how much is due to conservation? Regional water use is down 4 to 5 percent, with the accompanying loss of that revenue. Conservation efforts, which are good for the environment, aren’t as good for utilities companies, which make money from usage fees. Either way, SNWA is looking to fund projects.
“Our biggest challenge is capital funding, because we’re still building the third intake, and we have to go back out to market for another $500 million. That’s why the board approved an increase in regional water rates in 2010 and a second that will go into effect in 2011,” said Mulroy.
While SNWA looks for money and water in Southern Nevada, the one thing they have too much of is mussels. No good chemical solutions have been found to the Quagga Mussel, non-native and very happy in Southern Nevada’s warm waters, which are definitely warmer than Lake Michigan. Because Lake Mead never freezes over like the Great Lakes, there’s no time the mussels go dormant and just one mussel can have a million offspring a year. Currently divers are manually removing mussels from screens and scientists are working to find some kind of use for the creatures.
Truckee Meadows Water Authority
Truckee Meadows Water Authority (TMWA) was formed in 2001 when Cities of Reno and Sparks came together with Washoe County to buy water assets from what was then Sierra Pacific Power Company (now NV Energy) and became a government-owned non-profit.
The water assets the newly formed authority bought from the power company come from Lake Tahoe and the Truckee River. The remaining percentage comes from ground water wells in the Truckee Meadows.
Conservation in the TMWA district relies mostly on landscape issues, from encouraging desert-friendly landscaping to the two-day-per-week watering schedule that ran for 15 years before becoming a three-day-a-week system in the last year.
“We went to a three day a week watering schedule for a number of reasons,” said Mark Foree, general manager. “Studies showed customers would not use more water on a three day a week schedule versus a two day and that actually happened, because we used a little less on the three day a week plan, about 3 to 3.5 percent less.”
The reduction in water usage could be in part due to the homeowners not feeling the need to water for as long now that there are three days to water yards as opposed to two, or to the trend toward conservation that’s moving across the country, or to the number of people leaving homes and businesses across Nevada.
In addition, when TMWA came together in 2001 there was only a partially metered system in place. Since then the authority has retrofit meters so that now 98 percent of TMWA customers are metered and with the majority of customers paying a metered rate, obviously people pay more attention to water use, Foree said.
TMWA is an enterprise fund, meaning all revenues are derived from sales to customers and related funds. There’s no sales tax revenue and no property tax revenue being diverted to the water authority. So with a reduction in water use and a reduction in water users, there’s a reduction in revenue.
In terms of drought in Northern Nevada, TMWA plans against a nine year drought based on historical precedent, and has upstream storage reservoirs hedging Northern Nevada’s bets. TMWA owns all the water in Independence Lake, half of the water in Donner and has contracts with the federal government to store water in Stampede and Boca reservoirs, but even with the last four years of below-average precipitation, we have yet to draw on any upstream drought resources in that period, Foree said.
“We have a very good drought plan, one of the best in the west, and we’re always hoping for more snow and more precipitation. This year is no different.”
All in all, utility companies are riding the wave with the rest of Nevada’s industries. Although they may have had to become more creative than some and have the unique distinction of actually trying to get their customers to use less of their product, utilities remain the backbone of the Silver State.