Wednesday, September 27, 2000

Copyright ) Las Vegas Review-Journal Electricity reliability called into question

Southern Nevada Water Authority concerned

By JOHN G. EDWARDS REVIEW-JOURNAL

Nevada Power isn't doing enough to ensure reliable electricity, which is used to pump water from Lake Mead, the Southern Nevada Water Authority said in papers filed with the Public Utilities Commission.

"It would be difficult to pump water uphill without electricity," Vince Alberta, a spokesman for the water authority, explained Tuesday.

The water authority sells water to local water utilities in the Las Vegas area, he said.

"We have a responsibility to the community to ensure that there's available resources for us to deliver a reliable supply of water to the public," Alberta added.

Other Las Vegas area customers of Nevada Power also would be affected if the utility was unable to provide electricity reliably, according to Dennis Peseau, an economist retained by the water agency.

Nevada Power is reducing transmission line investments while demand is surging, Peseau said.

Also, the electric utility has not adequately prepared to manage power purchases to minimize costs for customers, Peseau testified in the filings.

Sonya Headen, a spokeswoman for Nevada Power, declined comment Tuesday, saying the utility hasn't had time to study the authority's filing.

The written testimony in the so-called Nevada Power resource plan review will be considered at a PUC hearing in Las Vegas at 10 a.m. Monday.

Peseau laid the groundwork for the arguments water authority will present then. He argued that Nevada Power has "a perverse incentive" under current regulations to minimize its investment in transmission lines.

The electric utility's retail rates are capped for three years for customers it serves as a default provider, because the customers failed to switch to a competitor, Peseau explained.

Thus, Nevada Power cannot recover any investment in transmission lines until after the rate cap.

"Nevada Power now has a significant incentive to underbuild its transmission lines and distribution (line) system until its ... rate caps have ended," Peseau said.

"Shareholders are best served by the company minimizing and postponing rather than maximizing such investment," he said.

Nevada Power's total amount of planned transmission and distribution investments over five years dropped to $805 million from $1.2 billion proposed previously.

Nevada Power intends to invest $28.6 million in transmission lines this year and $12.9 million next year, but only $1 million in 2003 and $2 million in 2004. Yet, the company expects a 4 percent annual growth rate during this period, Peseau stated.

In particular, Peseau criticized Nevada Power for failing to plan any transmission lines to serve independently owned generating plants.

The water authority, the staff of the Public Utilities Commission and Calpine Corp., an independent power generation company based in San Jose, Calif., all recommended that Nevada Power invest in transmission lines so that independent electrical generation plants can be built.

Calpine is finalizing plans for a 750 million-watt, natural gas-fired power plant at the tribal lands of the Moapa Band of Paiutes. But Calpine said it must have interconnection with Nevada Power's transmission lines before it can start construction.

Calpine said it wants transmission connections by May 2003, but Nevada Power has testified it doesn't intend to consider building more transmission lines for plants like Calpine's until 2005.

Calpine builds and operates so-called merchant plants that sell power to virtually any utility or large user in a competitive power market. Merchant plants are key market participants in deregulated markets like the one Nevada officials intend to establish.

Calpine, however, says consumers also will benefit from its plant through "customer choice and enhanced system reliability."

http://www.lvrj.com/lvrj_home/2000/Sep-27-Wed-2000/business/14480570.html

-- Carl Jenkins (Somewherepress@aol.com), September 27, 2000