Alaina Burtenshaw, Chairman

Nevada’s Energy Policy and The Regulation of Public Utilities

A Review of the Public Utilities Commission’s Role in the Energy Policy of the State

DISCLAIMER

• Any opinion expressed in this presentation is solely mine, not that of the Commission or any other members of the Commission.

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AGENCY OVERVIEW

The Public Utilities Commission of Nevada (“PUCN“) is a regulatory agency that ensures investor-owned utilities comply with laws enacted by the Nevada Legislature.

The PUCN’s basic regulatory duties, as defined by the Legislature (NRS 704.001), include:

• To provide for fair and impartial regulation of public utilities.

• To provide for the safe, economic, efficient, prudent and reliable operation and service of public utilities.

• To balance the interests of customers and shareholders of public utilities by providing public utilities with the opportunity to earn a fair return on their investments while providing customers with just and reasonable rates.

• The PUCN regulates approximately 400 investor-owned utilities in Nevada, but does not regulate cooperatives or municipal-owned utilities.

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APPLICABLE NEVADA REVISED STATUTES

701 Energy Policy

702 Energy Assistance

703 Public Utilities Commission of Nevada

704 Regulation of Public Utilities

704A Facilities Placed Underground

704B Providers of New Electric Resources

705 Railroads

707 Telecommunications

455 Pipeline Safety

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ORGANIZATION OF THE PUCN

• Commissioners o The three members of the Commission are appointed by the Governor to

4-year terms.

• The Commission has nearly 100 employees in its Carson City and Las Vegas offices that are divided into the follow areas: o Regulatory Operations Staff

o Independent investigatory arm of the agency o Comprised of accountants, attorneys, consumer complaint resolution

investigators, economists, engineers, and administrative support

o Policy Staff o Policy staff assist the Commission with legal and technical advice o Comprised of general counsel and policy advisors

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COMMISSION AND STATE ENERGY POLICY

• Natural Gas Pipeline Safety

• Utility Facilities Siting

• Rates Charged for Service

• Integrated Resource Planning

• Renewable Portfolio Standard

• Renewable Generations and Solar Thermal Programs

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GAS PIPELINE SAFETY

• The PUCN oversees gas pipelines in a pipeline safety partnership with the United States Department of Transportation Pipeline and Hazardous Materials Safety Administration Office of Pipeline Safety

• PUCN gas pipeline engineers monitor the design, construction, operation and maintenance of gas systems under the Commission's jurisdiction and Title 49 of the Code of Federal Regulations ("CFR"), parts 191 and 192.

• The PUCN's gas pipeline engineers also inspect local natural gas distribution companies ("LDC"), natural gas master metered distribution systems found mainly in mobile home parks ("MHP"), underground piping systems providing liquid petroleum gas ("LPG") service to ten or more customers, again mainly MPHs, and direct sales lateral customers (such as gold mines) whose pipelines are fed directly from large interstate supply lines.

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CALL BEFORE YOU DIG

• Hitting an underground utility line while digging can cause environmental damage and serious personal injury, as well as disrupt service to an entire neighborhood. If you don’t call 811 prior to digging and hit an underground utility line, you could potentially incur fines and be responsible for repair costs

• 811 is a national number created by the Federal Communications Commission to help protect homeowners and contractors from unintentionally hitting underground utility lines while working on digging projects. 811 is a free service.

• The Commission ensures compliance with Nevada’s 811 law (NRS 455). PUCN inspectors patrol to ensure that excavators and underground facility operators are acting in accordance with the law and to help resolve disputes

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SITING OF UTILITY FACILITIES

NRS 704.865 provides that a person, other than a local government, constructing a utility facility in Nevada must obtain a Utility Environmental Protection Act (“UEPA”) permit from the Commission. The process balances the potential environmental impact of a proposed utility with the public interest served by such facility. The Commission issues a UEPA permit to construct utility facilities once all other relevant permits have been obtained by the developer.

UEPA permits granted by the Public Utilities Commission of Nevada ("PUCN") apply to:

• Conventional power plants.

• Renewable energy power plants rated over 70 Megawatts (nameplate).

• Electric transmission facilities rated over 200 kilovolts.

• Gas transmission lines and associated facilities.

• Water transmission lines and associated facilities.

• Sewer transmission and treatment facilities.

Exemptions from the UEPA process include (but are not limited to):

• Electric transmission lines rated under 200 kV.

• Electric transmission lines required to be placed underground (in their entirety) by local ordinance.

• Electric and gas transmission lines constructed (in their entirety) within an incorporated city.

• Replacement of an existing facility with a like facility.

• A utility facility owned by the federal government, a co-operative, or a non-profit corporation.

• Water transmission lines and associated facilities constructed for mining operations.

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SITING OF UTILITY FACILITIES

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Currently There are 35 UEPA applications related to electricity and renewable energy projects pending. Most are related to renewable energy, projects involving renewable facilities over 70MW or transmissions projects related to delivery of electricity generated by renewable energy 28 UEPA Permits were issued since 2010 for electric and renewable energy projects

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MAJOR COMPONENTS OF ELECTRICITY RATES

Commission ensures that public utility rates are just and reasonable as provided by NRS 704.001 (4)

Base Tariff General Rate

• Recovers the costs associated with the physical plant, wire, transmission, and labor.

• These costs are set through a General Rate Proceeding every 3 years.

Base Tariff Energy Rate

• Energy expenses are a dollar-for-dollar pass-through to ratepayers. These costs are trued up each year through the deferred energy accounting adjustment (DEAA)

• The Commission audits these costs annually

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MAJOR COMPONENTS OF NATURAL GAS RATES

• Gas Commodity Charge: This is the cost of the gas itself. This is expressed in therms, a unit of energy equal to 100,000 BTUs (British Thermal Units).

• Delivery Charge: The cost of delivering the gas from a central pipeline to your home or business. This charge includes construction and maintenance costs, depreciation costs, operation expenses, taxes, and the company’s return on invested capital. This charge is based on the amount of gas used.

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OTHER RATES

The Commission will also set rates for recovery of costs associated with energy efficiency and renewable energy programs in this application.

• Temporary Green Power Financing (TRED) Electricity Only

• Renewable Energy Program (REPR): A fee that helps further development of alternative energy projects and renewable rebate programs. Electric Utilities Only.

• Energy Efficiency (EE) Charge: A charge to recover costs and other expenses associated with energy efficiency and conservation programs. Electric Utilities Only.

• Universal Energy Charge: A mandated fee that provides money to fund the State of Nevada energy bill assistance and conservation programs. Electricity and Natural Gas Utilities.

• Tax or Franchise Fee: A fee imposed by the city or county. The money is collected by the utility and turned over to local government. This is not regulated by the Commission. Electric and Gas Utilities.

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INTEGRATED RESOURCE PLANNING OVERVIEW

• Commission is charged with overseeing safe and reliable service by utilities

• Electric utilities must file an IRP every three years for approval by the Commission. [NRS 704.741]

• The IRP must include the following:

o Forecast of future demands over a 20-year period;

o A diverse set of scenarios of the best combinations to increase the supply of electricity or decrease the demand;

o One of the scenarios must be one of low carbon intensity;

o A designation of renewable energy zones; and

o Energy efficiency program for residential customers which includes the use of solar thermal resources. [NRS 704.741]

• A natural gas utility files an annual Informational Report with the Commission instead of an IRP. [NRS 704.991]

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LAST DECADE—REDUCED RELIANCE ON WHOLESALE ELECTRIC POWER MARKETS

Peak Demand 2011 • NPC –-5,539 MW • SPPC--1,513 MW

Construction of New Generation Facilities • Clark Units Peaking Units 11-22—600 MW • Chuck Lenzie Combined Cycle 1,200 MW • Harry Allen Combined Cycle 500 MW • Tracy Combined Cycle 500 MW

Power Plant Acquisition • Silverhawk Combined Cycle 400 MW • Big Horn (Walt Higgins) Combined Cycle 500 MW

Increase in expenditures for utility-sponsored conservation and energy efficiency programs. NPC expenditures for energy efficiency was $37.2 million in 2011. SPPC electric efficiency costs were $6,245,000 in 2011

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FUEL MIX NPC 2003 AND 2011

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2011 2003

MWh % of Total MWh % of Total

Gas 11,687,714 54.1% 4,292,701 19.8%

Coal Generation 3,346,506 15.5% 5,734,105 26.5%

Total Generated 15,034,220 69.6% 10,026,806 46.3%

Totaled

Purchased

6,577,339 30.4% 11,637,000 53.7%

Total 21,611,599 100.0% 21,663,876 100.0%

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FUEL MIX SPPC 2003 AND 2011

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2011 2003

MWh % of Total MWh % of Total

Gas 3,254,453 36.9% 2,515,759 23.3%

Coal Generation 1,199,121 13.6% 1,664,771 15.4%

Hydro* 0 0.0% 46,409 0.4%

Total Generated 4,453,574 50.5% 4,226,939 39.1%

Totaled Purchased 4,368,036 49.5% 6,574,606 60.9%

Total 8,821,610 100.0% 10,801,505# 100.0%

*Included are hydro generating plants that were included in the sale of SPPC’s water business to

the Truckee Meadows Water Authority.

#Decrease between 2003 and 2011 can be attributed to the exit of large mining customers from

the SPPC system pursuant to NRS 704B

.

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1,077 1,109 1,336 1,336 1,293 1,293 1,293

5,711 5,905

6,982 6,990 6,990 7,248 7,248

1,047 1,048

1,051 1,051 1,051 1,051 1,051

188 189

208 299 311 311

367

0

2,000

4,000

6,000

8,000

10,000

12,000

2006 2007 2008 2009 2010 2011 2012

Nevada Generating Summer Capacity - MW

2006 - 2012 (Source: EIA Form 860 - Annual Electric Generator Report)

Waste Heat

Solar

Geotherma

l

Biomass

Wind

Hydro

Gas

Petroleum

Coal

10,059 MW 9,834 MW 9,810 MW 9,711 MW

8,375 MW

8,068 MW

10,465 MW

Petroleum 06 = 45 MW

07 = 45 MW

08 = 45 MW

09 = 45 MW

10 = 45 MW

11 = 11 MW

Waste Heat 10 = 7 MW

11 = 7 MW MW

Solar 07 = 79 MW

08 = 89 MW

09 = 89 MW

10 = 137 MW

11 = 137 MW

Biomass

Wind

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RENEWABLE ENERGY RENEWABLE PORTFOLIO STANDARD

• Each electric utility must comply with the following RPS requirements for their total retail energy sales:

o 18% for 2013 & 2014;

o 20% for 2015 to 2019;

o 22% for 2020 to 2024; and

o 25% by 2025 and each year thereafter. [NRS 704.7821]

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COMMISSION RESPONSIBILITIES WITH REGARD TO RPS OVERSIGHT INCLUDE THE FOLLOWING:

• Approval of Renewable Purchased Power Agreements submitted by NPC and SPPC

• Administration of the system of portfolio credits ( a credit is created and tracked for each kilowatt hour of electricity generated by a renewable resource or saved from a utility conservation program)

• Determination of Compliance

• Administrative fines for non-compliance

• Audit of purchased power costs

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IMPACTS

• Portfolio Standard Compliance for 2011 for both NPC and SPPC

• New Contracts for the purchase of electricity generated by renewable energy coupled with DSM resources indicate adequate resources to meet RPS until at least 2020 for NPC based on forecasts and based on current law

• SPPC is projected to remain in compliance until about 2030

• One Nevada Transmission Line- 250 mile 500 kV transmission line connecting NVE’s northern and southern service territories will facilitate delivery of renewable energy to market

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NPC Renewable Purchased Power Agreements

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Solar Plants

Las Vegas Valley Water District 3.1 MW

Nellis Air Force Base 12 MW

Nevada Solar 1 69 MW

RV Apex Solar 20 MW

Silver State Solar 52 MW

Stillwater 2 Solar 22 MW

Solar facilities 1 MW or less 12 MW

Wind

Spring Valley Wind 152 MW

Geothermal

Desert Peak 19 MW

Faulkner 1 49.5 MW

Galena 13 MW

Jersey Valley 22.5

McGinnis Hill 51 MW

Salt River 23.6 MW

Tuscarora 25 MW

Landfill Gas

CC Landfill Facility 12 MW

Lockwood Renewable Energy 3.2 MW

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SPPC Renewable Purchased Power Agreements

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Geothermal

Beowawe 17.7 MW

Brady 24 Mw

Burdett 26 MW

Galena 3 26.5 MW

Homestretch 2.1 MW

San Emido 11.75 MW

Soda Lake 23.1 MW

Steamboat Hills 14.6

Steam 1-3 28.8 MW

Solar

Nevada Solar One 22 MW

Contracts Under 1 MW 2 MW

Other

Small Hydro 11.5 MW

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Renewable Energy Projects Under Development

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Capacity Energy Source On line Date Utility

Spectrum Solar 30 MW Solar PV 7/2013 NPC

Crescent Dunes 110 MW Solar Thermal 9/2013 NPC

Mountain View 30 MW Plant Name 2/2014 NPC

Dixie Meadows 17 MW Geothermal 4/2015 NPC

Contracts Under 1MW

6 MW per Year (Est.)

Solar and Wind Various NPC/ SPPC

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RENEWABLE GENERATIONS AND SOLAR THERMAL PROGRAMS

Legislatively mandated programs administered by the Utilities and overseen by the Commission

Program includes Solar, Wind and Water Power programs

• Total expenditures for the program and goals are established by statute NRS 701B.010 - 701B.280, NRS 701B.400 - 701B.650 and 701B.700 - 701B.880.

• Additionally, there is a solar thermal program required for both electric and natural gas utilities NRS 701B.300 - 701B.345.

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RENEWABLE ENERGY CUSTOMER REBATE PROGRAMS – RESULTS

• To date, over 1,400 projects totaling more than 38 megawatts are installed at homes, businesses, public buildings and schools. Estimated total direct program costs $178 million

• As of December 2012, Southwest Gas has rebated 93 STSDP installations and NV Energy’s gas utility has rebated 15 STSDP installations.

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COMMISSION RESPONSIBILITIES WITH REGARD TO RENEWABLE GENERATIONS INCLUDE THE FOLLOWING: • Oversee Program design

• Establish incentive levels

• Review of annual results

• Audit of program costs

• Rate Recovery of costs (REPR)

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