By Mark Waite
The recent contracts awarded to Valley Electric Association for the Nevada National Security Site and Creech Air Force Base have reopened a not so civil war between VEA and its industrial-sized neighbor, NV Energy.
There is even a “green line” in this dispute, a term that usually refers to Mideast conflicts.
A pre-hearing conference was held by the Public Utilities Commission Tuesday to set up a hearing schedule on the complaint over the 50-year, $23.6 million contract to purchase, operate and maintain the Creech AFB electric distribution infrastructure, awarded Sept. 28. That involves allegations VEA is operating as a utility in its service territory without a Certificate of Public Convenience and Necessity.
On Thursday, the PUC will hold a hearing over a protest by NV Energy of a five-year, $62 million contract awarded Sept. 27 by the U.S. Department of Energy to VEA to provide electric, transmission and dispatch services for the NNSS, formerly known as the Nevada Test Site.
NV Energy claims the DOE was required to file an application with the PUC and pay an exit fee before exiting its power system at the NNSS, according to a state law passed in 2001. That exit fee includes the customers’ load share portion of any unrecovered balance in the deferred accounts of the electric utility, the annual assessment and any other tax, fee or assessment required.
“As a result, the Nevada Power’s ratepayers are at risk of being burdened with the costs associated with the investments in transmission, distribution and generation infrastructure and energy supply purchases made by Nevada Power in order to provide electric service to the test site,” the NV Energy petition states.
The test site had been provided electrical service by Nevada Power, now a subsidiary of NV Energy, for more than 50 years. The state law was designed to protect ratepayers from absorbing costs incurred to install facilities and make long term power purchase commitments to provide service to customers who then decide to leave the utility’s system, NV Energy states.
While the dispute over the Creech AFB contract involved service territory, NV Energy notes the boundary between their service territory runs through the NNSS, what is referred to as the “green line.” That stems from a 1963 agreement between Nevada Power and VEA’s predecessor, the Amargosa Valley Cooperative.
“The parties also agreed that neither would extend its facilities within the test site without first advising the other party and securing approval from the commission,” NV Energy states.
The 1963 agreement followed a complaint filed by Nevada Power in 1962 claiming VEA infringed on its service territory by constructing a 138-kilovolt transmission line into the Department of Energy’s Jackass Flats Substation, to deliver about two megawatts of power from the Parker Dam project. Nevada Power had entered into an agreement with the DOE in 1955 to provide power to the Nevada Test Site.
In 1992, VEA complained that Nevada Power violated state law by providing electric service to the entire test site, a complaint dismissed by the Public Utilities Commission in 1994, which stated the 1963 agreement didn’t convey exclusive franchise territories within the test site.
Most recently, NV Energy said the DOE began to take exclusive electric service from VEA on Sept. 27 and at the request of Valley Electric, leaving Nevada Power’s balancing authority and moving to the California Independent System of Operators CAISO , which NV Energy said will effectively preclude the test site from returning to Nevada Power for electric service.
The NV Energy complaint states, “It is not Nevada Power’s intention with this petition either to stop the DOE from obtaining the test site’s electric service needs from VEA or to terminate the stipulation. However, the DOE must exercise its rights under the stipulation in a manner that is consistent with Nevada law.”
The Department of Energy replied its right to choose between Valley Electric or NV Energy predates the enactment of the state legislation. They added the National Nuclear Security Administration didn’t engage in retail choice under the statute, the contract pertains to bundled services, not just energy, capacity and ancillary services.
“On at least three separate occasions in 2011 and 2012, the NNSA notified Nevada Power of an opportunity to compete for a contract to provide electric services to the NNSS. Nevada Power declined to submit an offer,” the DOE states. “Nevada Power made no effort for decades before or during the recent solicitation to contract with NNSA in order to protect its purported investments made to serve NNSS. Instead, Nevada Power chose to provide NNSS electric service on a month-to-month basis and took the risk that DOE would choose to be served by the only other eligible electric service provider, Valley Electric, as it did between 1999 and mid-2000.”
The DOE reiterates the 1963 territorial agreement which allows the test site a choice of energy providers. At the time, the PUC noted the provision of power at the test site was a different situation than the provision of power within an exclusive franchise territory, a decision ratified by the Nevada Supreme Court Jan. 22, 1998 which said the 1963 agreement “merely provided the parties with the opportunity to compete to provide service to the test site at the discretion of DOE.”
The Supreme Court said due to national security concerns, the DOE must be allowed to exercise discretion in acquiring energy in a manner that will allow it to carry out its sensitive mission at the test site.
Valley Electric’s response to the complaint states, “VEA has made, and continues to make, significant investments to ensure that DOE receives the quality of service and reliability it needs at the NNSS facilities at the lowest cost to the American taxpayer.”
Valley Electric argues the PUC should dismiss the complaint on the grounds it lacks jurisdiction over the NNSS as a federal enclave. NV Energy countered, “the Nevada Test Site is not a federal enclave because the U.S. government did not accept exclusive jurisdiction over it,” and adds the U.S. only accepted concurrent legislative jurisdiction with the state of Nevada.
Valley Electric also claims the NNSS isn’t an “eligible customer” under the 2001 state law which allows customers using over one megawatt to choose an alternate supplier.
VEA said the 1998 Supreme Court ruling concluded the 1963 agreement was ambiguous and didn’t create exclusive service territories at the test site.
Valley Electric said Black Hills Power brought a similar complaint over providing power for Ellsworth Air Force Base, where the Eighth Circuit Court of Appeals ruled federal enclaves weren’t subjected to state regulation.