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NV Energy complaint over VEA, Creech AFB contract dismissed

LAS VEGAS — The Nevada Public Utilities Commission Wednesday dismissed a complaint filed by NV Energy against Valley Electric Association for operating outside of their service territory in signing a contract with Creech Air Force Base.

“The commission questions how a cooperative association can be authorized to conduct any business outside of its service territory. Nonetheless, such inquiries appear to be beyond the scope of the commission’s jurisdiction in this case and instead fall within the jurisdiction of the Department of Taxation, Internal Revenue Service and other state and federal agencies,” the PUC order concluded.

It resurrected memories of a bill in the last legislative session that would put VEA under jurisdiction of the Public Utilities Commission that was vetoed by Gov. Brian Sandoval. But commissioner David Noble warned during a prior hearing Sept. 25, “while I don’t find that what they’re doing out there warrants regulating at this point, they certainly are pushing the envelope.”

In September 2012, VEA received approval for a $61.6 million contract to provide electrical service to the Nevada National Security Site and a $36.6 million contract to purchase, maintain and operate the electric distribution infrastructure at Creech Air Force Base.

NV Energy protested both contracts. Their complaint that VEA had to pay an exit fee to take over the NNSS contract was dismissed earlier. In the Creech Air Force Base case, NV Energy said VEA was operating as a public utility without a Certificate of Public Convenience and Necessity (CPCN) within the NV Energy exclusive territory, was interfering with their system for entering into an agreement that would duplicate service and was providing service to non-members of their association.

NV Energy argued by providing service to the Department of Defense, Valley Electric was changing from a cooperative association to a regulated public utility subject to the jurisdiction of the PUC. NV Energy, dba Nevada Power, said, “Nevada law states that every cooperative association supplying services for the use of the public and for the use of its own members is hereby declared to be affected with a public interest, to be a public utility and to be subject to the jurisdiction, control and regulation of the commission.”

NV Energy said VEA’s argument it could serve as many federal entities as it wants, wherever it wants without PUC oversight “is preposterous and would create a dangerous precedent.”

VEA countered the facilities involved in the Creech contract didn’t meet the definition of a public utility. Because there is only one customer, the U.S. government, the facilities aren’t used for the purposes of serving “persons” under state law and don’t fall within the definition of a public utility subject to PUC regulation, the co-op argued.

The commission sided with VEA that said NV Energy’s claim it is prevented from delivering power to its customer base was patently false. VEA said it doesn’t accept delivery of power, or take title or ownership of the power, it likewise doesn’t resell power, but is paid fixed monthly amounts for its operation and maintenance of the electric distribution system. The PUC said NV Energy delivers power to the same point of delivery it always has.

The commission’s draft order states: “Creech AFB’s desire to handle the facilities on the customer side of the meter differently than it has previously is only relevant to NPC (Nevada Power Company) to the extent it interferes with NPC’s ability to provide safe and reliable service to its customer at the point of delivery; no evidence of any such interference was presented in this proceeding.”

The PUC staff recommendation noted, “VEA will own electric lines to deliver power to another. Strictly speaking, this action renders VEA a public utility under NRS 704.020 which the commission may regulate. Unfortunately, this strict, simple reading could render jurisdictional other actions within the state that the commission does not currently regulate.”

They noted some casino properties receive electric service from a certificated power provider but are responsible for the ownership, operation, management and maintenance of the facilities themselves.

But commissioner Alaina Burtenshaw wanted language included in the draft order that states: “the commission has serious concerns regarding the potential legal and regulatory implications of VEA entering into the privatization contract as it relates to VEA’s existing CPCN (Certificate of Public Convenience and Necessity).”

The PUC said there were suggestions in the future Creech AFB may elect to receive electric commodity service from VEA. The PUC said it was difficult to understand why VEA would enter into the privatization contract that could require the co-op to be a regulated public utility.

“It is inexplicable why this was not addressed before the privatization contract was entered into as it materially impacts VEA’s ability to operate lawfully in Nevada,” the commission order states.

Burtenshaw said she wanted the concerns over the implications of the privatization agreement written into the order so Valley Electric doesn’t think everything is “hunky-dory.” She said the co-op should pay attention to significant legal issues pertaining to the VEA certificate.

At the Wednesday hearing, she said, “I think this company, VEA or any co-op, should not have the ability to amend their bylaws and redefine their membership on the grounds of the certificate. If that’s a fight that comes down the road, I hope that they are careful enough that they don’t engage in something that would go beyond the scope of what they’ve done here today.”

At the previous hearing, Burtenshaw said, “this belief Valley Electric should have the authority and has the authority to willy-nilly redefine their bylaws to redefine their members that allows them to serve anyone outside their service territory granted by this commission I think that’s a very troubling precedent.”

She warned the cooperative shouldn’t take lightly the order dismissing the petition as carte blanche to pursue whatever activity they want in the State of Nevada.

AFL-CIO Executive Director Danny Thompson testified NV Energy has a guaranteed rate of return, any lost business affects their bottom line and the ratepayers. While a bill allowing the PUC to regulate Valley Electric was vetoed by the governor Thompson said the concern is still there.

VEA quickly issued a press release calling it “a significant victory” the PUC dismissed the complaint.

“It is important to note that VEA earned the privilege to serve Creech Air Force Base through an open, fair and competitive process,” Valley Electric Chief Executive Officer Tom Husted said. “We were to the best of our knowledge the only Nevada-based company to bid on this contract.”

Husted said revenues from the two contracts helped VEA avert double-digit rate increases. The cooperative wants a fair chance to promote economic development in the region, he said.

Husted said the order provides inaccurate and unsubstantiated language about their contract to provide electric distribution services to the base.

“We went to great lengths to ensure the contract would not put our members at risk or violate the terms of our Certificate of Public Convenience and Necessity. Today’s decision by the PUCN is further evidence that VEA is well within its right to serve as a trusted contractor for this vital defense facility,” he said.

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