VEA must pay $25,000 after PUC order

Valley Electric Association was ordered to pay a $95,000 fine for extending infrastructure to the Nevada National Security Site before Public Utilities Commission approval, but $70,000 will be held in abeyance for two years if there are no further violations of a 1963 agreement.

VEA was ordered to pay $25,000 within 30 days of the order, issued Aug. 21.

On Sept. 17, 2013, Valley Electric started construction on its Innovation Project, a 5.3-mile, 138-kilovolt transmission line and other facilities upgrading the infrastructure at the Nevada National Security Site. VEA landed a $61.6 million contract to supply power to the NNSS in September 2012. VEA filed a petition with the Public Utilities Commission on July 12, 2013 requesting approval to build the Innovation Project or an order finding it doesn’t require commission approval. But the VEA petition wasn’t granted until Dec. 20, 2013.

The PUC referred to a Sept. 18, 1963 agreement with Amargosa and Nevada Power Company, now NV Energy, that states neither party will extend its facilities within the Nevada Test Site, the old name for the NNSS, without advising the other party in writing and securing PUC approval. VEA had a contract with the U.S. Department of Energy to complete the Innovation Project by Nov. 1, 2013. VEA completed the project on Oct. 8, 2013.

Valley Electric later stipulated they wouldn’t place the Innovation Project into operation until the interconnection agreement with Nevada Power had been accepted by the Federal Energy Regulatory Commission. The PUC could levy fines up to $1,000 per day for each day of the violation, which lasted 95 days.

VEA argued the 1963 agreement was unenforceable if applied to reliability upgrades requested by the U.S. Department of Energy, the co-op said it didn’t operate the Innovation Project in parallel with the Nevada Power system and added there was no definition of “extension of facilities.” VEA also stated the agreement didn’t apply to federal enclaves like the NNSS due to a supremacy clause.

VEA pleaded the PUC should consider the smaller size of the cooperative in levying the fine, their good faith effort, lack of prior violations and the deterrence effect. They said the project won’t threaten the safety, efficiency or reliability of electrical service in Nevada but will bring significant reliability benefits.

The PUC countered those arguments would deprive the commission of its ability to review a project and ensure the provision of safe, reliable utility service in Nevada before construction.

“The commission was not given an opportunity to assess the Innovation Project prior to it actually being built. Had the commission found that the safety, efficiency or reliability of the electric grid was put at risk, it would have had no opportunity to address those concerns prior to construction,” the PUC stated.

In dismissing the federal enclave exemption, the commission said the question was whether they had a right to enforce an order applicable to VEA, not whether VEA had the right to build the Innovation Project, PUC staff added the DOE never claimed exclusive jurisdiction over the NNSS. But the PUC noted the project didn’t rekindle territorial disputes between VEA and NV Energy, the purpose of the 1963 agreement, however that didn’t lessen the gravity of the violation.

“VEA failed to demonstrate good faith in constructing the Innovation Project in one critical circumstances: its failure to self-report the status of the construction to the commission,” the PUC said. That notification didn’t occur until Nov. 7, 2013, almost two weeks after the project was completed and then only after direct questioning from a hearing officer. PUC staff was notified about the project by outside parties.

VEA stated a fine wasn’t warranted, particularly one near the maximum limit, adding “the facts in this docket do not support a fine of more than $1,000.” The cooperative stated they followed the mandates of the National Environmental Policy Act and obtained an environmental assessment from the U.S. Bureau of Land Management, ensuring environmental impacts had been fully addressed.

“While this is VEA’s first violation of the 1963 agreement, this one violation is egregious,” the PUC said. The commission said it sets a troubling precedent to other entities if not properly addressed.

In its conclusions, the PUC said, “there is good cause to fine VEA $95,000. However the commission recognizes VEA has made some good faith efforts in complying with the 1963 agreement and 1964 order.”

John Maurer, president of the VEA board of directors, issued a statement that the board recognizes the stated mission of the PUC. But he said the violations concerned an ambiguous 50-year-old commission order on extending facilities to the NNSS.

“VEA’s new transmission line was built to serve the reliability needs of the federal government and the sensitive mission that occurs on the NNSS. The line was built in compliance with all environmental and reliability regulations and it fulfills a requirement contained in VEA’s contract with the federal government that required timely completion of the project, which saved our members from a contractual reduction in revenue from that service,” Maurer said.

In his statement Maurer disagrees with the PUC dismissal of the federal supremacy argument at the NNSS, but agreed with the statement there was no evidence VEA tried to conceal or hide the project from the commission, but engaged in good faith and mitigating efforts.

“In the past seven years, contracts such as this, along with VEA’s innovation efforts, have saved our members nearly $15 million in averted rate increases annually and our consumers’ rates are 20 percent lower than originally projected,” Maurer said.

“At the advice of our counsel, we will not comment on any potential legal response. We simply intend at this time to examine all options and will then make a decision as to how to best respond in order to protect the interests of our members,” Maurer said.