On October 21, 2011, Nevada Power Company ("NPC") re-filed its application requesting approval of the Public Utilities Commission of Nevada ("PUC" or "Commission") for power purchase agreements ("PPAs") for three renewable energy projects. This re-filing is a result of the PUC's denial of NPC's initial request for approval of these PPAs in July 2011. The Commission denied NPC's initial request because the utility did not meet its burden in justifying the need for the additional renewable energy. The PUC stated in its order that based upon the evidence and testimony, Nevada Power did not adequately satisfy the legal requirements to allow the PUC to approve the three renewable energy PPAs. It was the first time since Nevada adopted its Renewable Portfolio Standard ("RPS") in 2001 that the PUC did not approve a renewable energy PPA. In late September 2011, the Commission, however, granted NPC's request for rehearing on these PPAs and issued an order requiring NPC to re-file its application for approval, along with additional justification by October 21, 2011.
In the re-filed application Nevada Power is requesting approval of the same three renewable PPAs , which are FRV Spectrum Solar (30 MW solar PV located in Clark County, Nevada), Mountain View Solar (20 MW solar PV project in Clark County, Nevada), and Dixie Meadows Geothermal Project (51 MW geothermal project in Churchill County, Nevada). The new application is similar to the original application in its explanation for requesting approval of these projects. However, NPC provides additional justification as to why the PUC should approve the PPAs, including quantifying the environmental benefits associated with each project, providing specific economic benefits for each project, and describing the minimal rate impacts associated with each project.
One of the interesting things to note in the new filing is that both FRV Spectrum and Mountain View amended their respective PPAs to lower their product rates. FRV Spectrum's product rate is now $111 per MWh, down from the original price of $121.75 per MWh, and Mountain View's product rate is now $116.05 per MWh, down from the original price of $117.50 per MWh. NPC stated that the solar companies were able to lower their product rates due to a decrease in solar panel costs. The Dixie Meadows product rate remains the same at $92 per MWh.
A few issues have not changed since the original application was filed. First, Nevada Power states that based off a revised load forecast, it does not estimate it will need any additional portfolio energy credits ("PCs") to satisfy the RPS until 2020, and collectively with Sierra Pacific Power, until 2025. It does state that this this is based off a moderately conservative load forecast and that under a more aggressive load forecast NPC may need additional PCs to comply with the RPS by 2015. Regardless, it does not appear that NPC has any immediate need for additional PCs and acknowledges in the application that it is requesting approval of these three PPAs to create an additional buffer in case other renewable projects underperform or are cancelled.
Also, as requested by the Commission, NPC includes in the application a comparison of the three renewable energy contract prices to the estimated avoided cost rate over the course of the PPAs' terms. Based upon NPC's estimates, the Dixie Meadows PPA will be the only project with a product rate lower than the avoided cost rate, but this is not projected to occur until the end of the PPAs 20-year term. As presented, FRV Spectrum and Mountain View will never be below the estimated avoided cost rate and are currently projected to be approximately $70-$75 per MWh above the avoided cost rate during the first contract year. It is nearly impossible to accurately forecast the avoided cost rate for the next 25 years; however, the current differences are the most problematic because NPC does not need any additional renewable energy or PCs.
The fact that NPC admits that it does not immediately need the PCs from these projects and that all of them have product rates well above the avoided cost rate leads to the same problem the PUC faced when it originally reviewed these projects: If the PCs are not needed, what justifies their approval especially considering their higher costs? In this re-filed application NPC does a better overall job of describing the benefits associated with these projects (i.e. environmental and economic); however, it is too soon to determine if the PUC will consider this enough in approving these PPAs, or if the Commission will find a way to approve these PPAs on a policy rationale.