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Summary
Nevada's two investor-owned electric utilities, Nevada Power Company and Sierra Nevada Power, administer customer energy efficiency programs that are funded by a systems benefits charge on customer bills. Nevada's recently amended renewable energy portfolio standard allows energy efficiency to be used as partial fulfillment of these requirements. Nevada utilities can earn performance incentives for successfully meeting energy efficiency goals. The levels of funding and program services has grown rapidly since Nevada re-established requirements for energy efficiency programs provided by the state's electric utilities, as well as integrated resource planning. |
| Customer Energy Efficiency Programs |
Nevada returned to a traditional regulated utility structure after it restructured its industry in the late 1990s. Nevada’s vertically integrated, investor-owned utilities are required to perform integrated resource planning and related demand-side management programs. If its 2010-2012 plan is approved by the Public Utility Commission of Nevada (PUCN), Nevada Power Company expects to save about 3.6% of its sales from efficiency measures adopted during that time. The utility companies administer the energy efficiency programs with oversight by the PUCN. The utility companies hire contractors to implement the programs. The companies propose a budget and program plan to the PUCN as part of integrated resource planning requirements. The utility companies must have their program plans and budgets approved by the PUCN prior to implementation. Sierra Nevada Power offers a limited set of natural gas efficiency programs.
According to the Energy Information Administration, Nevada utilities reported efficiency program savings of 181,426 MWh in 2007, 0.71% of total retail sales.
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The utility companies collect an energy efficiency system benefits charge through customers' electric rates that funds the programs. The companies file general rate cases every two years, at which time they request full recovery of their program costs. According to the Energy Information Administration, Nevada utilities spent $18.2 million on energy efficiency in 2007, which is equivalent to 0.73% of total utility revenues.
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| Energy Efficiency Resource Standard |
In 1997, Nevada established a renewable portfolio standard as part of its restructuring legislation. The RPS was revised in 2005 to increase the portfolio requirement to 20% by 2015 and allow the utilities to use energy efficiency programs to help meet the requirements. Energy efficiency measures qualify if they are subsidized by the electric utility and implemented or sited at a retail customer’s location after January 1, 2005.
The most recent amendments contained in Senate Bill 358, passed in 2009, raised the standard to 25% by 2025. The contribution of energy efficiency is capped at a quarter of the total standard in any particular year.
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In 2008, the Nevada Public Service Commission adopted temporary rules allowing gas utilities to propose a decoupling mechanism in a general rate case filed within one year of the approval of a set of energy efficiency programs for that utility. The rules specify a revenue per customer mechanism design, with adjustments done on a per class basis. NPSC Docket No. 07-06046; Nevada Admin. Code 704.953. Gas utilities in Nevada have the option to either implement decoupling or to utilize a performance incentive. Southwest Gas, whose DSM plan was recently approved by stipulation, is planning to ask for decoupling in a rate case to be filed soon.
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| Reward Structures for Successful Energy Efficiency Programs |
The revised regulations for IRP and DSM (Docket No. 02-5030) adopted in May 2004 include a provision that allows electric utilities to earn an extra 5% return-on-equity (ROE) for applicable, approved DSM costs (base ROE is 10.25%—meaning that utilities could earn up to 15.25% ROE). This fraction is to be determined in individual rate cases; the provision calls for applying the utility’s debt-to-equity ratio to the fraction of capitalized (rate base) DSM costs, and then applying the extra 5% ROE to that amount. This incentive amount for DSM is automatic as long as utilities follow approved plans and budgets. However, it is possible that the Public Utilities Commission could reduce this earnings amount as a result of a hindsight prudence review.
The gas division of Sierra Pacific Power (doing business as NV Energy) has an approved DSM plan and plans to apply for a performance incentive mechanism in its next rate case.
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| Energy Efficiency as a Resource |
Nevada Administrative Code §704.934 directs each regulated utility to submit a plan for conservation and load management as part of its resource plan. The plan must include, among other things, an assessment of savings attributable to technically feasible programs for conservation and load management, a list of proposed programs for reducing energy and demand, a determination of the reduction in the use of energy and the demand for energy that would result from the proposed programs, an assessment of the costs of the proposed programs and the savings in the utility’s costs produced by the proposed programs, and an assessment of the impact on the utility’s load shapes of proposed and existing programs for conservation and load management.
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Last Updated
10/19/2009
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