NV Energy wants to merge Nevada Power, Sierra Pacific Power units

Ahead of its planned takeover by MidAmerican Energy Holdings, NV Energy (NYSE: NVE) applied May 31 at the Federal Energy Regulatory Commission for the merger of its Nevada Power and Sierra Pacific Power subsidiaries into a combined company.

This would be an internal corporate reorganization under which Sierra Pacific will merge into Nevada Power, the surviving entity, which will be renamed “NV Energy Operating Co.,” doing business as “NV Energy.”

NV Energy asked that the commission grant this authorization by Dec. 1, 2013, and grant the limited waivers of certain Part 33 filing requirements to enable the reorganization to be effective on the latter of Dec. 31, 2013, or the in-service date of the One Nevada Transmission Line (currently anticipated by Dec. 31, 2013).

On May 29, MidAmerican Energy Holdings, a subsidiary of Berkshire Hathaway, and NV Energy announced that they had reached a definitive acquisition agreement whereby MidAmerican will acquire NV Energy, subject to obtaining all necessary regulatory approvals. This announced transaction does not alter or impact the requests made in this application, NV Energy said. MidAmerican and NV Energy will later make all necessary filings with the commission and other regulatory agencies for approval of the acquisition.

Sierra is a vertically integrated regulated public utility that generates, transmits and distributes electric energy to approximately 366,000 customers throughout northern Nevada. Sierra operates a transmission system in northern Nevada, and owns and operates about 1,500 MW of generation.

Nevada Power is a vertically integrated regulated public utility that generates, transmits and distributes electric energy to approximately 854,000 residential, commercial and industrial customers over 4,500 square miles in Las Vegas and surrounding areas in southern Nevada. Nevada Power operates a transmission system in the southern portion of Nevada, and owns and operates about 4,537 MW of generation.

Since 1999, Sierra and Nevada Power have had no direct interconnection between the two regulated public utility service territories, and have operated as two separate Balancing Authority Areas (BAAs). Accordingly, the companies have separately planned and operated their respective utility systems, with each company responsible for meeting its own generation resource requirements (including meeting Nevada’s Renewable Portfolio Standard).

Due to the location and availability of lower-cost renewable energy resources located in Northern or Southern Nevada, the companies have on occasion entered into related Power Purchase Agreements that were filed and approved by the federal commission and the Public Utilities Commission of Nevada (PUCN) to the extent required. These deals provided for either Sierra or Nevada Power to purchase power from a renewable energy resource that was located in the other company’s BAA in order to assist the companies in meeting Nevada’s Renewable Portfolio Standard at lower costs to retail ratepayers.

The companies noted in their related Power Purchase Agreement (PPA) filings with the federal commission that such arrangements would remain necessary only until such time as the companies could build a direct interconnection and integrate their respective transmission systems.

ON Line was the chosen means to interconnect the two systems

In January 2006, the companies announced a plan that proposed to connect the Nevada Power and Sierra systems through the construction and operation of the ON Line. ON Line (originally known as the Eastern Nevada intertie or ENti) was designed as a 235-mile, 500-kV line interconnecting Sierra’s Robinson Summit Substation (near Ely, Nev.) with Nevada Power’s Harry Allen Substation (just north of Las Vegas, Nev.).

During the same time period, Great Basin Transmission LLC was pursuing a transmission project that would extend from Idaho to Southern Nevada known as the Southwest Intertie Project (SWIP). The southern portion of the SWIP project (known as “SWIP-S”) overlapped directly with the proposed ON Line. The companies then elected to pursue the ON Line and Great Basin’s SWIP-S project as a joint development project, and in the alternative, in the event the PUCN did not approve the joint development, the NV Energy units would be permitted to proceed with the project as a self-build option.

Accordingly, Great Basin and the applicants began discussions to enter into an agreement to jointly develop the ON Line. Those discussions led to the negotiation and execution of a Transmission Use and Capacity Exchange Agreement (TUA) between Great Basin and applicants in August 2010, which sets forth the terms and conditions of the development of the ON Line project. The commission approved the TUA in November 2010.

In February 2011, Great Basin and applicants achieved “Acquisition Closing” (as such term is defined in the TUA) and began construction of the project in April 2011. Phase 1 originally was expected to be in service by Dec. 31, 2012. However, in early December 2011, the ON Line project experienced high sustained winds in the area of construction, which caused damage to the tubular guyed-V structures. As a result, construction was delayed in order to address the wind-induced vibration.

In February 2012, the owners announced at least a three-month delay in the in-service date of the ON Line project as the owners, in coordination with various contractors and consultants, worked to address the issue. Following detailed analyses, and based on recommendations from various consultants and contractors, the ON Line owners identified a means to address the wind-induced vibration issues.

In September 2012, the companies requested that the PUCN authorize continuation of the ON Line project on a revised schedule and with a revised budget. In December 2012, with the proposed wind-induced vibration mitigation measures, the PUCN authorized the companies to continue with construction. Accordingly, recommencement of the construction of the ON Line project began in January 2013, and the in-service date is now anticipated by Dec. 31, 2013. With the completion of ON Line, the companies will finally be able to operate as a single consolidated system, NV Energy said.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.