Thursday, January 29, 2004
Copyright © Las Vegas Mercury

Power failure

One thing Nevada Power's proposed rate hike won't cover: aging equipment

By Larry Wills

As Nevada Power lobbies to tap ratepayers once again, critics worry that the company is ignoring its aging generators, some of which are approaching 40 years of service, while others are breaking air quality rules.

"The whole thing is held together with a Band-Aid," contends Bob Hall of the Nevada Environmental Coalition, a persistent critic of the company.

And there's little in the $142 million rate hike proposal to upgrade Nevada Power's generating sites that have been neglected in recent years. The company wants the money to boost its profit rate to 10 percent a year, which is supported by its shareholders. If approved, residents will be paying 23 percent more for electricity than they did three years ago.

State consumer advocate Tim Hay says little money is going into maintenance. "Not much is in there at all," he says. The Mohave plant near Laughlin, he says, is particularly vulnerable. "It's pretty clear that it's nearing the end of its useful life," he says. "It would require a substantial retrofit. In some of the older plants, the heat rates are not particularly good compared to more contemporary plants."

Hay says the neglect started in 1999 when the company was gearing up for deregulation. Under that plan, generating facilities were to be sold off and the company had little interest in pouring money into equipment. "When that was on the table, maintenance expenditures declined," he says. "Those expenditures were barebones."

Two years later, the industry received a shock amid wide swings in power costs that provoked public outrage. Gov. Kenny Guinn then stopped the move to deregulate in its tracks as Nevada Power grappled with soaring power costs. Since then, as power rates continued to climb, Nevadans passed an initiative approving takeover of the company by the Southern Nevada Water Authority. The company has resisted the $3.1 billion offer, insisting it is not for sale, and since then, the authority has not pushed the issue.

But the proposed takeover, which has been delayed for more than a year, could be soured by the sad condition of the generating facilities. "The plants are not particularly valuable," Hay says.

Worse, Hall charges the plants have been out of compliance with federal standards for years, and bringing them up to Environmental Protection Agency standards may be impossible.

Hall has filed a battery of suits challenging plans that he insists violate federal clean air rules. Three of the company's plants were targeted in what Hall describes as a deliberate effort to evade the law. At Nevada Power's Clark Station on Boulder Highway, for example, he alleged in one lawsuit that EPA standards were skirted.

"The county has at all times failed and refused to subject Nevada Power's Clark Station to the public notice process that is required," he contends. "The magnitude of emissions from this source of air pollution required public involvement at the outset of the permitting process." He also contends in the complaint that Clark County "used the much less stringent local rules in a highly successful effort to evade the federal laws they were paid by the EPA to enforce."

Hall's lawsuits have won 9th U.S. Circuit Court of Appeals rulings, tossing out Clark County's standards and placing future power plants in jeopardy. What that means for future generation in Southern Nevada is not clear, since some plants haven't installed modern pollution control devices. "They haven't put controls on," Hall says. "There's no incentive. They don't have the money."

Even recently built plants are out of compliance, Hall says. "We're talking shutting down the newer plants and replacing them," Hall says.

Dan Geary, representing the National Environmental Trust, says the company had no interest in upgrading plants that had a limited life. "There was no sense to meet standards if they were going to close it soon. A lot of the technology is out of date. Now, my guess is, there will have to be a lot of work."

J.C. Davis, spokesman for the water authority, says his agency has no information on the condition of the plants since Nevada Power has not turned over the documents. Although Nevada Power officials were not available for comment, one state legislator says the problem is overblown.

Assemblyman Tom Collins, D-North Las Vegas, and a former contract worker for Nevada Power, says the company may have deferred maintenance several years ago when it merged with Sierra Pacific, but he says that is not the case now. "They've been maintained pretty well. They've made investments in the plants and there's more reliability."

Collins says it's in the company's interest to maintain its generators, since local power is cheaper than power purchased elsewhere. "I don't see them letting those plants be neglected."

But upgrading plants that violate EPA rules may be another matter. The aging Laughlin plant was built before the pollution rules came in and the Navajo plant at Page., Ariz., may need expensive upgrades running into the hundreds of millions of dollars.

Collins believes the complexity of the issue may preclude any takeover by the water authority. "I doubt the possibility of a takeover. Nevada Power is on the mend," he says.
State consumer advocate Tim Hay, right, says little of Nevada Power's proposed rate increase is slated to go into maintenance.