FERC signs off on Sierra Pacific Power merger into Nevada Power

by Barry Cassell, GenerationHub

The Federal Energy Regulatory Commission (FERC) on Nov. 26 approved the proposed merger of Nevada Power and Sierra Pacific Power, both currently subsidiaries of NV Energy, into one company, with Nevada Power being the surviving entity.

On May 3, NV Energy, Sierra Pacific Power and Nevada Power filed this application under 203 of the Federal Power Act requesting authorization for an internal corporate reorganization under which Sierra Pacific will merge into Nevada Power.

Sierra Pacific is a vertically integrated public utility that generates, transmits and distributes electric energy throughout northern Nevada. Sierra Pacific operates a transmission system in northern Nevada and owns and operates about 1,500 MW of generation. Sierra Pacific also operates as a local distribution company and provides natural gas service to customers in Reno and Sparks, Nev.

Nevada Power is a vertically integrated public utility that generates, transmits and distributes electric energy in Las Vegas and surrounding areas in southern Nevada. Nevada Power operates a transmission system in southern Nevada and owns and operates some 4,537 MW of generation.

Nevada Power, as the surviving corporation, will assume all debts, liabilities, FERC-jurisdictional contracts and assets of Sierra Pacific.

Imminent Start of ON Line Will Connect the Utility Territories

Since the 1999 merger that resulted in the affiliation of Sierra Pacific and Nevada Power, the two companies have had no direct interconnection between their regulated service territories and have operated as two separate balancing authority areas (BAAs).

In January 2006, the companies announced a plan that proposed to interconnect the Nevada Power and Sierra Pacific systems through the construction and operation of the One Nevada Transmission Line, known as the ON Line. This is a 235-mile, 500-kV transmission line from northern Nevada at the Robinson Summit Substation, south to Nevada Power’s Harry Allen substation.

The applicants stated that the ON Line originally was expected to be completed and in service by Dec. 31, 2012; however, because of certain delays, the in-service date of the ON Line is now anticipated by Dec. 31, 2013.

In its merger approval, FERC said among other things that:

·        This transaction will not have an adverse effect on rates.

·        The ON Line is not a rate issue. “Protestors argue that the Commission should consider the costs of the ON Line when considering the effect on rates of the Proposed Transaction,” the order said. “We disagree. The ON Line will be constructed and put into service regardless of whether or not the Proposed Transaction is consummated;” and

·        It accepts the applicant commitment to hold customers harmless for five years from costs related to the proposed transaction.

MidAmerican Energy Holdings, a subsidiary of Berkshire Hathaway, and NV Energy announced in May a still-pending deal for MidAmerican to take over NV Energy. MidAmerican Energy Holdings already controls PacifiCorp and the MidAmerican Energy utility in the Midwest.

Merger approval also being sought at Nevada commission

NV Energy in its Nov. 7 Form 10-Q filing talked about the merger approval process for Nevada Power (NPC) and Sierra Pacific Power (SPPC) at the Public Utilities Commission of Nevada (PUCN).

The May joint application with the PUCN requested the following:

·        Authority to modify the legal and regulatory structures of NPC and SPPC by merging SPPC into NPC, effectively transferring all of SPPC’s assets and obligations to NPC, and renaming the surviving utility NV Energy Operating Co.;

·        Authority to transfer SPPC’s certificates of public convenience and necessity (CPCN) to NPC, and to modify the transferred CPCNs and NPC’s CPCN to reflect the name of the surviving utility, NVEOC; and

·        Authority to transfer all SPPC’s electric and gas utility assets, including electric generation assets, to NPC.

The PUCN is not bound by any statutory deadlines with respect to this application. Hearings were expected to begin in February 2014 at the Nevada commission, but the two utilities are seeking to delay the proceedings to the second half of 2014, the Form 10-Q noted. 

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