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Nevada utility begs for reprieve -- Renewables mandate missed

A Nevada utility is asking state regulators to push back its timeline and exempt it from penalties for not meeting the requirements of Nevada's renewable energy standard, saying that it cannot meet the interim requirement for 5% of its energy to be generated from renewables for 2003-2004. The utility cited the failure of US Congress to extend wind's federal production tax credit and project financing difficulties as reasons for its request.

A Nevada utility, Sierra Pacific Resources, is asking state regulators to push back its timeline and exempt it from penalties for not meeting the requirements of Nevada's renewable energy standard, saying that it cannot meet the interim requirement for 5% of its energy to be generated from renewables for 2003-2004. The utility cited the failure of US Congress to extend wind's federal production tax credit and project financing difficulties as reasons for its request. Nevada's Public Utility Commission (PUC) will rule on the timeline exemption early this month.

A 2001 law calls for Sierra, which owns the only two electric utilities in Nevada -- Nevada Power and Sierra Pacific Power -- to increase its renewables supply by 2% every other year until it reaches a target of 15% of retail sales by 2013. Sierra signed its first round of six contracts in December 2002, including deals for electricity from two wind projects that have been either delayed or cancelled.

The 50 MW Ely Wind project in eastern Nevada was delayed late last year due to financing and siting difficulties. Originally located at the Nevada nuclear test site, project owner Global Renewable Energy Partners, owned by Vestas following its merger with NEG Micon, moved it to Ely and sold it to Carlson & Associates, an energy developer based in Las Vegas. Tim Carlson says the project will be delayed while he works out its financing, but he is confident it will be built in time to meet the utility's 2005-2006 minimum standard of 7% of retail sales.

The other wind project to win one of Sierra's six contracts was the 80 MW Desert Queen Limited Partnership in southern Nevada, being developed by Cielo Wind Power of Austin, Texas. Cielo's Walt Hornaday says his company and the utility could not reach an agreement over the structure of a power purchase agreement (PPA). The failure of Congress to extend the PTC, worth $0.018/kWh, finally killed the deal. He added that Cielo will continue with the project, but that a future PPA with Nevada Power is unlikely.

Below grade

Hornaday declines to say why the PTC ended the deal rather than delayed it, but he did say that Cielo is "a small company that needs a strong PPA to capitalise the project." Renewable developers across the country have had trouble financing projects when PPAs are held by utilities with financial difficulties. Sierra has suffered two huge financial setbacks in the last couple of years, including a $330 million claim against it by the failed Enron Corp for early termination of a power sales contract, a decision upheld by Federal Energy Regulatory Commission. Although Sierra's financial condition is improving, Rebecca Wagner from the PUC says, it still has a below-grade investment rating.

Sierra says in its report to the PUC that it is working with developers "who are dependent on the utilities' balance sheet to finance their projects on alternative financing structures that will satisfy lenders and get these projects underway."

Sierra released in June 2003 a solicitation for a second round of renewable projects to help the utilities meet their 2007 renewables requirement. Although bids closed in late August, contracts have yet to be awarded.

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