The long road to respect

The history of NV Energy Inc and its predecessor companies (collectively referred to as “the compa­ny” in this section) can be divided into these three periods (Fig 1-1):

  • The “early days,” which lasted for about six decades. The company essentially was a distribution-only business during this period. It had a few small hydro plants and diesel generators, but most of the power sold to custom­ers was purchased from others.
  • The “middle ages,” defined as that period between the company’s emergence as a verti­cally integrated utility and when the relentless Nevada population and tourism boom dictated the need for a far more robust energy provider.
  • The “modern era,” which began about five years ago, is characterized by the company’s trans­formation into a world-class utility: Generating capability already has more than doubled and there have been envi­able achievements in emissions control, use of renewable-energy resources, water con­servation, and demand-side management.

Starting a company’s history about a century after it began operating might not seem to make much sense—but it does in this case. The events of the last dozen years or so are the rea­son for the utility’s “rebirth” as NV Energy. This story starts in the mid 1990s in California, where legislators decided that the vertically integrated electric-utility model, successful for decades, was too expensive; there was a better way, so they said.

At that time, Nevada had two major utilities: Nevada Power Co in the southern part of the state and Sierra Pacific Power Co (SPPC) in the North. The latter was held by Sierra Pacific Resources (SPR). In 1997, the Nevada legislature fol­lowed California’s lead and passed a law requiring investor-owned electric utilities in the state to sell off their generation assets. The idea was to recreate distribution utilities that would buy electricity from indepen­dent producers and reduce everyone’s electric bill. Nevada Power merged with SPR in 1999 and the combined company’s generation assets were put up for sale as ordered.

However, as the new millennium dawned, the California experiment revealed significant negatives regard­ing deregulation of electric power. The Nevada legislature rescinded its 1997 law in 2001, just as the asset sale was scheduled to close. The law­makers’ spin: Nevada had relied too heavily on others and had to control its own destiny—specifically, become self sufficient regarding energy. It was yet another two years before the necessary policies were in place to allow generation additions.

While all this was happening, new residents and businesses were flock­ing to Nevada. It outpaced the other 49 states in population growth (percentage basis) for 20 of the 22 years from July 1986 to July 2008.

Perhaps the most important year in the com­pany’s history was 2003. Walter M Higgins, chair­man and CEO of SPR, was in the “hot seat.” It was his job to put the company’s generation program back on track while navigating through the perfect storm of industry challenges: low hydro availability, skyrock­eting gas prices, and mar­ket manipulation traced to deregulation initiatives.

You may not consult the Chinese fortune calendar very often, but the next time you do, note that it charac­terizes 2003 “as a turning point year for many people.” That certainly was accurate for Higgins.

The Public Utilities Com­mission of Nevada (PUCN) shifted gears in 2003, giving the utility permission to build the Harry Allen combined cycle, encour­aging the company to investigate buying existing assets, and asking SPR to identify sites for coal-fired generation. Higgins needed more seasoned industry executives to meet expectations.

He moved quickly, hiring Michael W Yackira as EVP strategy and pol­icy and Roberto R Denis as SVP energy supply. Both came from FPL Group Inc where they held top man­agement positions. The revamped executive corps had the experience to make the necessary decisions quickly and confidently. Here’s a sample of key actions taken over the last five years:

1. Snapshot of the electric power industry in 1955 provides valuable perspective

  • US population, 165.9 million—about 55% what it is today.
  • Installed capacity, 114,545 MW—less than one-eighth what it is today.
  • Electric production, 547 billion kWh—less than one-sixth what it is today.
  • Average annual residential use, 2755 kWh—about one-third what it is today.
  • Average generating-unit heat rate, 12,025 Btu/kWh.
  • Total capacity additions nation­wide, 12,025 MW. NV Energy alone added 1671 MW in 2008.
  • Natural gas was the fuel for nearly 18% of the kilowatt-hours generated, about the same as it is today.
  • 2004. The nearly half-built Moapa facility (two 2 × 1 F-class com­bined cycles) was purchased from Duke Energy Americas.
  • 2005. Planning of the 2 × 1 F-class combined cycle at the Frank A Tracy Generating Station moved forward after the PUCN approved the project.
  • 2006. A 75% ownership in the Silverhawk Power Station (a 2 × 1 F-class combined cycle) was purchased from Pinnacle West Capital Corp. . . . The 1500-MW, coal-fired Ely Energy Center was proposed. . . . The Chuck Lenzie Generating Station (formerly Moapa) began commercial opera­tion. . . . An ultra-low-emissions 7EA peaking unit began commer­cial operation at the Harry Allen Generating Station. . . . Construc­tion started on the Tracy com­bined cycle. . . . Planning began on emissions control upgrades for the two 2 × 1 combined cycles at the Edward W Clark Generat­ing Station. . . . Clark County, which today is home to the Clark, Higgins, Lenzie, Silverhawk, and Allen Stations, was designated a nonattainment area for carbon monoxide.
  • 2007. Yackira was elected presi­dent/COO of SPR in February; CEO in August with the retire­ment of Higgins. . . . Key contracts were signed to add 600 MW of fast-start, low-emissions peak­ing capacity at Clark Station. . . . Plans to build the 2 × 1 F-class combined cycle at Allen Station moved forward.
  • 2008. Joint ownership/co-de­velopment agreement for the Carson Lake project was signed with Ormat Technologies Inc, the industry’s first such part­nership between a utility and geothermal developer. . . . Big­horn Generating Station, a 2 × 1 F-class combined cycle, was pur­chased from Reliant Energy. . . . The Tracy combined cycle began commercial operation. . . . SPR was renamed NV Energy, which more accurately reflected the company’s status as the state’s premier energy provider. . . . A 50% ownership and co-develop­ment agreement for the 200-MW China Mountain wind energy project was signed with partner RES Americas Inc.
  • 2009. The coal-fired Ely Energy Center was postponed until cost and environmental uncertain­ties—such as carbon capture—become clearer. . . . A 10-yr con­tract for the output from the 2 × 1 F-class Griffith Energy Project in Kingman, Ariz, was signed to fill the void created by the Ely postponement. . . . Construction of the One Nevada Transmission Line, the 500-kV line that would link the company’s northern and southern systems for the first time and enable expanded renew­ables development, is moving through the licensing process and is expected to be in service by late 2012.

Looking ahead, Presi­dent/CEO Yackira’s mis­sion remains focused on increasing the company’s energy-efficiency and con­servation programs, which last year saved nearly 435-million kWh statewide; accelerating investments in renewable energy and related initiatives, and adding clean and efficient traditional generating plants as needed.

A mid-2009 change in the execu­tive ranks of note: SVP Energy Sup­ply Denis, the driving force behind the generation expansion program, switched chairs, becoming SVP Ener­gy Delivery. Jeffrey L Ceccarelli is the new SVP Energy Supply.

Denis brings to his new position experience in the “wires” business, plus an EE degree from Georgia Institute of Technology. Ceccarelli is a “lifer,” having joined the company as a student engineer (civil) in 1972. Most recently he was SVP service delivery and operations as well as president of Sierra Pacific Power.

The following 2008 stats help put the company in per­spective: electric revenue, $3.32 billion; peak load, 7152 MW, the lowest since 2004 (record is 7609 MW in 2007); peak generation, 5685 MW; electric custom­ers in Nevada, 1.15 million; employees, 3126; service territory, 54,500 mi2. In addition, 51% of the company’s generation came from natural gas, 24% from coal, and 9% from renewables; 16% of the power sold was purchased.

The “middle ages”

Nevada Power was strictly a distribu­tion utility before building the state’s first steam/electric unit at Clark Station in 1955. By contrast, SPPC, incorporated in 1928 following the merger of several companies, always generated some of the power it sold using hydro and diesel generators. It wasn’t until 1963 that SPPC built its first steamer. Follow the company’s development in the generation busi­ness in Fig 1-2.

2. The people behind the plant names

Harry Allen joined Southern Nevada Power Co in 1946 as commercial manager. He had numerous executive positions during his career, including VP operations and construction. Allen was elected president of Nevada Power Co in 1969 and chairman of the board in 1974. Retirement was in 1977.

Edward W Clark (1871-1946) was a highly influential Southern Nevada entrepreneur and businessman and member of the Colorado River Commission, which persuaded Congress to build Hoover Dam. Elected president of the Consolidated Power & Telephone Co in 1924; he broke up the company and formed the Southern Nevada Power Co in 1929, which was the first company to distribute electric power from the dam. SNPC became Nevada Power Co in 1961.

Walter M Higgins guided the company through troubled waters and was the primary architect of its transformation from a “mom and pop” utility to a world-class energy provider. He was chairman and president of Sierra Pacific Resources from 1993 to 1998 and again from 2000 to 2007.

Charles A Lenzie, more comfortable with the informal “Chuck,” spent 25 years with Nevada Power Co, retiring as president in 1999 after the company’s merger with Sierra Pacific Resources. The lifelong philanthropist remains active in Southern Nevada civic affairs.

Frank A Tracy joined Sierra Pacific Power Co in 1940. Two years later, he was named president and elected to the board of directors. Tracy served as president, and later as chairman of the board, until his retirement in 1962.

There were only seven utilities and 16 generating plants in the state in 1955. Nine of the plants were hydro, totaling 586 MW; seven were diesel facilities totaling 11 MW. After Clark Unit 1 began commercial operation, hydro-rich Idaho was the only state in the Lower 48 without a steam/electric plant. Sidebar 1 offers a snapshot of the US electric power industry in 1955.

When you look at Las Vegas today (see photo on the first page of the Clark Station profile), it’s difficult to imagine the virtual “nothingness” that existed in 1955. Clark County had only 82,900 residents spread out across its nearly 8000 mi2; the entire state, 220,200.

Given Las Vegas attracts more than 30-million tourists and conven­tion-goers annually, its reasonable to assume that a large percentage of subscribers have visited the city. To those readers, the photo in Fig 1-3, taken about the time construction started on Clark Unit 1, probably is startling. What you are looking at is the Hotel Flamingo to the right of Las Vegas Blvd; Flamingo Rd, run­ning perpendicular to LVB below the hotel is a dirt road.

Most of NV Energy’s generating plants are named after company presidents who served during the “middle ages” and earlier. After look­ing at the old Flamingo, it’s easy to appreciate that a few of those pro­filed in Sidebar 2—Edward W Clark and Frank A Tracy, in particular—were true pioneers in an inhospitable land.

The “early days”

This report offers considerable detail on the challenges of “starting over,” but what about those associated with “starting up”? It’s hard to imagine the difficulties overcome in this rug­ged, remote sector of the country as the last century of the second mil­lennium dawned and the idea of har­nessing electricity for lighting and mechanical work was still viewed by many with skepticism.

We probably will never know what those challenges were and have to be content thinking how we engineers of today might approach the construc­tion of powerplants and distribution systems with only hand tools and draft animals at our disposal. His­torical materials available through Nevada Power and Sierra Pacific Power are sketchy at best. Early doc­uments of interest would have been with the companies that merged to form SPPC; they cannot be located and probably no longer exist.

The industry magazine that did the best job, by far, in chronicling developments in electric power was Electrical World, which published its first issue Jan 6, 1883 as The Opera­tor and Electrical World (it evolved from a telegrapher’s paper called The Operator). A quick scan of sev­eral issues from the 1880s and 1890s offers no insights on electric-power developments between the Mississip­pi River and the Pacific Coast other than a few mentions of electric light installations in Los Angeles and San Francisco.

Sierra Pacific Power has a more interesting history than Nevada Power. One of its predecessors served Virginia City, made famous by the Comstock Lode that motivated Pres­ident Abraham Lincoln to make Nevada a state in 1864. A hundred years later the storied city would be reintroduced to Americans through the TV series Bonanza.

But “back in the day,” the prom­ise of instant wealth in Northern Nevada was a people magnet. The population of Virginia City in 1865 reportedly was 20,000. Perspective: Virginia City was home to about three-quarters of Nevada’s residents. San Francisco had three times the population and was the 15th largest US city; entire Los Angeles County had 13,318. Even Mark Twain tried his luck at mining; he failed.

Virginia City’s population peaked at 30,000 in the 1870s but the boom continued until the late 1890s. The opportunity was not lost on Thomas Alva Edison who personally designed the city’s first electric distribution system (Fig 1-4).

Mining interests bankrolled the construction of what was to become SPPC’s Farad Hydroelectric Plant—the first electric generating plant on the eastern slope of the Sierra Nevada—to supply the power nec­essary for pumping water from the deep shafts of Virginia City’s silver mines. Farad was built alongside the Truckee River in 1899 (Fig 1-5).

By contrast, Nevada Power’s ancestor, Consolidated Power & Telephone Co, began supplying elec­tricity to Las Vegans in 1906 with a small second-hand dc generator. Soon afterward the utility began buy­ing electricity from others and just distributed power.

End notes. Virgina City cele­brated its 150th anniversary in June; the city now has 1000 residents. Sierra Pacific Power transferred the ownership of the company’s small hydro plants—including Farad—to the Truckee Meadows Water Author­ity in 2002. Mining still accounts for a significant portion of NV Energy’s electric sales in Northern Nevada (19% of kilowatt-hours sold in 2008) as it did when Farad was installed. ccj