Generation E

Can a little electricity co-op lead Nevada to the promised land of renewable energy?


In the not-too-distant future, a woman gets home from work in Bakersfield, California. As she walks in her house, she reflexively flicks on a light. Little does she know, the electricity entering the lamp over her head comes from a solar plant in Nevada’s Amargosa Valley via a high-voltage transmission line owned by Valley Electric Association (VEA), a nonprofit co-op based in Pahrump.

That’s the future Thomas H. Husted, CEO of VEA, dreams of today. It’s an ambitious plan for an organization that began as a small band of farmers trying to get electricity to their homes and irrigation lines. Yet VEA is just one example of many co-ops across the country that are adopting progressive practices in energy generation, transmission and distribution. They’re proving themselves effective agents of the predicted change in domestic power from fossil fuels to more renewable sources, such as geothermal, wind and solar.

VEA believes it has an important role to play in developing renewable energy in Nevada—a sector that proponents of economic diversification have often said holds promise for the state. And VEA is making some bold moves in other areas, too. In the past year, it won two federal service contracts—for the Nevada National Security Site (still known colloquially as the Nevada Test Site) and Creech Air Force Base—that have piqued the ire of the state’s 800-pound utility gorilla, NV Energy.

The upstart from way back

So, who is this (relatively) small player with big ambitions?

VEA’s story starts with the New Deal. During the Depression, President Franklin D. Roosevelt noticed that some 90 percent of people living in urban areas had electricity, while only 10 percent of those in rural areas did. Private utility companies—known today as investor-owned utilities—didn’t want to serve rural areas because of prohibitive infrastructure construction costs; nor did they want the federal government to own and operate rural utilities. So Roosevelt created the Rural Electrification Administration to jump-start co-ops with loans and other assistance.

VEA grew out of the Amargosa Valley Cooperative, which got a $3.9 million REA construction loan in 1962, and three other small utilities. They incorporated in 1965, and today their service area covers 6,800 square miles in southwestern Nevada, along the California border, from Sandy Valley in the southwest to Fish Lake Valley in the north.

When the group built its first transmission line, it had only about 600 meters. That’s grown to 22,000 meters today. Compared with NV Energy’s millions of customers, the number seems tiny. But the real strength of co-ops is in the name: cooperation. One of their basic tenets is collaboration with each other, and national groups facilitate this, along with providing marketing and research support. The National Rural Electric Cooperative Association counts 905 co-ops serving 18.5 million customers in the U.S. Compare that with 200 investor-owned utilities serving 104 million customers, and you start to see the differences between the two types of company: Co-ops are member-owned and operated, so they focus on good service at a good price; investor-owned utilities are high-volume outfits that focus on making profits for shareholders.

This helps explain why co-ops are leading the charge toward renewables: They can afford to eat some up-front investment costs if it means more savings for members down the road.

“It’s the right thing to do,” Husted says. “Just because we’re an energy company and we sell electricity, that does not mean we’re judged by the amount of energy we sell. At the end of the day, it’s about value.”

That’s how Husted lays out the philosophy behind VEA’s solar water heater program, which puts the energy-efficient, money-saving technology in members’ homes at wholesale cost. In other words, the utility is subsidizing the installation of equipment that reduces the amount of electricity its customers buy.

Nevertheless, co-ops are businesses, and businesses are about growth. Profits are typically put in reserves, paid out to members as dividends or used to fund programs such as the six scholarships VEA will hand out to local students this year.

In order to keep growing, VEA, like any business, has looked for opportunity. Lately, renewable-energy development presented itself as one viable path to growth. The company’s territory is large, and it has experience in high-voltage transmission, which moves electricity from generating stations to distribution networks. Ask any economist or politician what’s standing in the way of renewable development in Nevada, and they’ll say “transmission”—meaning we lack the infrastructure to move any power we might generate.

Aggravating the problem, NV Energy has met the state Legislature’s requirement for the percentage of renewable energy it has to have in its portfolio, in part by buying short-term clean-energy credits from out-of-state producers. Proponents of renewables believe this has dampened demand within the state.

Amid these circumstances, VEA looked to California. With the state’s large, urban populations of green-minded citizens, West Coast utilities are hungry for renewable energy sources; two northern counties even allow consumers to choose their own eco-friendly electricity generators. Why not build a transmission line to California to provide a way for solar and geothermal plants in Nevada to export power?

Earlier this year, VEA left NV Energy’s balancing authority and joined the California ISO, an independent system operator—meaning it switched grid-management bosses. Around the same time, it completed a 15-year, $80 million expansion of its transmission infrastructure that will allow it to accommodate renewable development.

“We have developers that have applied to interconnect to our system equivalent to the output of Hoover Dam,” Husted says. “Some 1.4 gigawatts of renewable generation is proposed within our service area, so our transmission facilities need to be able to accommodate that development.”

Going to battle with NV Energy

Meanwhile, VEA has been battling NV Energy at the Public Utilities Commission. In a pair of cases, NV Energy complained to the commission that VEA unfairly snagged two federal contracts: one for supplying power to the Nevada National Security Site, and another for handling the distribution of electricity at Creech Air Force Base. Both disputes, while complicated, boil down to jurisdiction. NV Energy claims that VEA is operating outside its service territory (geographically, the test site is situated partly in VEA’s territory and partly in NV Energy’s; Creech is in NV Energy’s territory); VEA argues—and, based on recent rulings, the commission seems to agree—that federal enclaves place these contracts outside relevant state laws and the commission’s authority. In April, the commission denied NV Energy’s petition to force VEA to comply with state law governing the test site contract. The Creech case is still pending.

Why would NV Energy worry about a small-fry like VEA having government business?

NV Energy wouldn’t comment for this story, but Farah Saeed, an energy consultant at Frost & Sullivan, says investor-owned utilities consider co-ops competitors. Although the two have different missions, she says, “there have been arguments in the past over how investor-owned utilities should be able to protect their domain.”

The local example of this isn’t over yet. As of press time, the Nevada Legislature’s Senate Commerce and Labor Committee was still considering AB 391, a bill introduced by Richard “Skip” Daly (a Democrat from Sparks) that would put “certain entities which are declared to be utilities but which provide services only to their members” under the full control and regulation of the Public Utilities Commission. Currently, VEA is exempt from full commission regulation because it is a co-op. Its board of directors sets rates, while the commission grants it certificates to serve customers and defines its service area.

Husted says VEA’s switch to the California balancing authority has to do with the co-op’s belief that utilities need to move from isolated, spotty grids to larger areas with the ability to oversee the flow of power across great distances. The Clean Energy Vision Project agrees. In its report, Western Grid 2050, the group wrote that the ideal operation of the grid requires “more regional cooperation and coordination among balancing areas and greater institutional flexibility to facilitate the best use of renewable energy resources in the West.”

Even though the battle is unfolding an hour north of the Valley, Southern Nevada environmentalists, who are interested in fostering renewable development that doesn’t damage ecosystems, will be watching how the power struggle plays out.

“As a conservationist who cares about climate change and our state’s role in reducing the amount of fossil fuel on the grid, we want to have as many options as possible,” says Scot Rutledge, executive director of Nevada Conservation League. “The key is that whatever is developed is done in as environmentally responsible a way as possible.”

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