STATEMENT REGARDING SMALL BUSINESS IMPACT (NRS 233B.0608) LCB File No. R (pucn Docket No )

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1 STATEMENT REGARDING SMALL BUSINESS IMPACT (NRS 233B.0608) LCB File No. R (pucn Docket No ) 1. A description of the manner in which comment was solicited from affected small businesses, a summary of their response and an explanation of the manner in which other interested persons may obtain a copy of the summary. N/A. See Infonnational Statement submitted on November 18, 2013, Question Nos. 4, 5 and 11.1 Pursuant to NRS 233B.0608 (1), Staff of the Public Utilities Commission of Nevada ("PUCN") conducted an investigation to determine whether the proposed regulation is likely to: (a) Impose a direct and significant economic burden upon a small business; or (b) directly restrict the fonnation, operation or expansion of a small business. In a Memorandum dated September 5, 2013, Staff of the PUCN memorialized its conclusion that the proposed regulation does not impose a direct and significant economic burden upon small businesses, nor does it directly restrict the fonnation, operation or expansion of a small business. See Attachment 1 hereto. On September 30, 2013, the PUCN issued an Order adopting the findings of Staff's Memorandum of September 5, 2013 and specifically found that the proposed regulation does not impose a direct and significant economic burden upon small businesses, nor does it directly restrict the fonnation, operation or expansion of a small business. See Attachment 2 hereto. NRS 233B.0608 (2)(a) only requires an agency to consult with owners and officers of small businesses "if an agency determines pursuant to subsection 1 that a proposed regulation is likely to impose a direct and significant economic burden upon a small business or directly restrict the fonnation, operation or expansion of a small business... " (emphasis added). Given the PUCN's detennination that the proposed regulation does not impose a direct and significant economic burden upon small businesses, nor does it directly restrict the fonnation, operation or expansion of a small business, the PUCN is not statutorily mandated to make this inquiry nor do any such "affected" small businesses exist. 2. The manner in which the analysis was conducted. See Infonnational Statement submitted on November 18,2013, Question No. 11. Staff of the PUCN used a version of the Delphi method that incorporates elements of the Policy Delphi method to detennine the potential impact of a regulation on small businesses. See also Attachment 1. 1 There is numbering error in the Information Statement submitted on November 18,2013. Accordingly, the Question numbers listed here reflect the correct chronological order of the questions.

2 3. The estimated economic effect of the proposed regulation on the small businesses which it is to regulate, including, without limitation: (a) Both adverse and beneficial effects; and (b) Both direct and indirect effects. See Infonnational Statement submitted on November 18,2013, Question No.7. See also Attachment A description of the methods that the agency considered to reduce the impact of the proposed regulation on small businesses and a statement regarding whether the agency actually used any of those methods. N/A. See Infonnational Statement submitted on November 18, Question No. 11. Pursuant to NRS 233B.0608 (1), Staff of the Public Utilities Commission of Nevada ("PUCN") conducted an investigation to determine whether the proposed regulation is likely to: (a) Impose a direct and significant economic burden upon a small business; or (b) directly restrict the fonnation, operation or expansion of a small business. In a Memorandum dated September 5,2013, Staff of the PUCN memorialized its conclusion that the proposed regulation does not impose a direct and significant economic burden upon small businesses, nor does it directly restrict the fonnation, operation or expansion of a small business. See Attachment 1. On September 30,2013, the PUCN issued an Order adopting the findings of Staffs Memorandum of September 5, 2013 and specifically found that the proposed regulation does not impose a direct and significant economic burden upon small businesses, nor does it directly restrict the fonnation, operation or expansion of a small business. See Attachment 2. NRS 233B.0608 (2)(c) only requires an agency to consider methods to reduce the impact of a proposed regulation on small businesses "if an agency detennines pursuant to subsection 1 that a proposed regulation is likely to impose a direct and significant economic burden upon a small business or directly restrict the fonnation, operation or expansion ofa small business... " (emphasis added). Given the PUCN's determination that the proposed regulation does not impose a direct and significant economic burden upon small businesses, nor does it directly restrict the fonnation, operation or expansion of a small business, the PUCN is not statutorily mandated to make this inquiry nor would this infonnation regarding reduction of non-existent impacts be available. 5. The estimated cost to the agency for enforcement of the proposed regulation. See Infonnational Statement submitted on November 18,2013, Question No.8. See also Attachment 1.

3 6. If the proposed regulation provides a new fee or increases an existing fee, the total annual amount the agency expects to collect and the manner in which the money will be used. N/A See also Informational Statement submitted on November 18, 2013, Question No If the proposed regulation includes provisions which duplicate or are more stringent than federal, state or local standards regulating the same activity, an explanation of why such duplicative or more stringent provisions are necessary. See Informational Statement submitted on November 18,2013, Questions Nos. 9 and 10. See also Attachment The reasons for the conclusion of the agency regarding the impact of a regulation on small businesses. The PUCN complied with NRS 233B.0608 by making a concerted effort to determine whether the proposed regulation imposes a direct and significant economic burden upon small businesses, or directly restrict the formation, operation or expansion of a small business. The PUCN concluded that no such impacts would occur from the adoption of the proposed regulation based upon the well-reasoned investigation of its Staff, including but not limited to the fact that the electric utility is the only business directly affected by the proposed regulation. I, CRYSTAL JACKSON, Executive Director of the PUCN, certify that, to the best of my knowledge or belief, the information contained in the statement was prepared properly and is accurate. DATED this l.itl day of December, 2013.,~~~~ Executive Director PUBLIC UTILITIES COMMISSION OF NEVADA

4 ATTACHMENT 1

5 :r!. '\i -1-''''''. :~~~" '!;.\_"::.:".~... (-, t',:'i: '1:--,:' I Til l' r"' '-', l 1.,.:.,:-..."4" 'J -:- - '~-";'.. ' f'c-u' \... (\., '... _,,t flo I,,-,"..,; t-. f PUBLIC UTILITIES COMMISSION OF NEVADA ~r Ti:_ "..'t ". MEMORANDUM ~013 SEP \ 9 AM 9: OS DATE: TO: FROM: SUBJECT: September The Commission Via n J Anne-Marie Cuneo, DRO~V Tammy Cordova, StaffCounsellJt/~ Louise Uttinger, Assistant Staff counsetp/. fl, Small Business Impact Report Agenda 21-13; Item No. 5~ ; Docket No ; Rulemaking to amend NAC to require that an application filed for lost sales compensation pursuant to NRS be required to present evidence, as part of the application, regarding the electric utility's achieved rate of return. I. Summary: On March 27, 2013, the Public Utilities Commission of Nevada ("Commission") voted to open a rulemaking to amend Nevada Administrative Code (''NAC'') to require that an application filed for lost sales include information regarding the electric utility's achieved rate of return. This matter was designated as Commission Docket No On May 7, 2013, the Commissioner and Presiding Officer issued a Notice of Rulemaking and Notice of Request for Comments and Notice of Workshop set for June 27, On August 7, 2013, the Commissioner and Presiding Officer issued a Procedural Order that directed the Commission's Regulatory Operations Staff ("Staff') to conduct an investigation pursuant to Nevada Revised Statute (''NRS'') 233B.0608(1) regarding whether the proposed regulations, attached as Attachment 1 to that Procedural Order, are likely to: a. Impose a direct and significant economic burden upon a small business; or b. Directly restrict the formation, operation or expansion of a small business. The Order directed Staff to conduct an investigation into whether the proposed regulations are likely to affect small businesses as contemplated in NRS 233B.0608(1) and to present a report of the results of this investigation, along with a statement identifying the methodology used, in determining the impact on small business. Staff was further directed to place this report on an 1

6 agenda for Commission consideration not later than the last open meeting of the Commission in September NRS 233B.0608 (1) requires an agency to determine whether a proposed regulation is likely to: (a) impose a direct and significant economic burden upon small businesses; or (b) directly restrict the formation, operation or expansion of small business. A small business is defined in NRS 233B.0382 as a business conducted for profit which employs fewer than 150 full-time or part-time employees. NRS 233B.0608 (1) further requires that the assessment must be made prior to conducting a workshop regarding the proposed regulation. NRS 233B.0608 (3) requires that an agency considering a proposed regulation "shall prepare a statement identifying the methods used by the agency in determining the impact of a proposed regulation on a small business." Three Staff Financial Analysts, who were involved in the rulemaking in this Docket and who were most knowledgeable about the proposed regulations, and one Staff Engineer, participated in this analysis. This briefing memo constitutes the Staff Report regarding the Small Business Impact of the proposed regulations. D. Investigation and Analysis: In accordance with NRS 233B.0608 (3), Staffused a version of the Delphi method that incorporates elements of the Policy Delphi method to determine the potential impact of a regulation on small businesses. The Delphi method is a systematic interactive forecasting method based on independent inputs of selected experts. It recognizes the value of expert opinion, experience and intuition and allows the use of limited information when full scientific knowledge is lacking. In this instance, the participants were members of Regulatory Operations Staff, three of whom were involved in the rulemaking and who were most familiar with the subject matter of the rulemaking. Each participant in the exercise used his background and expertise to reflect upon and analyze the impact of the regulations on small businesses. Following written responses the Delphi participants engaged in a discussion and critique of those responses, arriving at a consensus position. The participants noted that: 2

7 Immediate Adverse Effects: The proposed regulation will not have an immediate adverse effect on the utility. The additional information will be included in the annual deferred energy accounting adjustment filing. Any lost revenue adjustments and accompanying proposed rate reductions will be filed annually, and it is anticipated that any credit rates to return lost revenues will be effective on October Ist of the following year. l Since the utility is the only business directly affected by the regulation, small businesses will not be adversely affected. The proposed regulation puts limits on certain amounts the utility may recover from its customers, therefore there are no immediate adverse effects of the regulation on the public generally. Because the proposed regulation puts limits on certain amounts the utility may recover from its customers, some of whom are small businesses, the proposed regulation is not likely to impose a direct and significant economic burden or directly restrict the formation, operation or expansion of a small business. Immediate Beneficial Effects: There are no immediate beneficial effects of the regulation on the utility. The proposed regulation imposes additional filing requirements and potential lost revenues adjustments if the utility achieves earnings in excess of the rate of return authorized by the Commission in the utility's last general rate case. The proposed regulations also serve to increase the administrative and regulatory oversight and can only reduce the utility's revenues and net income. The proposed regulation will not provide an immediate beneficial effect on other businesses. Any adjustments and accompanying proposed rate reductions will be filed annually, and it is anticipated any credit rates to return lost revenues will be on October 1st of the following year. (It is Staff's position that the Commission has the statutory basis to require adjustment to the recorded lost revenues and establish credit rates under NRS S(3)(b) during the pendency of the proposed regulations.) It is Staff's position that the Commission has the statutory basis under NRS (3){b) to require adjustment to the recorded lost revenues and establish credit rates during the pendency of the proposed regulations. 3

8 The proposed regulation will not provide an immediate beneficial effect on the public generally. Any adjustments and accompanying proposed rate reductions will be filed annually, and it is anticipated any credit rates to return lost revenues will be effective on October 1st of the following year, with the earliest first potential such adjustment under the proposed regulation occurring on October 1, Long Term Adverse Effects: The proposed regulation will have a long-term adverse effect on the utility in three areas. First, there will be additional recordkeeping and regulatory overhead in the internal administration of the regulation. The utility will need to provide additional information in its annual deferred energy accounting adjustment filings and propose ratemaking treatment for the lost revenue adjustment if the utility is achieving earnings in excess of the rate of return authorized by the Commission in the utility's most recent generate rate case. There may be additiona11itigation during the filings with respect to the calculation of the proposed lost revenue adjustment. There will be additional accounting entries, adjustments and monitoring if a credit rate is necessary to be developed to return lost revenues as a result of the proposed regulation. The cost of these items may be absorbed by the utility as part of its ongoing regulatory and lost revenues processes and should not directly impact ratepayers. Second, the utility will be required to adjust previously recorded revenues, and income, to comply with the proposed regulations if it is achieving earnings in excess of the rate of return authorized by the Commission in the utility's most recent general rate case. Third, if the utility continues to achieve earnings in excess of the rate of return authorized by the Commission in the utility's most recent general rate case, or be on the borderline, there could be a rate see-saw effect from the implementation of the regulations where in one year, there is a credit adjustment, but none in the following year. The proposed regulation has no long-term adverse effects on other businesses. However, all, businesses, including small businesses, may experience some rate fluctuation as it relates to the lost revenues component of the energy efficiency and conservation program rates. Since the regulation puts limits on certain amounts the utility may recover from its customers, there are no long-term adverse effects of the proposed regulation on the public generally. 4

9 The regulation puts limits on certain amounts the utility may recover from its customers, some of whom are small businesses; therefore, the proposed regulation is not likely to impose a direct and significant economic burden or directly restricts the formation, operation or expansion of a small business. The proposed regulation does not have any long-term direct and significant economic burden on a small business. Long-Term Beneficial Effects: Staff did not identify specific long-term beneficial effects of the proposed regulation on the utility. However, the regulation may provide some limited mitigation to potential adverse public sentiment when the utility is achieving earnings in excess of the rate of return authorized by the Commission in the utility's most recent general rate case. With respect to other businesses, the proposed regulation will serve as a check valve as it relates to lost revenues when the utility is experiencing an earned rate of return in excess of that authorized by the Commission in the utility's most recent general rate case. Since the regulation puts limits on certain amounts the utility may recover from its customers, such limits reflect a long-term beneficial effect of the regulation on the public generally. Cost to the Commission to enforce or administer the proposed regulation. including start-up and ongoing costs. Start-up costs include developing the regulation and conducting workshops and hearings. Some of these costs, such as publication costs and court reporter costs, are incremental in nature. Ongoing costs include review by the Commission and Commission Staff of the additional information and calculations that must be made and filed in annual deferred energy accounting applications. The Commission may experience an increase in Staff time to review and evaluate the information filed as required by the proposed regulation. The Commission may also experience an increase in the time required to litigate the deferred energy accounting adjustment filings based upon the additional information and any potential proposed rate adjustment. These increases, if any, may be absorbed by the existing personnel, processes and budgets in place. 5

10 As a result of the investigation, Staffhas concluded that the proposed regulations are not likely to: (a) impose a direct and significant economic burden upon small business; or (b) directly restrict the formation, operation, or expansion of small business. Therefore, a small business impact statement pursuant to NRS 233B.0608 (2) is not required. III. Notice and Subsequent Action: On August 7, 2013, the Presiding Officer issued a Procedural Order, attaching the proposed regulations. This Procedural Order directed the Regulatory Operations Staff ("Staff") to conduct an investigation pursuant to NRS 233B.0608(1) to determine whether the proposed regulations were likely to a) impose a direct and significant economic burden upon a small business; or (b) directly restrict the formation, operation or expansion of a small business. IV. Conclusion: Staff recommends that, in accordance with NRS 233B.0608(1), the Commission find that the proposed regulations are not likely to impose a direct or significant economic burden on a small business, or to restrict the format~on, operation or expansion of a small business. Staff further recommends that, pursuant to NRS 233B.0608 (3), the Commission state that the Delphi method was used in the determination of the impact of the proposed regulations on small business. 6

11 ATTACHMENT 2

12 BEFORE THE PUBLIC UTILITIES COMMISSION OF NEVADA Rulemaking to amend NAC to require that ) an application filed for lost sales compensation ) pursuant to NRS be required to present ) Docket No evidence, as part of the application, regarding the ) electric utility's achieved rate of return. ) ) PRESENT: Chairman Alaina Burtenshaw Commissioner Rebecca D. Wagner Commissioner David Noble Assistant Commission Secretary Breanne Potter At a general session of the Public Utilities Commission of Nevada, held at its offices on September 25, ORDER The Public Utilities Commission of Nevada ("Commission") makes the following findings and conclusions: I. INTRODUCTION The Commission opened' a ~lemaking to amend Nevada Administrative Code ("NAC") to require that an application filed for lost sales compensation pursuant to Nevada Revised Statutes (''NRS'') be required to present evidence, as part of the application, regarding the electric utility's achieved rate of return. II.' SUMMARY The proposed regulation in Docket No does not impose a direct and significant economic burden upon small businesses, nor does it directly restrict the formation, operation, or expansion of a small business, and therefore a small busjness impact statement pursuant to NRS 233B.0608(2) is not required. ' III. PROCEDURAL HISTORY On March 27,2013, the Commission voted to open a rulemaking to amend NAC to require that an application filed for lost sales include information regarding the electric utility's achieved rate of return. This matter was designated Docket No The rulemaking is conducted by the Commission pursuant to NRS and NAC Chapters 233B, 703 and 704, including, but not limited to, NRS On May 7, 2013, the Commission issued a Notice of Rulemaking and Notice of Request for

13 Docket No Page 2 Comments and Proposed Language and Notice of Workshop. On June 6, 2013, the Attorney General's Bureau of Consumer Protection ("BCP"), Caesars Entertainment Operating Company, Inc. ("Caesars"), Nevada Power Company d/b/a NV Energy and Sierra Pacific Power Company d/b/a NV Energy (collectively, "NV Energy"), and Regulatory Operations Staff ("Staff') filed comments. On June 20,2013, BCP, NV Energy, and Staff filed reply comments. On June 27,2013, the Commission held a workshop. BCP, Caesars, NV Energy, and Staff made appearances. On July 31, 2013, a copy of the proposed regulation was mailed to the Legislative Counsel Bureau ("LCB") for review and approval pursuant to NRS 233B.063. On August 7, 2013, the Presiding Officer issued a Procedural Order with the proposed regulation attached. Staff was directed to conduct an investigation pursuant to NRS 233B.0608 to determine whether the proposed regulation issued by the Presiding Officer is likely to: (a) impose a direct and significant economic burden upon a small business; or (b) directly restrict the formation, operation or expansion of a small business. On September 12,2013, the proposed regulation (LeB File No. ROS8-l3) was returned to the Commission by LCB in revised form. IV. SMALL BUSINESS IMPACT STATEMENT Party Position Staff 1. Staff conducted a Delphi Method exercise to determine the impact of these proposed regulations on small businesses. The Delphi Method is a systematic, interactive, forecasting method based on independent inputs of selected experts. In this instance, the participants were members of Staff. Each participant in the exercise used his background and expertise to reflect upon and analyze the impact of the proposed regulations on small businesses. 2. Staff states the proposed regulation will not have an immediate adverse effect on the utility. The additional information will be included in the annual deferred energy accounting adjustment filing. Any lost revenue adjustments and accompanying proposed rate reductions will

14 Docket No Page 3 be filed annually, and it is anticipated that any credit rates to return lost revenues will be effective on October 1 of the following year. l Since the utility is the only business directly affected by the regulation, small businesses will not be adversely affected. The proposed regulation puts limits on certain amounts the utility may recover from its customers; therefore there are no immediate adverse effects of the regulation on the public. Because the proposed regulation puts limits on certain amounts the utility may recover from its customers, some of whom are small businesses, the proposed regulation is not likely to impose a direct and significant economic burden or directly restrict the fonnation, operation, or expansion of a small business. 3. Staff states that there are no immediate beneficial effects of the regulation on the utility. The proposed regulation imposes additional filing requirements and potential lost revenues adjustments if the utility achieves earnings in excess of the rate of return authorized by the Commission in the utility's last general rate case. The proposed regulations also serve to increase the administrative and regulatory oversight and can only reduce the utility's revenues and net income. The proposed regulation will not provide an immediate beneficial effect on other businesses. Any adjustments and accompanying proposed rate reductions will be filed annually, and it is anticipated any credit rates to return lost revenues will be on October 1 if the following year. The proposed regulation will not provide an immediate beneficial effect on the public generally. Any adjustments and accompanying proposed rate reductions will be filed annually, and it is anticipated any credit rates to return lost revenues will be on October 1 Of the following year, with the earliest potential adjustment occurring on October 1,2014. I It is Staffs position that the Commission has die statutory basis under NRS (3)(b) to require adjustment to the recorded lost revenues and establish credit rates during the pendency of the proposed regulations.

15 Docket No Page 4 4. Staff states the proposed regulation will have a long-term adverse effect on the utility in three areas. First, there will be additional recordkeeping and regulatory overhead in the internal administration of the regulation. Second, the utility will be required to adjust previously recorded revenues, and income, to comply with the proposed regulation if the utility is achieving earnings in excess of the authorized rate of return. Third, if the utility continues to achieve earnings in excess of the authorized rate of return, there could be a rate see-saw effect from the implementation of the regulations where in one year, there is a credit adjustment, but none the following year. The proposed regulation has no long term effect on other businesses. However, all businesses, including small businesses, may experience some rate fluctuation as it relates to the lost revenues component of the energy efficiency and conservation program rates. Since the regulation puts limits on certain amounts the utility may recover from its customers, there are no long-term adverse effects of the regulation on the public. Since the regulation puts limits on certain amounts the' utility may recover from its customers, there are no long-term adverse effects of the regulation on the formation, operation, or expansion of small businesses. 5. Staff states that it did not identify specific long-term beneficial effects of the proposed regulation on the utility. However, the proposed regulation may provide some limited mitigation to the potential adverse public sentiment when the utility is achieving in excess of its authorized rate of return. With respect to other businesses, the regulation will serve as a check valve when the utility is achieving in excess of its authorized rate of return. Since the regulation puts limits on certain amounts the utility may recover from its customers, such limits are a longterm beneficial effect of the regulation on the public. 6. Staff states there are some ongoing costs to the Commission to enforce or administer the regulation. Start-up costs include developing the regulation and conducting

16 DocketNo Page 5 workshops and hearings. Ongoing costs include review by the Commission and Commission Staff of the additional information and calculations that must be made per the regulation. The Commission may experience an increase in Staff time to review and evaluate the information filed as required by the proposed regulation. These increases, if any, may be absorbed by existing personnel and budgets. 7. Based on the foregoing, Staff recommends that the Commission find that the proposed regulation in Docket No will not impose a direct and significant economic burden on small businesses or directly restrict the formation, operation or expansion of a small business. Commission Discussion and Findings 8. At a utility agenda meeting held on September 25, 2013, the Commission voted to accept Staff's recommendation. 9. The Commission finds that the proposed regulation does not impose a direct or significant economic burden upon small businesses, nor does it directly restrict the formation, operation, or expansion of a small business, and therefore a small business impact statement pursuant to NRS 233B.0608(2) is not required. 10. The Commission concludes that the provisions ofnrs 233B.0608 have been met. THEREFORE, it is ORDERED that: 1. The proposed regulation in Docket No does not impose a direct and significant economic burden upon small businesses, nor does it directly restrict the formation, operation, or expansion of a small business. II II

17 Docket No Page 6 2. The Commission may correct any errors that may have occurred in the drafting or issuance of this Order without further proceedings. By the Commission, Dated: Carson City, Nevada '-31'13 BREANNE POTTER, Assistant Commission Secretary On behalf of the Commissioners (SEAL)