Monthly Archives: October 2015

Nevada PERS gets legislative fix toward financial solvency

The health of the Nevada Public Employees Retirement System (PERS) has been the subject of debate for some time. At issue is the financial security based on employee contributions and the investment of those funds.

But crucial changes made during the 2015 legislative session, combined with a diverse investment strategy, may have the fund on the right track toward solvency.

Much of recent debate comes from a $12.5 billion unfunded liability. The state has only 71 cents of every dollar it has promised to current and retired employees.

The fund has averaged a 9.8 percent return on investments over the past 30 years but has encountered some significant setbacks, including a 16 percent loss in 2009 because of the recession.

One issue creating the deficit is that life expectancy has increased. Since the 1900s that age has nearly doubled. In 1973, around the time most of the baby boomers were entering the workforce, the average age was 66. In 2012, when boomers were reaching retirement, their life expectancy increased by 10 years to age 76. That means the pension plans had to make payments for longer periods of time.

To counter the effects of life expectancy, many states, including Nevada, have had to adjust the amount of contributions made by employees and employers, as well as the compensation rates and age in which an employee is eligible to draw full benefits.

During the recent 2015 legislative session, several bills were introduced to help decrease the $12.5 billion deficit. One of the most influential was Senate Bill 406, introduced by Sen. Michael Roberson, R-Las Vegas, that goes into effect for employees hired after July 1. This bill established a set minimum retirement eligibility age of 55 with 30 years of service, and raised the number of years of service to 33.5 to be eligible to retire at any age. In addition, an employee can no longer purchase retirement time to be used in the calculation of years of service.

The calculated accrual rate was also reduced from 2.5 percent to 2.25 percent for every year of service. And the amount of compensation used to determine the retirement benefit, which is calculated by multiplying the members’ 36 consecutive months of highest compensation, has been capped at $200,000.

“These changes, along with some changes made to the beneficiaries, are designed to reduce the overall payout of retirement money, which combined with increased contributions and investments are designed to make the system fully funded in 22 years if projections hold,” said Stephen Edmundson, Nevada PERS investment officer.

But what about the investments?

A new study of equity holdings of self-managed state public pension funds finds that they not only have a bias toward in-state companies but in particular toward those with political connections.

What’s more, these investments aren’t winners; this bias toward in-state politically connected firms costs the typical state pension fund about $225 million in annual decline in fund performance, according to estimates in the study, which is slated to be published in an upcoming Journal of Financial Economics.

Fortunately, Nevada’s pension fund does not operate in the same manner.

“Our agency does not have a mandate to invest in the state of Nevada. Our investment decisions are made based on the economic benefits to our members. However, within our portfolios there are a number of traded companies that have a strong presence in Nevada,” Edmundson said.

Among those are Station Casinos, Caesars Entertainment, Tropicana Las Vegas, Hilton, Amazon and Allied Barton.

According to the annual report issued for the fiscal year ending June 30, 2014, the net position of the fund (total assets less total liabilities) stood at $33.58 billion, an increase of $4.7 billion over the previous fiscal year.

The investment income for that year was $5 billion. This was accomplished through a diversified investment portfolio that is designed to control risk and maximize return under a variety of economic conditions.

The portfolio is made up of:

• Cash equivalents, 3 percent

• Domestic equity, 43.5 percent

• Domestic fixed income, 28.1 percent

• Private markets, 7.1 percent

• International equity, 18.3 percent

A spreadsheet sent to the Las Vegas Business Press showing investments as of June 30 indicates that the total market value of all investments has increased to $34.38 billion, a 4 percent growth. And while the amount of shares of international equity occupies only 6 percent of the total portfolio, their value has increased to 27 percent of all investments.

But despite the moderate one-year growth as the U.S. and the world emerge from the recession, critics contend Nevada’s predicted 8 percent average annual return on investment over time for its pension fund is overly optimistic. Falling short of that mark would cause the unfunded liability to grow and could increase costs for employers and employees while leaving less money for other government functions.

There are an estimated 100,000 members in more than 100 state and local governments paying into the system annually. PERS members do not pay into the federal Social Security program and do not receive Social Security benefits when they retire. Each employer and employee contribute a total of 28 percent (up from the 26 percent before the 2015 legislative session) of the employee’s salary to the fund each year. The cost is supposed to be split evenly, but many local governments have chosen to pay a larger share rather than give employees raises. Those payments are parlayed into an investment program.


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New regulations to affect commercial air conditioning


When U.S. environmental experts sit down with their international counterparts Nov. 1-3 in Montreal, near the top of the agenda will be reducing the effects of gases used in air conditioning.

That’s a potentially chilling topic in places — such as Las Vegas — that depend on air conditioning to maintain a climate that’s conducive to partying and gaming and just living.

But experts say there is no cause for alarm. Change is coming, they said, but it will look like the gradual conversion to digital televisions. No sudden changeover requiring capital investment will be necessary. New chemistry and the normal replacement of equipment should solve the problem.

On Oct. 15, the White House announced new administrative measures and private sector pledges to phase down the use of hydrofluorocarbons (HFCs), the refrigerant used in air conditioners, by the year 2025.

HFCs are a major source of greenhouse gases that deplete the ozone layer and have a global warming potential (GWP), that is greater than carbon dioxide.

The United States, European Union, China, Brazil, India and other countries are now working to amend the U.N. ozone treaty to phase out the production and use of HFCs by the year 2040.

Among the private sector commitments, Ingersoll-Rand, which manufactures Trane air conditioners, said it would reduce refrigerant-related emissions from its products by 50 percent and operations emissions by 35 percent by 2020.

How is this being accomplished, and what does it mean for businesses and residents that rely on air conditioning during the hot summer months?

According to Scott Tew, executive director of the Ingersoll Rand Center for Energy Efficiency & Sustainability, the next generation of refrigerants are typically based on HFO (hydrofluoro olefin) and have 300 times less atmospheric lifetime and impact on global warming than the current HFC refrigerants, making them more climate-friendly.

“In addition to incorporating next-generation, lower global warming potential refrigerants throughout the Ingersoll Rand HVAC and refrigeration portfolio, new technologies are being introduced that reduce the amount of refrigerant required, reduce leaks and increase product efficiencies. The combination of next-generation refrigerants and new technologies reduces the GHG of the products in aggregate making them exciting, viable long-term solutions,” said Tew.

HFO-1234yf is a refrigerant that DuPont and Honeywell developed and manufacturing to meet a European Union directive to phase out refrigerants with greater than 150 global warming potential (GWP) in air-conditioning applications for new cars.

DuPont is marketing a product based on HFO-1234yf under the name Opteon XP10 throughout Europe. In addition to the reduction of GWP, HFO-based refrigerants are nontoxic and nonflammable, a distinct advantage over other alternative refrigerants like ammonia and pentane that have been used in the past.

According to Diane Picho, global business manager for DuPont Refrigerants, the new HFO-based refrigerants are a close match in performance properties to the HFC products and is very compatible with existing HFC-134a systems technology. “The new Opteon XP10 would provide an efficient transition to those types of equipment that are currently based on the 134a technology,” said Picho.

Based on successful results in Europe, DuPont has plans to begin incorporating an Opteon product in the U.S. and is working with manufacturers such as Trane to develop new refrigeration systems of the future.

Today, air conditioning units in the U.S. use HFC products such as R-123 and R-22. The further production of R-22 equipment ended in 2010 and the production of the R-22 refrigerant is scheduled to end in 2020 along with the production of R-123 equipment. Refrigerant R-123 production is scheduled to end in 2030.

Similar to the transition from analogue to digital TV and incandescent to CFL and LED lighting, it is expected that most homeowners will make a seamless transition to saving energy and saving the planet from greenhouse gases. This assumption is based upon the life expectancy of most air-conditioning units of between 15 and 25 years, along with the development of both the new HFO refrigerants and more efficient A/C systems that are expected to become available in the next five years.


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High wire act


An Ampjack America crew works on raising the height of a power transmission tower without a crane and without disrupting service. (Courtesy, Ampjack America)

Imagine working on a steel tower, 75 to 100 feet in the air, with only your skill and a safety harness protecting you from falling. If that doesn’t sound dangerous enough, imagine up to 500,000 volts of electricity pulsing through wires only a few feet from your body.

That is the environment Ampjack America workers face each day in the field.

Ampjact America is the U.S. subsidiary of a Canadian company with its U.S. headquarters in the Howard Hughes Center on Flamingo Road. Recently, the company received a $1.3 million contract to raise the height of 15 high-voltage power line towers in North Dakota. This is the first of four contracts that will include an additional 20 towers that distribute power into South Dakota. The company is also working on engineering designs for four additional projects that will raise the heights of 45 to 50 towers in the U.S.

Ampjact is the only company with patented tower-jacking technology that allows a crew to unbolt the top section of a high voltage transmission tower — with the live transmission lines still attached — and raise that section an additional 15 feet.

It’s a tough task against thousands of pounds of downward pressure. Once the top section is raised, the crew will install a new 15-foot permanent support section onto the tower. This type of work used to be performed with a crane, but that required a larger construction footprint in what is often a very narrow or environmentally sensitive area. It also meant cutting power to that section of the line during the course of the work.

The design of this tower-jacking equipment took several years to perfect, according to Luke Chaput, president of Ampjack. “It took a lot of R&D (research and development), experimenting with various designs, and a few setbacks along the way,” said Chaput.

When it came time to expand the service to the U.S., “Las Vegas was the logical choice,” explained Chaput. “The corporate tax structure offered by the State of Nevada along with the amount of direct flights to and from McCarran Airport makes Las Vegas a great place to do business.”

While the Las Vegas office is small, the company does employ, on a contract basis, between 10 and 20 highly skilled linemen who travel to job sites under the project management of Ampjack. All of the money for the U. S. contracts and the payroll passes through a bank in Las Vegas.

The reason that the towers need to be raised is to comply with regulations governing the distance between the ground or other objects and the lowest point of the transmission line between the poles. With the increasing need for additional power, many power companies are having to increase the amount of power running through the power lines. That increase in power causes an increase in the amount of heat produced which in turn causes the line to stretch and sag lower than is allowed.

In addition to raising towers, Ampjack also engineers and designs new towers and specializes in tower restoration and failure mitigation. Its website is


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What is next for rooftop solar advocates?

While other states have been debating the advantages and disadvantages of net metering for several years, Nevada has been on a fast track toward some sort of resolution since SB374 was signed by the Gov. Brian Sandoval on June 5. Under that bill, the State of Nevada Public Utilities Commission was given the directive to find an alternative to net metering by Dec. 31.

So it should not have been a surprise when a chartered bus carrying employees of Solar City showed up at the PUCN’s annual “General Consumer Session” on Sept. 22, wearing bright yellow T-shirts emblazoned with “We Are Solar” across the front. During the two two-hour sessions, more than 50 very passionate people stepped up to the microphone to express their concerns. And even though the session was open to comments about all of the utilities regulated by the PUCN (electric, gas, water, wastewater, and telecommunications), nearly all of the comments were about rooftop solar systems.

Yet, even though the PUCN has been directed to find an alternative to net metering, most of the speakers were residents already in the program or waiting for their installation to be completed and requesting that the current net metering program remain intact. Many of the other speakers were employees of solar installation companies pleading for their jobs and livelihood.

What is next?

The final decision on the rooftop solar issue will be made by the PUCN’s commissioners, and can only be based on evidence that is presented by the official parties — called intervenors — in the case. That means the public’s pleas and comments, which were duly recorded and will reside in some file in Carson City, will in all likelihood not have much impact on the outcome.

On July 31, NV Energy filed an application for approval of a cost-of-service study and Net Energy Metering tariffs. And on August 4, the Stat of Nevada Attorney General’s Bureau of Consumer Protection filed a Notice of Intent to Intervene, meaning that they want to be a voice for the consumer on the setting of the new rooftop solar standard.

Since those two filings, 11 other petitions to intervene have been filed by groups such as the Sierra Club, Alliance for Solar Choice, Nevadans for Clean Affordable Reliable Energy; and some individual companies such as Bombard Renewable Energy.

However, there is another party that has a say in all cases before the PUCN. That party is the Regulatory Operations Staff of the PUCN. This staff operates separately from the commissioners and includes the director of regulatory operations, staff counsel, resource and market analysts, financial analysts, engineers, and consumer complaint resolution specialists. And, it is under the staff’s recommendation to the commission that all of those pleas of passion by the general public can be taken into consideration.

All “prepared direct testimony” by the staff and the intervenors must be filed with the commission by 2 p.m. on Oct. 27 p.m.

By Nov. 10, at 2:00 pm, NV Energy’s subsidiaries of Nevada Power and Sierra Pacific Power Co. must file their “prepared rebuttal testimony.”

The formal hearing on the matter before PUCN commission will begin on Nov. 18 at 10 a.m. and time has been allotted for continuation through Nov. 20, if necessary.

It is clear that the PUCN has a difficult decision to make. And, if each of the 11 intervenors and the staff submit their own individual plans, there will be a mountain of evidence to wade through before the Dec. 31 deadline. If on the other hand, the intervenors join together to present one viable option that takes into consideration the needs of NV Energy, as well as the owners of rooftop solar, the hearing could be quite short and the ruling simple.

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