Note:  There are a lot of good names and organizations in this article, 
especially the Economic Development Councils.  Worth spending some time with 
them?

Lorna 

Wednesday, February 7, 2001 
Nevada Goes for the Gold

By Dave Todd 
dtodd@ftenergy.com <mailto:dtodd@ftenergy.com> 

It's a reverse twist on America's economic history. One might even call it a 
case of Eastward Ho!

For the first time in the nearly two centuries that California has been part 
of the United States, entrepreneurs are talking about leaving, not moving 
into, the Golden State because of potential opportunities for doing business 
to the east. Not much farther east, only over the mountains into neighboring 
states, but still in that direction, as opposed to jurisdictions north or 
south of California. And the biggest lights in the eyes of one particular 
industry are emanating from Nevada. 

Jack Stewart, president of the California Manufacturers and Technology 
Association, recently warned that massive power price increases and future 
rate hikes "could be the genesis for industry departures from the state." The 
impact on large industrial users, he warned, could "provide an impetus for a 
statewide economic downturn" in California, which accounts for about 12% of 
the United States GDP.

California's mass exodus
Since the beginning of the year, Nevada's primary economic development 
agencies have been overwhelmed by California companies wanting to relocate 
some or all of their operations to the state. The bad news for California is 
that the list includes many Silicon Valley enterprises or "wannabes" whose 
growth planning units have been gripped by uncertainty about the 
dependability of future electric supply delivery.

Somer Hollingsworth, president and CEO of the Nevada Development Authority in 
Las Vegas, said in late January he was urgently asked to meet with corporate 
officials of a major California company to brief them about relocating to 
Nevada. In meeting with the company he asked, "Are there others like you? And 
they said, yes, we can introduce you to company after company after company." 

Overwhelmingly, it is high-tech California companies that are most interested 
in moving because of their ever-growing requirements for reliability in their 
electric service. Beyond that, "We have five power companies that have 
already come down here and talked to us-power producers," he said. These 
companies, including Calpine Corp., are keen to take advantage of a variety 
of opportunities made easier by the fact that, unlike California, Nevada has 
no state income tax and no general corporate or business inventory tax, 
putting it at both a geographical proximity and tax advantage to California. 
It also puts Nevada ahead of other low-tax Western states such as Arizona, 
Colorado and Utah. 

Reno/Silicon Valley share symbiotic relationship
Hollingsworth's northern counterpart at Reno's public/private sector-backed 
agency, the Economic Development Association of Western Nevada (EDAWN), tells 
a similar story. Chuck Alvey, who heads that body, says interest in his city 
from Silicon Valley refugees is becoming intense. 

A mere three-hours' drive and 40-minute plane ride from the San Francisco/San 
Jose area, Reno and Lake Tahoe already house hundreds of high-tech industry 
executives who commute back and forth and who have, up to now, escaped the 
impact of power drains caused by their energy-intensive industries. "Server 
farms," banks of computers that manage Web sites and related business 
operations, continue to grow in number. A single server farm can require as 
much as 10 MW of power to operate.

Strict new federal energy efficiency standards, to curb demand by other power 
hogs, such as residential central air conditioners and heat pumps, clothes 
washers, water heaters and commercial heating and cooling equipment, won't be 
implemented in time to affect the current power crisis. The U.S. Department 
of Energy last month announced that the energy conservation measures could 
save consumers and businesses more than $19 billion over the next 30 years. 

Though the energy saved would eliminate the need for 40,000 MW of new power 
generation, the new standards wouldn't be phased in until between 2003 and 
2007. 

Stan Thomas, director of business planning and growth strategies for Sierra 
Pacific Power Co., Nevada's dominant energy company, said his business has 
"experienced great success" at moving Silicon Valley-based firms' divisions 
into Nevada, albeit in a limited way. "But we're seeing a lot more companies 
saying: 'Wait a minute. We can't operate here anymore with power being shut 
off, and having payrolls to meet and not producing any product.' " 

He added that getting "a little more aggressive" about enticing electricity 
supply-constrained companies to relocate to Nevada is no longer likely to be 
seen as a cherry-picking operation at another state's expense. In fact, 
Nevada froze its electric deregulation planning last year, pausing to 
reconsider its options, as a direct result of California's policy confusion. 
"We have delayed until we have a plan together where capacity exceeds (native 
in-state) demand," said Thomas. 

Sierra Pacific's power delivery capabilities are being enhanced by its plan 
to build a new 345-kV line in eastern Nevada to import power from Utah. In 
1998, it also installed a major line into the Pacific Northwest. Both 
developments are significant because the company has switched its strategy to 
become more of a power transmission distribution company than a generator. 

"We're learning our lesson here," said Thomas. Setting aside the issue of 
burgeoning energy demand requirements across the West, the need to recover 
stranded costs associated with deregulation is a preoccupation for power 
plant-owners in general, he said. 

As for California, " I think the next couple of years are going to be some 
tight times, no doubt about it. And that's why what we're trying to do (in 
Nevada) is secure long-term contracts as well as short-term contracts to 
protect our customers while we're in the process of securing capacity, to 
ensure that we have an adequate supply of electricity at reasonable rates." 

Other areas targeting California companies
It's not just Nevada's physical proximity to California that helps it attract 
relocating companies. It's also the different opportunities offered by 
Nevada's two main population centers, Reno and Las Vegas. Both cities attract 
different kinds of energy-dependent businesses from California. In this 
regard, "We are two different markets," said Thomas.

In any case, Nevada isn't the only state that's getting calls, and returning 
interest in kind. Half a continent away, Tennessee's state department of 
economic and community development recently targeted about 1,000 California 
companies with financial enticements and advertisements that proclaim "the 
lights are always on" in the electric power-rich Tennessee Valley Authority's 
service territory. Elsewhere across the nation, from Seattle to Manhattan, 
there are initiatives to build or refurbish buildings to make them capable of 
servicing high-energy demand, Internet-related data centers. 

Nevada, however, has one giant advantage, aside from being closer to 
California. Las Vegas, for example, has one of the most extensive, readily 
accessible black fiber systems of any major metropolitan area in the United 
States. But of course it would. As the Nevada Development Authority's 
Hollingsworth joked: "Most everything we have here is state-of-the-art and 
brand new because we blow everything up every 20 years. We just implode it 
and build something new." The most recent casualty to fall to progress was 
the El Rancho Hotel on the Las Vegas Strip, deemed past its prime, which bit 
the dust in October in a televised entertainment spectacle. Power to the 
people.