By David Jenkins
When the Legislature in Nevada unanimously passed a bill increasing the state’s renewable energy standard, lawmakers surely intended the cost savings to benefit all Nevadans by lowering their electricity rates.
That noble intention is now in jeopardy because of a new scheme hatched by NV Energy, the state’s monopoly utility.
NV Energy is cutting lucrative side deals with large businesses and government entities that it fears losing as customers. These deals involve the utility paying huge sums of money to these customers, which represent about 5 percent of sales, and promising them specific amounts of low cost renewable energy in order for them to stay in the utility’s service.
It smells a lot like bribery.
The problem for the vast majority of ratepayers is that dedicating cheaper renewable energy to a small subset of customers will skew the electricity rate upwards for everyone else, primarily residential and small business customers.
This is because electricity generated from natural gas can cost as much a $40 more per megawatt hour (MWh) than electricity generated from solar or geothermal.
Originally, NV Energy wanted to offer a special discounted rate to large customers who, under state law (704B), can apply to leave the utility. That plan met resistance from the Public Utilities Commission (PUC) after its experts, and those from the Bureau of Consumer Protection, found it would result in the vast majority of NV Energy customers bearing millions more in energy cost.
Now NV Energy is trying to accomplish the same inequitable outcome through these side deals.
According to recent news reports, the utility has reached agreements with the city of Henderson and the Las Vegas Convention and Visitors Bureau to pay them, collectively, roughly $1 million per year not to leave. They will also pay the Clark County School District $1.5 million a year for five years if the district remains its customer. In addition, NV Energy pledged to help those entities to meet their renewable energy goals.
The utility has entered into similar deals, which do not require PUC approval, with a number of casinos, including the Cosmopolitan, Las Vegas Sands, the Atlantis, Golden Gaming and South Point.
One of the big reasons that the Legislature and the governor just raised the state’s renewable energy standard to 50 percent by 2030 was to lower utility bills for all Nevadans.
Nevada currently relies on out-of-state natural gas for 70 percent of its electricity generation. Gas generated electricity costs $60 or more per MWh. New solar generated electricity is selling for as little as $20 per MWh. Worse yet, the cost of natural gas is expected to double over the next 10 years.
If NV Energy, through these side deals, can direct that cost savings from renewables to a small group of select customers, then electricity rates for its other customers will disproportionately reflect the higher costs associated with natural gas generation.
Most NV Energy customers should be outraged that this monopoly utility—after making all sorts of promises to beat back a ballot initiative that would have broken up the utility’s energy monopoly (Question 3, also known as the Energy Choice Initiative)—is now gaming the system to the detriment of its captive customers.
This kind of self-interest driven hubris by NV Energy is what prompted the break-up effort in the first place. Free market competition would have forced the utility to compete for the business of all its customers, not just the handful it caters to today.
Now that NV Energy has shown its disregard for legislative intent and willingness to bypass the PUC, it is more important than ever that the PUC protect Nevada ratepayers and not allow this utility to game the system.
That means not allowing any rate increase that affects its regular captive customers more than large customers—and fully taking into account the cash payments.
It also means taking care to implement the new renewable energy standard fairly, so that the resulting cost benefits accrue equally to all Nevadans.
David Jenkins is president of Conservatives for Responsible Stewardship.