When gaming and tech companies unveiled a ballot measure to restructure Nevada’s power market last year, NV Energy’s response was minimal. The state’s largest utility, which stands to lose its regulated monopoly on supplying power generation, said it was neutral on the Energy Choice Initiative, the proposed constitutional amendment to create a competitive power market.
Voters overwhelmingly approved the ballot measure in 2016 (as a constitutional amendment, they must approve it again in 2018). Gov. Brian Sandoval said that he supports the concept and has convened a committee to study the issue. Nearly all the gubernatorial candidates are behind the plan, the Nevada Independent reported last month. But in an hour-long interview with the Independent, NV Energy CEO Paul Caudill expressed concerns about rhetoric around the effort.
“It’s becoming increasingly difficult for me to maintain [a neutral] position,” said Caudill, who is part of the governor’s panel. “We’re a year away from the vote and what I see happening is [that] loosely accurate or inaccurate information is being used to push the deregulation initiative.”
He also has concerns about how energy choice will affect his employees.
“You don’t have to like me or the direction I’m taking the company,” he said. “But I’m not going to sit on the sidelines while people that I work with — people that live, currently live, already live, in our community — get dragged under the bus. It’s not going to happen.”
In the interview, Caudill also discussed moving past “reputational damage” from a high-profile rooftop solar fight and suggested NV Energy is close to making a big renewable commitment.
Berkshire Hathaway Energy acquired NV Energy in 2013, and Caudill came to the utility after leading MidAmerican Solar, which owns and operates renewables in competitive retail markets. In the past year, national clean energy advocates have heaped praise on MidAmerican Energy, NV Energy’s sister company. The Iowa-headquartered utility announced in April 2016 that it planned to get 100 percent of its energy from renewables, investing in 2000 megawatts of wind.
“We may not be far from that,” said Caudill, referring to MidAmerican. “I’m confident we could make a commitment to move forward with significantly more renewable energy than [what] we have today.” “I don’t know what the number is,” he added. “I’d like to say it’s 100 percent.”
In the interview at NV Energy’s headquarters Friday, Caudill talked more about renewables, how geothermal could make a comeback in Nevada and more reasons why NV Energy could push back against the initiative.
Shifting from neutral: Caudill cautioned it’s hard to predict the effects of the Energy Choice Initiative (Here’s an explainer on the initiative). A lot depends on how the market is structured, he said. But he said that some of the information being used to push it was misrepresentative.
“I heard about the Energy Choice Initiative in February 2016… I said our goal is going to be as objective as we can and try to help the state of Nevada through a really complex issue. I had an interview with [Nevada Independent editor Jon] Ralston, and he asked me some pretty pointed questions. I told him, ‘Jon, this is more than NV Energy. This is a lot about the state of Nevada so we’re going to try to help.' I will tell you it’s becoming increasingly difficult for me to maintain [a neutral] position. We’re a year away from the vote and what I see happening is [that] loosely accurate or inaccurate information is being used to push the deregulation initiative.”
The impact on rates: Caudill said NV Energy’s rates are an easy target but they should be put into context. He said NV Energy rates should be compared with rates in neighboring states.
“I’ll give you a great example [of misleading information]. I’ve heard over the last couple of months that NV Energy has some of the highest rates in the nation. That’s an easy one… Why is it important to energy choice? Fundamental to the Energy Choice Initiative is this concept that deregulation will lower your rates. So, if [you] can establish that NV Energy has among the highest rates in the nation, then people are going to say, ‘Well, shoot I don’t like that.’”
“Here are the facts… NV Energy today, August 2017, has rates that are about five percent lower than our surrounding states [excluding] California. I think we’re 45 percent cheaper than California. And we’re somewhere in the neighborhood of 17 percent lower than the national average. So, it’s difficult — when you hear people that are painting the company in that kind of a light — for me to sit back and say, ‘well I’m just going to sit on the sidelines and accept that.’”
Energy choice and employees: Although NV Energy stayed neutral on the Energy Choice Initiative, the AFL-CIO tried to kill it last year with a lawsuit. The union represents about a third of NV Energy’s employees and remains an opponent of the initiative. Caudill cited the potential effect of energy choice on employees as a reason to speak out.
“If I sound a little bit passionate here, it’s because I am. These are the power plant workers out there — this summer, they ran those plants at 99.9 percent availability, when if they didn’t do that, we’re in the market buying power at [high] prices our customers have to pay for. They’re the linemen and women that were up there this winter when you had 50 feet of snow in northern Nevada, working out there in that type of environment to repair damage and keep the lights on.”
“You don’t have to like me or the direction I’m taking the company. I’m a big boy and I get that it comes with the territory. I clearly understand what I bought into when I came here. But I’m not going to sit on the sidelines while people that I work with — people that live, currently live, already live, in our community — get dragged under the bus. It’s not going to happen.”
“It’s not just about NV Energy employees. How many people work for the Nevada Rural Electric Association providers? Go to Lincoln County Power District or Overton Power. These are public power, rural electrics that are also impacted by customer choice. Look at what they do for their communities, and they’re going to be impacted by this decision. Somebody’s got to stand up for them. I’m not sure what kind of tack we’re going to take going forward, but it’s becoming tough.”
Energy choice and renewables: “It’s not clear to me, and it’s also not clear to some other folks who are starting to talk about it. Who’s going to buy? These are all issues that the committee is working with. So, I’m not taking a position on either side, but these are huge questions. Is a third-party independent power producer going to go out and invest…$200 million in a 100 megawatt solar plant, or that same amount of money in a geothermal facility or a wind facility, if they are not assured that they’re going to be able to pass it through to its customers? I think there are questions even about how a renewable portfolio standard would be implemented.”
A BIG RENEWABLE PUSH?
A ‘massive commitment’: In the past, NV Energy had not been unable to make a 100 percent clean energy commitment like MidAmerican because of differences in the local markets. The Nevada market is small compared to MidAmerican, which can sell renewables at cheap prices to a regional market, known as the Midwest Independent System Operator. But as the price of solar drops, the situation is changing, Caudill said, and NV Energy is planning to change with it.
“One of the complexities behind what we’re dealing with here is the fact that our market size, as it is set up today, just simply doesn’t allow us, at least in today’s thought processes up to now, look at a massive commitment [to renewable energy]. I will tell you that’s about to change.”
What’s changed now: Solar prices have dropped dramatically and are expected to drop more in the future. Caudill said the trend has created an opening for a big investment in renewables.
“Now with the price of large-scale solar, and frankly with the price coming down of rooftop solar, I think the opportunity is there for us to invest in renewable energy like we’ve never done before. And I say ‘invest.’ It would be a combination of the company owning it and also third-party developers. And [we would] displace some of our costlier thermal generation assets. There has been a fundamental market shift in terms of costs that make things pretty attractive.”
How much? Caudill would not commit to a specific percentage of renewables but said: “I’m confident we could make a commitment to move forward with significantly more renewable energy than what we have today… I don’t know what the number is. I’d like to say it’s 100 percent.”
Can the utility make this massive commitment under energy choice? “Again, I don’t know what the future holds after November of next year if the vote is yes. Based on a strict read of the constitutional amendment, we would not be in the energy business. We would not be buying or selling power at retail. At that stage, we wouldn’t be able to accomplish that.”
ON ROOFTOP SOLAR, GEOTHERMAL AND THE POWER MIX
Looking back at the rooftop solar, net metering debate: For three years, national rooftop solar companies and NV Energy engaged in a high-profile debate over net metering, a policy that reimburses solar customers for the excess solar energy they produce and send back to the grid. The debate is so contentious because it gets at fundamental questions about the utility business model and who pays for the grid. After regulators sided with NV Energy, national rooftop solar companies pulled their operations from the state, arguing that the new net metering rates were unworkable and punished rooftop solar customers. Their departure had a big economic impact and applications for new rooftop solar systems plummeted in one of the sunniest areas in the country. Facing political and legal pressure, regulators slowly walked back the rates, while legislators worked on a permanent fix during the session. The rooftop solar companies returned, though some remain unhappy with how NV Energy has interpreted the fix.
“Let me make another point that I think is important when you think about renewables in the last four years. We’re far from perfect. In hindsight, we may have messed up a little bit in 2014 and in 2015 and in 2016, to some extent, with rooftop solar… We did have a noble cause. We were trying to protect our customers who don’t have rooftop solar from the cost shifts that occur through net metering — from those customers who do have rooftop solar. But frankly, when you look at what happened. The Public Utilities Commission said we were right and then they said we were right. After being right two or three times with something as complex as this, it turned out to be probably not all that acceptable politically. So, reputational damage from that has been difficult and not just for NV Energy but for other people involved as well. And I feel bad about that.”
“But as we sit here today, through the leadership of Assemblyman [Chris] Brooks, Speaker [Jason] Frierson, Senator [Kelvin] Atkinson at the 2017 legislative session, I think we are at a good spot. We track applications that we are getting for rooftop solar weekly. And it’s obvious to me that the rooftop solar industry is getting its legs underneath it a little bit. We’re all moving forward. My goal right now is to keep our heads down and do the best job we can at serving those customers who decide they want rooftop solar.”
On geothermal: Geothermal plants contribute more than half of the clean energy that the utility relies on to meet the state’s renewable portfolio standard. Yet geothermal, which is relatively more expensive than solar, is often left out of the conversation about renewables.
“I see a brighter future for geothermal energy than we have for the last five, six years here. In the early days — go back 30 years — some of our longest power purchase agreements were with geothermal plants. It was a resource that was number one in those days because of the cost of solar and the fact that wind is not a great resource here. Geothermal was the place to go if you wanted renewable energy here. And then what happened is solar costs came down. When you look at just least-cost planning and you say, ‘I’m only going to approve and buy those renewable assets that are the cheapest,’ geothermal’s price is higher.”
“But as you go to higher penetrations of renewable energy displacing thermal plants, geothermal has a significant value. And that is you can dispatch it. 24/7. We can use geothermal plants at night when we can’t use a solar facility. I think there is a significant value there. And as you start pushing to increase [solar] penetration on the grid, geothermal is going to become more valued.”
A more flexible energy mix: In the traditional paradigm, utilities relied on baseload power plants, coal or nuclear plants that were dispatched around-the-clock to meet minimum demand. Across the country, several baseload plants have retired in recent years, often pushed out of the market by low natural gas prices. This trend prompted the Department of Energy to study the issue earlier this year. Caudill said the future will be a mix of technologies, including renewables.
“Nothing is baseload anymore… There [will be] no such thing — I don’t see [anything] — as a truly baseload resource in the future. I think it’s going to be a whole combination of technologies that are integrated to be able to supply the grid with number one, reliability, and then also the lowest cost power available in the market. And a lot of that’s going to end up being renewable.”
Disclosure: NV Energy is a donor to The Nevada Independent. Switch and MGM, backers of the Energy Choice Initiative, are also donors to the Nevada Independent. All our donors are disclosed here.