NV Energy is asking state energy regulators to change the formula of how it bills customers in Southern Nevada — a change the utility says would give customers more decision-making power around energy efficiency, but that accountability groups argue would be confusing and expensive for customers.

Earlier this year, the utility proposed implementing what’s called a demand rate charge for its Southern Nevada residential and commercial customers. The proposal, touted as simple by the utility, would bill customers for the maximum amount of electricity used at a single point during the day rather than the total amount of electricity consumed over a day. 

The change would allow customers to make “decisions around energy efficiency and changes in consumption behavior,” Janet Wells, NV Energy’s regulatory vice president, said in testimony to state energy regulators, adding that it provides “a more equitable outcome for all customers.”

But more than one energy expert had a hard time explaining the proposed new structure to The Nevada Independent, with one pointing out that if energy experts struggle to understand it, it’s unlikely that many consumers will. 

“If you can’t understand how your own energy bill is being made, how can you change your energy use?” Sheila Hallstrom, Advanced Energy United’s (AEU) Nevada regulatory lead, told The Nevada Independent in an interview. “We do not believe this is the best way forward.”

If energy regulators don’t approve the requested change, the utility is asking them to instead approve an increase in the basic service charge — the flat rate customers pay just to have monthly service — that its Southern Nevada customers pay each month. The proposals are part of an overall request by the utility that also seeks to change the way new solar customers are billed, add a rider for low-income customers and recover more than $215 million in costs the company incurred building out battery storage and other infrastructure projects, estimated to increase customer bills by about 9 percent. 

According to Hallstrom, approval of the utility’s demand rate charge request would mark the first time an investor-owned utility in the U.S. would apply that kind of mandatory billing structure to all residential customers. 

Requiring a new structure that hasn’t been tried with a sample population isn’t a good strategy, Hallstrom said. “We shouldn’t be doing trial and error in these situations.”  

How demand rate charges work

Even if the terms are unfamiliar, most people understand the underlying principle of power bills: the more power you use, the higher your bill. Known as volumetric pricing, bills increase and decrease with the amount of energy a customer uses each month.

A demand charge, however, is based upon the maximum amount of power required by a customer during a set amount of time, shifting a customer’s bill from how much electricity is consumed over a day to how much electricity is needed at a single point. Under the utility’s proposal, the demand charge would be based on a customer’s highest 15-minute period of energy usage.

For example, if a customer used the most power between 5:30 and 5:45 p.m., their bill for that day would be based on the energy used during that time. 

That 15-minute burst of energy usage would be multiplied by four, to get an hourly total, with that number then multiplied by a cost per kilowatt per day — in this case, 19 cents. This would determine the demand charge, which customers would pay in addition to their volumetric rate — the amount of total energy they used. Customers would also still be charged a basic service charge fee.

As part of the proposal, the utility would lower the cost customers pay per kilowatt hour, meaning the volumetric portion of the bill would likely be lower. 

Does it work?

The goal (partially) is to incentivize customers to think not just about how much energy they use each month, but how and when they are using that electricity.

For some customers, demand charges could lead to lower bills if they spread out their energy consumption and use less energy all at once. 

But for others, including people with rooftop solar, it can often lead to more expensive bills because the demand rate will be charged irrespective of customers’ overall energy usage. 

“It’s a very confusing structure,” Hallstrom said.

Jeffrey Bohrman, director of regulatory pricing and economic analysis for the utility, disagreed in testimony.  

“The concept of the demand charge construct is not in and of itself complicated,” he said. “Quite simply explained, by turning more appliances on at a single point in time, a customer will be putting a greater strain on the electrical grid than they would if they were turning on only one appliance at a time.”

How is it different from other rate-reducing measures?

The utility already offers optional daily demand pricing (DDP) — similar to the type of charge the utility is asking regulators to approve. Under its existing DDP option, the utility offers a lower monthly basic service charge and lower energy consumption rate than standard customers are charged. 

NV Energy also offers a time of use (TOU) rate that charges customers different costs for power depending what time of day they use electricity. At peak times, power is more expensive; during off-peak hours, the rates drop. Customers can save up to 15 percent by using this rate plan, according to the utility.

Charging customers a set rate at certain times is much easier for customers to understand, Hallstrom said.

“TOU is a much better way to see a reduction in peak demand,” she said. “Customers know if they use electricity at a certain time, how much it will cost.”

Plan B: Increase the basic service charge 

If NV Energy’s proposal is denied by state energy regulators, the utility is requesting its basic service charge for Southern Nevada customers be increased from $18.50 per month to $24 per month.

The proposals also help to recover costs incurred by net metering customers who “are not paying their equitable share of fixed costs,” Wells said in her testimony.

The request comes on the heels of a failed 2024 proposal by the utility for approval of a massive increase in the basic service charge for its Northern Nevada customers. 

The request would have increased Northern Nevada’s basic service charge from $16.50 to $45.30 per month, which would have made it the highest in the United States by a considerable margin, according to the state’s Bureau of Consumer Protection. Energy regulators denied that request.

Some Southern Nevada customers could get relief from the proposed increases.

The utility is also proposing a low-income residential assistance rider, which would remove the monthly basic service charge for customers whose income is less than 150 percent of federal poverty level (roughly $48,000 for a family of four).