RENO — In his first public interview in more than a decade, Switch CEO Rob Roy engaged in a passionate defense of a ballot question that would fundamentally reshape Nevada’s electric market while sharply criticizing the alleged excesses, overearnings and “fake philanthropy” of the state’s primary utility, NV Energy.
Roy — the 48-year-old data center maven who over two decades helped Switch rise from a Las Vegas strip mall to a $4 billion publicly traded corporation — said that he wanted to work with all parties, including the utility, to substantially expand Nevada’s solar capacity while also lowering energy costs, but felt frustrated by NV Energy’s use of the “monopoly scepter” to stem any major changes in energy policy.
In an interview with The Nevada Independent at his 2,000-acre “Citadel Campus” data center near Reno, Roy alternatively lambasted NV Energy — claiming it earned somewhere between $60 and $100 million in unauthorized over-earnings every year — while providing a rousing defense to the Energy Choice Initiative, a ballot measure designed to substantially overhaul Nevada’s electric market and is almost entirely funded by the Las Vegas Sands and Switch.
Roy, whose company paid a $27 million exit fee to leave NV Energy’s service in 2016 (which he called “completely unfair”), said neither he nor his company stood to financially benefit from the ballot question passing in 2018, and that his interest was solely to benefit Nevada and to build up the state as a whole.
“We’re done now. We exited. I don’t have to have to do any of this,” he said. “I didn’t have to spend any of the $3 million we spent last time to get this to go forward. I’m doing this for a different reason, and it’s also a fear-based reason. I’m afraid if we don’t do it, the monopoly is going to grind up the people afterwards. They are going to charge grandmas 13 cents (per kilowatt hour).”
“I care more about Nevada than Omaha does. I know that in my soul.” Omaha is a reference to the headquarters of Berkshire Hathaway, billionaire Warren Buffett’s company, which owns the Nevada regulated monopoly.
The Energy Choice Initiative, or Question 3, passed on an overwhelming 72 to 28 percent margin in 2016, and would amend Nevada’s Constitution should it pass twice to require the state to create a competitive retail electric market by 2023, ending the current monopoly held by NV Energy over most of the state’s electric customers.
Although NV Energy stayed officially neutral on the ballot question in 2016, it did join with a new advocacy group opposing ECI two weeks ago, and sources said the utility is prepared to spend up to $30 million to defeat the initiative.
Roy, who said utility CEO Paul Caudill told him the $30 million figure could be just the start of the utility’s opposition, said he was undaunted and planned to take a much more active role in the ballot process, and that Switch would “come out a little bit from behind the curtain.”
“I’ve had 10 other people come to me and say, ‘Hey Rob, aren’t you worried about somebody spending $30 million against ECI,’” he said. “No, because I’m going to set one billion dollars of truth on the table, and that’s going to be a really expensive number for them to match.”
Part of that “truth” is an assertion that NV Energy, which under Nevada law is authorized to charge rates that not only cover its business costs but also a “reasonable” rate of return approved by state energy regulators, has continually overcharged its customers and pocketed the difference.
In a manifesto provided by Roy to The Nevada Independent, backers of the initiative claimed that the utility appeared to be taking in somewhere between $60 and $100 million a year in overearnings from its authorized rate of return. That estimate is based on testimony from state Public Utilities Commission staff that each 10 basis point change in the company’s return on equity represented around $3.9 million, which when multiplied out by NV Energy’s yearly return on equity.
Switch has acted as a thorn in the side of NV Energy, using an affiliated nonprofit group called “Smart Energy Alliance” to intervene in the company’s proceedings before state energy regulators and to carefully comb through their filings for any financial issues or oversights that could leave the utility with more money.
“When you’re given the privilege of a monopoly, you also should not get to manipulate the rule sets here,” he said. “You shouldn’t be able to lobby, you should take the 10 percent guaranteed, $6 billion company that is a gift from we the people, and make your 10 percent, but you shouldn’t be able to lobby and twist a thousand of rules along the way, which has happened in the last 20 years.”
As Roy tells it, his desire has always been to work with NV Energy, but he blames the utility for never coming to meet him halfway on his business needs and goals for Nevada. He said that the idea behind Switch’s recently announced “Gigawatt 1” solar portfolio — purported to be the largest in the country — was shared with Caudill in 2014 as a solution to what he viewed as the company’s unsustainable energy costs, but said the idea was met with indifference from the utility.
“I believe that Nevada has a solar window that is as unique as Alaska’s oil reserves for the people of Nevada,” he said. “I believe it should be used to generate successful returns for whoever, NV Energy or whoever’s doing them. Let’s do it together guys, and then let’s give 10 percent of the money back, because we can build so much solar here that we can sell it to the other 12 states that don’t have it.”
Roy said that Switch was responsible for writing about 90 percent of the ballot initiative and had spent several years preparing draft suggestions for the needed changes in laws and regulations that would come if it passes. Though the Legislature will be charged with approving any new laws to implement the constitutional change, Roy said he was confident that lawmakers would approve his vision of how the new market would be structured.
“I guess I’m going to say it this way — because I’m not going to allow it to happen. We built ECI. If ECI passes, it’s mine, and I mean that a little bit, and I truly am in it for the right reasons,” he said. “We’re going to change Nevada. Energy is the underlying piece of all of it. It has to be done better. “
Roy also said that the initiative would “demand” prevailing wage regulations — a sort of high hourly wage on public works projects — on any new generation plants, noting that he had recently met with three chapters of the International Brotherhood of Electrical Workers and Laborers International Union 872.
One of Roy’s biggest sticking points with the utility came over his criticism that it spent an estimated $5.4 million between its foundation and corporate giving in 2017, saying in the manifesto that it was a “misleading and disingenuous” way to distribute back money after it reported over-earning millions of dollars more, which “negates all aspects of what giving should be about.”
“I know NV Energy has donated lightbulbs to the schools,” he said in the interview. “Those are not relevant changes to actually fix things, to help energy policy in the U.S.”
Roy, who has donated several million dollars to philanthropic causes, including $3 million to the Smith Center, said it bothered him to “no end” that the utility appeared to take credit for “fake philanthropy” with money they had over-collected.
“It’s actually a pittance. Robin Hood stole money from the rich, and gave it all to the poor,” he said. “They’re stealing money from everybody, including the rich, and making themselves rich. And only giving back 10 percent.”
NV Energy spokeswoman Andrea Smith declined to answer specific questions raised by Roy, including the overearnings, but said the utility would “welcome the opportunity to sit down with the Nevada Independent at a later date to discuss any issues raised by Switch.”
Although Switch has given more than $2.4 million to state and local candidates since 2014, Roy said that he was a registered independent and would work with whichever gubernatorial candidate is elected in 2018.
“We’re much more involved than I think people realize,” he said. “No matter who’s going to win next, Switch is Switch-erland. We already have tremendous relationships with all of those people.”
Roy also expressed skepticism of a recently announced ballot measure raising Nevada’s Renewable Portfolio Standard, saying he met with California billionaire Tom Steyer last week and told him he wanted to push Nevada to 100 percent clean energy compliance, but didn’t want a government mandate forcing the issue.
“You don’t need to go make them. I’ll do it. I’m going to do it. Just get out of my way,” he said. “There’s some dangers to the gray areas that always get written into mandates.”
Updated at 10:25 a.m. to correct the amount of money Rob Roy has donated to the Smith Center.
Editor’s Note: The Nevada Independent will publish a full transcript of the interview with Rob Roy on Sunday, Feb 18.
From the Editor