Unless NV Energy is allowed to impose significantly higher impact fees on departing businesses, the utility will lose millions of dollars, cripple expected electric demand for decades and likely result in higher costs for residential customers, the company said in regulatory filings.
In a strongly worded, 29-page “alternative impact analysis” submitted last week by the utility as part of the South Point Hotel and Casino’s application to leave the utility’s electric service, NV Energy made clear its concerns with the legal process (dubbed 704B after the section in state law) used by more than a dozen businesses in the last two years to leave the utility’s electric service.
“In summary, all signs point in one direction: a comprehensive review and reform of the 704B process is needed,” the utility wrote in the filing. “Until such a review is completed and reforms are made, the (Public Utilities Commission) should insist upon a compelling showing by the applicant that the proposed transaction is in the public interest or use a much longer period for analyzing the impact of 704B transactions on base tariff general rates to protect the interest of remaining consumers.”
The utility’s filing isn’t immediately binding, but if adopted by energy regulators could price out multiple large Nevada companies applying to leave NV Energy’s electric service, the utility’s finances and, potentially, on power bills for the company’s residential and business customers.
In the filing, the utility said that if all pending exit applications were approved, its expected electric load would not recover to 2015 levels for up to two decades, and the multi-million dollar loss of expected revenue would mean the utility’s other customers would need to pay higher power costs.
“All other things being equal, (NV Energy’s) remaining customers will pay base tariff general rates that are $17 million higher than they otherwise would be in the next general rate review proceeding and potentially $30.3 million higher than they otherwise would be in the subsequent general rate review proceeding,” the utility wrote.
The filing comes amid a growing cascade of the company’s large power users taking advantage of a 2001 state law to depart as a utility customer, as long as the Public Utilities Commission finds the departure to not be contrary to the public interest and if they pay a typically substantial “impact fee” to offset future costs that other customers would otherwise be forced to pay. Departed companies remain with the utility as a transmission customer.
NV Energy has typically not opposed exit applications filed by its major customers, including applications sought and granted in 2014 by MGM Resorts, Las Vegas Sands and Wynn Resorts. But 2018 saw a record 10 companies file to leave as an electric customer, including the Grand Sierra Resort, SLS Las Vegas, Boyd Gaming, MSG Las Vegas, a building supplies company north of Las Vegas, the under-construction Raiders stadium, Atlantis Casino Resort Spa, Fulcrum Sierra BioFuels and Station Casinos. Another three have filed to leave so far in 2019.
NV Energy executive Shawn Elicegui hinted at the company’s antipathy toward the departures in January filings, citing both a transmission shortage in Northern Nevada as limiting capacity for additional departures as well as an argument that proposed departures were not in the “public interest.”
In the filing last week, the utility gave a more complete picture of how the departures were affecting its business model. It testified that sales to large commercial and industrial customers — the sector that saw the bulk of departures — had declined by 28 percent between 2013 and 2017.
NV Energy also said the commission decisions granting new or under-construction businesses such as the future Raiders stadium or a possible Google data center the ability to preemptively leave the utility without paying any kind of exit fee would further reduce the company’s expected load over the next several decades.
Those factors, according to the company, throw a wrench in fundamental assumptions around load growth that have “crumbled” since the initial set of 2014 applications were filed, when commissioners allowed the departures assuming that the utility would recover whatever lost load growth over the next six years.
In effect, the utility is calling for the Public Utilities Commission’s formula for determining impact fees to be substantially restructured, asking that it increase the time period for which the impact fee is calculated for base electric rates from six years to 18 years, and extending the time for non-bypassable charges from six years to nine years.
Those changes would likely substantially increase the exit “impact fee” that departing businesses are required to pay, including South Point. PUC staff recommended a $3.23 million impact fee for the company in an earlier filing; the cost under NV Energy’s recommended methodology was filed under seal and isn’t public.
The utility also questioned whether the current interpretation of the law fulfilled the “public interest” portion of the law as envisioned by lawmakers when they created the law in 2001, when the utility struggled to obtain enough electricity to meet its customer demand and flirted with bankruptcy. Initial companies that filed to leave the utility such as Barrick or Newmont did so in order to construct power plants of their own, but more recent businesses that have filed to leave contract with an outside provider who buys power on the open market, as opposed to constructing their own power plants.
NV Energy wrote in the filing that no company attempting to leave its electric service had proven “affirmatively” that departing the company would lower the price of electricity for other customers.
“Today, in contrast, the 704B process does not advance the public interest.,” the utility wrote in the filing.
The request to change the methodology for determining impact fees comes as state lawmakers may be set to amend 704B law. Democratic Sen. Chris Brooks has requested a bill draft request related to the issue, but has not yet introduced a bill on the topic.