The City of North Las Vegas is the latest municipality in the state to enter into an exclusive contract with NV Energy that will see the electric utility pay the city $250,000 annually over five years in return for promising not to leave as a customer.
The contract, which was approved without comment as part of the North Las Vegas City Council’s consent agenda during a meeting last Wednesday, is the latest in an ever-growing string of contracts that sees NV Energy give direct cash payments to government entities in return for sticking with the utility as a customer and promising to apply for a future fixed-rate, renewable energy based pricing program.
Thus far, the electric utility has given similar arrangements with cash payments to Clark County ($1.1 million per year), the City of Henderson ($250,000), the Clark County School District ($1.5 million), the City of Reno ($450,000 annually), the Nevada System of Higher Education ($500,000) and the Las Vegas Convention and Visitors Authority ($650,000). Combined with North Las Vegas, those contracts cumulatively mean that the utility company is paying $4.7 million annually just to keep its municipal and government customers in the fold.
In a statement, NV Energy spokeswoman Jennifer Schuricht said that the company was pleased to reach a multi-year deal that “addresses their unique energy needs without increasing rates for our other customers and provides for important electric infrastructure that will support economic development in the city for the benefit of all its residents.”
“These customized energy agreements allow us to continue to serve our largest customers and by retaining them, actually protect other customers from potential cost increases,” she said in an email.
Like the arrangements with other municipalities, the contract with North Las Vegas runs for five years and guarantees an “incentive payment” of $250,000 to be paid to the city annually over the next two years. It also saves a spot for the city in a future “Optional Pricing Program Rate,” (OPPR) a special renewable-energy based electric pricing program developed by the utility to keep large businesses from filing to leave as a customer.
The contract requires the city to apply for the OPPR program once and if approved by the Public Utilities Commission, includes a provision guaranteeing additional cash payments over three years if the savings from the new rate do not equal the initial incentive payment amount of $250,000.
It also contains provisions allowing NV Energy to adjust the size of the incentive payment based on any additional savings for the city under a planned $120 million rate reduction that the utility plans to request in June 2020. That rate reduction will come as part of the utility’s triennial general rate case, a process for electric utilities where the actual pricing of rates is proposed, debated and ultimately approved by the Public Utilities Commission.
It also contains a new wrinkle — a promise by NV Energy to “continue pursuing solutions” at the Apex Industrial Park site north of Las Vegas, including completing construction on a switching station near the park and working with the city to have enough electric infrastructure for planned future growth at the site, in order to “timely serve development projects within Apex and other areas in the (city’s) corporate boundaries.”
“Apex is key to the growth and economic diversification of southern Nevada and this strong partnership with NV Energy ensures the utility will continue developing the infrastructure needed for the global manufacturing and industrial customers we are bringing to North Las Vegas,” City of North Las Vegas city manager Ryann Juden said in an email.
In return, the only requirement for the city itself is to not pursue an exit from NV Energy from the state’s “704B” process — named after the provision in state law that allows large customers to apply for the right to leave NV Energy and purchase power from another provider, usually requiring a substantial “impact fee” to avoid shifting costs to other utility customers.
Some of Nevada’s largest businesses — MGM Resorts, Wynn Resorts, Caesars Entertainment — filed to leave the utility under that exit process in 2016, but the utility began taking more steps to formally oppose the exit process as a group of 14 large businesses and government agencies filed 704B applications over the last two years.
NV Energy supported a bill in the 2019 Legislature that added multiple barriers and new requirements for businesses seeking to leave NV Energy, but allowed the roughly dozen or so businesses that have pending applications before the commission to continue under the old system. That measure was approved nearly unanimously and signed into law by Gov. Steve Sisolak last year.
Of the 14 companies that had filed applications to leave the utility, seven received permission to depart NV Energy, while the other seven ultimately backed away from the process. The under-construction Allegiant Stadium in Las Vegas, which received permission to go with another electric provider in September 2018, reversed its decision and announced a new partnership with NV Energy to provide a discounted, renewable-based rate in October.