Most people won't notice any difference in their day-to-day electric service. But behind the scenes, NV Energy is entering a new energy market that will allow it to purchase and sell power up to a day ahead, a move that is expected to save utility customers more than $93 million per year.

State energy regulators in May approved a request from the utility to participate in the extended day-ahead market (EDAM) being set up by the California Independent System Operator Corporation, which oversees the transmission grid in California. NV Energy will join in 2028.

Joining EDAM should provide NV Energy greater system reliability and better access to renewable resources.

It should also save customers money. Although they might not notice it on their bill, NV Energy's ability to procure power at a cheaper rate will result in cost savings being passed on to customers.

"As a regulator, there are very few things you can do to help reduce customer bills other than telling the utility, 'No, you can't do something.' But to proactively be able to do something to benefit customers, this is one of them," said Rebecca Wagner, a former Nevada utility regulator and now the chair of the five-member board governing the day-ahead market.

NV Energy's entrance into the day-ahead energy market, the largest in the West, has wide-ranging support — usual utility opponents have told state energy regulators they supported the move. 

Proponents say it marks a major milestone for Western efforts to build a reliable and coordinated regional energy market, resulting in lower customer costs and greater reliability. 

"Expanding those opportunities into the day-ahead timeframe and across a broader regional footprint enables more efficient use of generation resources and access to lower-cost energy, while also strengthening grid reliability," utility spokesperson Katie Nannini said in a statement. 

Understanding day-ahead markets 

In 2015, NV Energy joined the Western Energy Imbalance Market, which allows utilities to purchase electricity in real time and day-of to meet unexpected demand needs or to sell an over-generation of power. It is governed by the same board that oversees EDAM. 

According to NV Energy's filings with state energy regulators, Nevada ratepayers have received $828 million in cumulative benefits from the utility's participation in the market, which is governed by the same board that will oversee the day-ahead market.

Real-time energy markets, however, only allow utilities to buy or sell power they need to obtain or offload within a 5-to-15-minute window, according to Advanced Energy United's Brian Turner, and account for only about 5 percent of a utility's power trading.

Day-ahead markets, such as EDAM, allow utilities to purchase and sell electricity to meet forecasted need and demand for the next day. These types of markets account for the bulk of a utility's power trading potential, Turner said.

EDAM is a new day-ahead market. It launched last month with a utility serving most western states outside Nevada; another western utility is set to join in the fall. According to NV Energy, joining the market will allow it to expand its access to renewable energy sources, importing and exporting renewable power when it is most cost effective.

The utility estimates it will save customers an estimated $93.1 million per year through lower energy production costs and other factors. Those savings will be passed on to customers, although it won't appear as a line item in their bills. 

Despite ongoing protests from consumers and advocacy groups arguing against NV Energy rate hikes, Nevadans pay some of the lowest electricity prices in the nation.

According to the U.S. Energy Information Administration, Nevadans paid 14.7 cents per kilowatt hour of power in March; less than the 14.43 cents per kilowatt hour they paid a year ago and well below the national average of 18.83 cents per kilowatt-hour.

The average cost across Mountain West states was 14.9 cents per kilowatt-hour.

Over the last 20 years, rate increases in Nevada have been the lowest in the country, rising just 1.4 cents per kilowatt-hour compared to 5.9 cents per kilowatt-hour nationally, according to the Energy Policy Research Foundation.

Complying with state law?

There are multiple day-ahead markets in the U.S, and each is linked to a Regional Transmission Organization (RTO) or Independent System Operator (ISO). 

RTOs and ISOs — independent, nonprofit organizations designed to ensure reliability and match electricity supply and demand — are essentially the same, excluding some minor operational differences. California's system operator that oversees the extended day-ahead market is a type of RTO/ISO. It primarily operates in California, yet several RTOs/ISOs in the East operate across multiple state lines.

In 2021, Nevada lawmakers passed SB448, ordering NV Energy to join an RTO by 2030, although the requirement has no teeth. 

Western utilities have largely taken an incremental approach to joining RTOs, according to Sydney Welter, regional markets policy advisor for the watchdog group Western Resource Advocates. They tend to first join an imbalance market, then a day-ahead market, then an RTO. 

"Ultimately, many entities still see a great benefit in joining an RTO," she said. 

With this a la carte-style approach, NV Energy could continue to add services that would ultimately equate to participating in an RTO, according to Turner. 

"The aggregate of these actions can amount to participation in an RTO as defined by SB448," he said in testimony to state energy regulators. 

Staff for state energy regulators acknowledged that NV Energy could continue to piecemeal aspects of an RTO, eventually finding itself "participating in an RTO without having applied to join an RTO."

But, staff cautioned, it "is concerned that the Nevada Legislature likely did not anticipate this piecemeal approach to joining an RTO and, therefore, any movement in this direction could be in violation of the statute."

One major component needed to satisfy the law's requirement is that NV Energy must relinquish control of its transmission systems to an RTO. Without that transmission component, NV Energy is still short of meeting SB448's requirements. 

Because it has not yet entered an RTO, the utility will need to request permission by Jan. 1 from state energy regulators to delay entrance. But, the company clarified to state energy regulators, it does not intend to seek a permanent waiver. RTO participation remains a potential, the company said — just not a present option. 

"Joining an RTO is the next evolutionary step … but it's a significant one," Wagner said. "There are additional benefits that can be gained from an RTO, but we just aren't there yet. The prudent course of action is to gain operational experience with EDAM before considering the step to an RTO."