Regulators approve major report critical of energy choice ballot question
The Public Utilities Commission voted Monday to approve a 109-page report warning that adoption of a retail energy choice ballot question in 2018 could raise power rates and cost millions of dollars to implement.
In a unanimous vote, the three PUC members voted to approve the draft report analyzing costs, benefits and a potential path forward for implementation for the Energy Choice Initiative (ECI) — a ballot question amending the state’s constitution to require Nevada shift from an electric monopoly structure to a competitive retail market where multiple companies could generate and provide electric service.
A draft of the report published two weeks ago claimed that the ballot question could lead to massive residential rate increases over the first 10 years and cost up to $150 million to successfully implement by its mandated 2023 deadline. But the version approved Monday includes a 15-page addendum that includes a suggestion which could possibly keep NV Energy operating as a power provider in a retail marketplace, at least initially.
Approval of the report doesn’t mandate any action from legislators or the Governor’s Committee on Energy Choice — a 25-member group charged with creating a list of recommendations on how to implement the ballot question if it passes in 2018.
But the report, which was requested by the governor’s commission last year (sans a cost and benefits analysis) does set the stage for a contentious May 9 commission meeting, where the report could be adopted or rejected by commission members and could inject a level of uncertainty into the planning stages of transitioning the state into a retail energy market.
PUC Chairman Joe Reynolds, who authored the report, noted that it had more than 4,600 pages of appendices backing up its claims and added that he has been adamant since the beginning that the report would study all relevant aspects of the ballot question, including those not directly mentioned in the request by the 25-member commission.
“If the Public Utilities Commission was going to conduct an investigation, we were going to do one that had integrity,” he said. “We were going to do one that was meaningful. We were going to look at the issues that we believed were necessary to be looked at.”
The ballot question itself passed on a 72 percent to 28 percent spread in 2016, and is largely bankrolled by the Las Vegas Sands and data center giant Switch. More serious opposition has emerged this election cycle, with NV Energy moving away from neutrality and pledging to spend up to $30 million to defeat it on the 2018 ballot.
Publication of the report earlier this month caused a furor among supporters of the ballot question — a spokesman panned it as “one-sided” and a “power grab,” and Sands executive Andy Abboud called Reynolds a “rogue regulator” and claimed the report was “flatly unlawful.”
It continued to draw heated comments on Monday, including some from Switch general counsel Sam Castor, who said the ballot question was about preventing NV Energy from continuing to bring in millions of dollars in over-earnings on electric prices than allowed, and not about creating a “deregulated” marketplace.
“They’re raping Nevada,” he said. “And anyone who gets up and talks about how this is about ‘deregulation’ is complicit in that inappropriate act.”
Supporters of the ballot question, including former Federal Energy Regulatory Commission chairman and ECI consultant Jon Wellinghoff, filed reply comments over the weekend asking the PUC to reject the “doomsday” report and draft a new one to better reflect the request from the governor’s committee on energy choice and to avoid a potential ethics complaint.
“It would be unprecedented and unlawful for the rest of the Commission to interject itself into this political question on the side of NV Energy by adopting this report,” the reply brief states. “But if it chooses to go down this errant path, the Commission should at least be forthright about it.”
The regulatory body did not take up the reply request, though Commissioner Ann Pongracz did include a 15-page addendum to the original report laying out a more detailed roadmap for policymakers and the Legislature to follow if the ballot question is approved on the 2018 ballot.
Pongracz called the report a “first look” at how to tackle the complex problem of switching market structures in a truncated window, but said it would be impossible for the commission to respond accurately in the report without at least a “preliminary evaluation of the associated costs and benefits.”
Although she did not delve into general predictions of how approval of the ballot question could raise or lower rates, Pongracz nonetheless noted that any new retail electric providers would be hard pressed to deliver electric rates that were not only lower than those provided by NV Energy, but also low enough to still offset the cost of upgrading systems and disinvesting of generation plants that the utility would need to sell off if the ballot question passes.
“For Nevada residential customers to break even in the aftermath of deregulation, the new energy market rate must not only match the existing energy rates charged by (NV Energy), but must be so much lower than the existing energy rates as to offset all the new incremental costs that the market restructure brings,” she wrote.
Her addendum also addressed one of the key issues the state will face if the ballot question passes — how to determine a “Provider of Last Resort,” or electric utility that will provide default service if a retail business goes under or if there no other options available for ratepayers. Pongracz wrote that even though NV Energy has expressed an intent to only focus on electric transmission if the ballot question passes, the PUC could require them to still offer electric service as a provider of last resort.
“While NV Energy is free to announce its intentions, NV Energy is nonetheless required under existing law to obtain the approval of the Commission prior to discontinuing, modifying or restricting its service,” she wrote. “Therefore, absent a change to current law by the Legislature, NV Energy is not allowed to implement a unilateral decision to stop serving current customers without Commission approval, and the ECI does not contradict this provision.”
Although supporters of the ballot question have charged that approving the report would violate state ethics law and amid accusations that it was one-sided, Commissioner Bruce Breslow publicly confirmed with the PUC’s general counsel that the regulatory body would not violate any laws on ethics. Breslow, who was appointed to the commission last August, said he thought the report was fair.
“I don’t think it creates a one-sided view,” he said. “I think it tries to outline all of the many, many issues that will come into play if the public should vote for this.”
Disclosure: Switch and NV Energy have donated to The Nevada Independent. You can see a full list of donors here.