Arguments that NV Energy’s move to implement a daily demand rate for customers violates state law were rebuffed Tuesday by state energy regulators. 

Now, some groups are considering legal action. 

In September, state energy regulators authorized the utility to start basing customer bills on the maximum amount of electricity used during a single point in the day, rather than following the traditional billing practice of charging based on total electricity consumed. 

Regulators determined that because NV Energy’s distribution facilities are built to handle the maximum amount of energy that a customer requires at any point in time, it logically follows that a rate structure should be tied to a customer’s max demand on the system, according to a draft order issued Friday and approved Tuesday by the Public Utilities Commission of Nevada (PUCN).

To offset this “demand charge,” the utility will lower the basic service charge and the cost that customers pay per kilowatt hour of power used. Known as the volumetric rate, this is usually the largest component of a customer’s bill. 

The change is slated to begin in April.

Initial approval of the change drew opposition from the state’s Bureau of Consumer Protection (BCP) and clean energy groups including Nevadans for Clean Affordable Reliable Energy, Vote Solar and the Solar Energy Industries Association. The groups submitted various requests for reconsideration, arguing that state law prohibits the setting of residential rates based on the time of day, day of week or time of year.

State energy regulators on Tuesday affirmed their earlier decision that the demand charge is valid, noting that when the Legislature decided to prohibit mandatory time-of-use rates just over a decade ago, it did not intend to prohibit demand charges or any other type of billing components. 

“Interpreting the law as the petitioners propose would essentially outlaw usage-based billing for utilities,” commissioners wrote in the draft order.

A daily demand charge that relies on a rate that remains the same throughout the day, week and year — 14 cents per kilowatt hour — will provide a “constant, fixed ‘demand rate’ that does not fluctuate,” according to the draft order.

Those groups are now considering legal options to challenge the decision in court, according to a press release from the Nevada Conservation League. 

“We are weighing all options to defend the rights of Nevada customers,” Chauntille Roberts, west regional director of Vote Solar, said in the press release. 

A ‘reasonable solution’

The utility currently offers a different kind of voluntary demand charge program for customers different from what will be implemented in April. Starting in April, the volumetric rate paid by all customers will decrease roughly 2 cents per kilowatt hour and the basic service charge will be lowered by 50 cents. 

Combined, state energy regulators say those changes are expected to result in a 1.5 percent decrease in most residential customer’s bills.

Once implemented, NV Energy will become the first investor-owned utility in the country to apply a mandatory demand charge on its residential customers. 

The change to daily demand rates extends to net metering customers as well, and those customers are likely to see their bills rise. Net metering programs allow rooftop solar customers to use energy generated from their systems as an offset on their monthly power bills. The offset price of power produced is at a percentage of the retail rate of electricity — making it lucrative for customers and uneconomical for the utility.

About 10 percent of Nevadans have rooftop solar, primarily in Southern Nevada. Those customers receive compensation for the energy they produce at 4.5 times what it would cost the utility to buy that solar energy, and the existing rate design for net metering customers does not cover the full cost of serving them.

According to the draft order, residential customers without solar pay a combined roughly $50 million annually to cover those costs.

Some of the solar group’s arguments against the demand charge would, if applied consistently, shift all the utility’s fixed costs of serving solar customers onto other ratepayers, according to the commission.

In September, regulators said that a daily demand charge for all customers is a “reasonable solution” for the utility to balance how much it costs to serve solar customers.

At Tuesday’s meeting, Commissioner Tammy Cordova pointed out that whether customers utilize traditional power sources or solar, “You should pay for the cost of maintaining that grid.”

The average daily residential peak power usage ranges from 2.6 kilowatt hours to 6.8 kilowatt hours, with typical peaks between 3 to 4 kilowatt hours.