Backers of the Energy Choice Initiative promoted it to voters last year as a path to a stronger economy, lower costs, and more renewable energy — though it’s biggest funder is supporting it for less publicized reasons.
A key executive with the Las Vegas Sands, the top bankroller of the ballot measure, revealed another rationale in a meeting of a commission studying the ballot question last month — that the casino giant was unhappy with the lack of transparency associated with paying millions of dollars for the right to leave NV Energy as a customer.
“I have a fundamental problem on the cost structure, of the (Public Utilities Commission) determining costs when they were unable to tell us how they determined our exit fee, and today it seems like those exit fees were completely unnecessary,” Sands executive Andy Abboud said at a September meeting of the commission. “I’m not here today to go after the PUC, but let’s be honest. That’s why a lot of us are here, that’s why this initiative was launched, was the lack of transparency on what consumers are being charged to leave the grid.”
Along with MGM Resorts and Wynn Resorts, the Las Vegas Sands applied to leave the jurisdiction of NV Energy and purchase electricity independently on the open market back in 2015. Unlike the other two companies, the Sands balked at paying the proposed $23.9 million “exit fee” assessed by the Nevada Public Utilities Commission to prevent other ratepayers from assuming the cost of large electricity users leaving the system.
The casino giant called the exit fees “exorbitant and unjustified” at the time, and complained in filings that the conditions imposed on the company to leave the grid were “unlawful, unreasonable and erroneous conclusions of law.”
Many of those concerns were echoed in a filing made by a nascent nonprofit backed by data center giant Switch requesting the commission to dismiss or at least investigate the calculation of impact fees assessed to large energy users. The 2015 filing made by the company dismissed the impact fee model as “entirely a fictional creation of NV Energy, blindly adopted through improper delegation of its responsibility by the (PUC) staff.”
The Sands has poured more than $1.9 million into Nevadans for Affordable, Clean Energy Choices, the political action committee backing the ballot initiative, which was also supported by MGM Resorts and Switch.
Abboud did not return requests for comment.
Jon Wellinghoff, a former Federal Energy Regulatory Commission chairman and advisor to the ballot question, said in an email that demand for the initiative stemmed from multiple sources including a desire for lower energy prices and expanded renewable energy.
“It’s the result of Nevadans who no longer want to be forced into a monopolistic system where the government sets the price of our energy and is required to give significant profits to the monopoly,” he said in an email. “Large and small users will be empowered to make their own choices in energy providers, and we can grow our economy through large increases in Nevada based renewable projects and the tens of thousands of jobs that come with energy freedom.”
The ballot question — which passed overwhelmingly on a 72-28 percent margin during the 2016 election — has elicited concerns from energy experts over the massive regulatory shift needed to move Nevada away from a monopolized energy structure to a retail market with multiple businesses engaged in the generation and retail sale of electric service.
Backers of the initiative have instead pointed to data that indicates states with retail energy choice markets typically have lower electric costs and studies indicating that making the switch would be an economic boon to the state.
But the issue of how much the initiative would cost (and benefit) Nevadans has been a touchier subject, and one that struck a note of tension between the commission and the PUC.
The governor’s 25-member energy choice commission, which has met regularly since April and is tasked with creating a set of recommendations to be delivered to the next governor and 2019 Legislature, voted to outsource to the PUC several key issues, including a timeline of implementation, any amendments or changes to existing law to help facilitate a retail electric market, options for wholesale energy markets and options for establishing a retail electric market.
But commission members sharply disagreed on including another item in the recommendation letter — whether the PUC should be asked to study the potential costs and benefits to the state if it moved to a retail electric market.
Several commission members raised concerns about including that aspect of deregulation in the request, saying it would be difficult to assess the cost of a retail marketplace without specific designs put in place or agreed to by state lawmakers, and how so-called 704B companies — named after the provision that allows them to leave NV Energy’s service — would be assessed in whatever report the PUC produces. Members ultimately voted 8-5 to not include the question of costs and benefits in the request.
But in a notice announcing the docket filed on Oct. 11, the PUC said it planned to study “potential short- and long-term financial benefits and risks to the residents and businesses of Nevada that may be associated with implementing the Initiative and the best strategies for maximizing any benefits (e.g. savings) and mitigating any risks (e.g. costs).” It plans to hold a workshop with public input on Jan. 9, 2018.
That plan follows through on a promise made by PUC Chairman Joe Reynolds during the meeting, who said he couldn’t “in good faith” open a docket into the issue of energy choice without also studying the potential costs and benefits.
In a follow up interview, Reynolds reiterated that he has no desire or intent for himself or the commission to weigh in on the merits of the ballot question, but that the proposed constitutional change was such an important issue that it’d be negligent to not study the cost or benefit aspect.
“I don't think anything can anything can reasonably or meaningfully be analyzed with this initiative without looking at the financial implications,” he said. “There’s billions, with a capital B, of dollars that may become the responsibility of Nevadans. The financial consequences of that to ratepayers and to businesses, again, is the most important question that anyone could be looking at with this, in my mind.”
Reynolds said he wasn’t concerned about whether the commission agreed with or included the findings of the docket in their final report to the 2019 Legislature, and said he hoped its results would be a resource both for commission members, lawmakers and the general public.
“The more stones that are unturned, the more questions, the closer that we look at this, and the more eyes on this, the better,” he said. “The PUC, we’re an independent regulatory entity. With all due respect, I’m not a subcommittee or answer to the governor's committee on energy choice. We’re independent regulators.”
Disclosure: MGM Resorts International, Wynn Resorts, Switch, and NV Energy are all major donors to The Nevada Independent. A complete list of Indy donors and sponsors can be viewed here.