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Switch CEO Rob Roy: Energy ballot question an 'all or nothing moment' for Nevada

Switch's Las Vegas data center. Photo courtesy Switch

For someone who hasn’t given a public interview in more than a decade, Rob Roy certainly has a lot to talk about.

The enigmatic founder of data center giant Switch, a company that within just a few years has emerged from relative obscurity to a publicly traded $4 billion corporation, sat down earlier this week for a three-hour interview with The Nevada Independent, where the 48-year-old self-proclaimed “tech futurist” revealed his frustrations with NV Energy, and accused the electric utility of pocketing tens of millions of dollars every year in “overearnings.”

Inside his massive Reno area-data center (which between the armed guards, giant concrete walls and sheet-metal decor invokes comparisons to the lair of a James Bond villain), Roy laid out not only a laundry list of complaints against NV Energy, but the many potential benefits he saw coming to the state if it passes the Energy Choice Initiative on the 2018 ballot.

“The intelligent thoughts around this say that a group of people together really will make it better,” he said. “I have zero fear that we won’t make it better. Of course, guys, I know there aren’t a lot of people that maybe feel that way, but, people go, ‘well, wait, how did you start this company, Rob? This is a $4 billion company you started in Nevada, weren’t you afraid?’ Yeah, but guys, fear doesn’t fix anything, actions do.”

Switch is the primary backer (and author, according to Roy) of the ballot question, which would add a new section to the state’s constitution requiring creation of a retail electric market, where consumers and pick and choose from more than one electric company, by 2023. NV Energy, which stayed neutral on the ballot question even as it passed overwhelmingly in 2016 on a 72 to 28 percent margin, announced two weeks ago that it would back an effort opposing the ballot question that could spend an unprecedented $30 million to defeat the initiative.

Roy insisted that the well-funded opposition wasn’t the reason for his emergence into the public eye, but said he and his company would take a more public role heading into the 2018 election. He called the ballot question an “all or nothing” moment for Nevada, promising that if it fails, the state will be forever stuck with a monopoly structure for energy.

“If we don’t pass it this time, guys, they control the people, especially the little people in Nevada, for almost all of time. I can’t see how anything would ever come back and fix it in the future,” he said. “People need to understand that. They don’t need to be afraid of change. They need to be afraid of being stuck with the same old, same old. And, I’ll tell you why. They are not good at this. They are overcharging Nevada hundreds of millions of dollars. Something else has to come in and help, so that’s one. It’s an all or nothing moment. If ECI doesn’t pass, the monopoly has everybody.”

Although Roy focused most of his attention on energy policy and the ballot question, the interview revealed a public side of the CEO that’s been missing from the public spotlight over the last decade. In addition to outlining his many complaints and issues with NV Energy, Roy hit a wide variety of topics including his thoughts on the Republican tax bill passed last year, how he thinks Nevada residents can benefit from solar the same way Alaskans do from oil drilling and the extent to which Switch could get involved in a retail energy market.

Relationship with NV Energy

Roy says that he first envisioned the idea that would become Gigawatt Nevada — a massive, one-gigawatt solar portfolio the company announced last week — in 2013, and told NV Energy CEO Paul Caudill about his vision during a meeting in October 2014.

As Roy tells it, 2014 was a critical time for Switch. The company was expanding so quickly that Roy said it needed to renegotiate and find a more cost-effective source of electricity than what NV Energy was offering, or else he would need to relocate to Arizona, where the cost savings from the state’s offered tax breaks would have saved the company millions of dollars.

“They just said, ‘We’re neutral.’ I went, ‘okay, well, I’m going to fix Nevada,’” he said. “I get it. You’re only neutral. You’re so neutral, you do nothing. And so, now, nothing’s happened. Nothing’s changing. Nothing’s getting better. We need to be the frontrunner in solar in the Western U.S. We can’t be 50th at that. We need to be number one at that. And so, I’m going I’m not waiting for you guys, I’m going.”

Roy said he outlined at that meeting what steps he would take to leave the utility’s service under the state’s complex exit process for large energy users to leave the utility and buy power on the open market, and then help several major casino companies such as MGM Resorts and Wynn Resorts (some of NV Energy’s largest customers) leave their service territory as well.

“In all fairness, they didn’t listen to any of it, and I have done all of it,” he said. “We’re exactly in this position because they didn’t try, in my opinion, to do anything other than just, well, ‘it’s too complicated’. The PUC (Public Utilities Commission), it can’t be done, Carson City is too controlled. ‘Rob, you don’t get it. You don’t understand this is how it works. This is how it works. This is how it works.’ Well, I’m going to do it without you because I’m not like any of you guys.”

Roy said even now, he wanted to keep the door open to NV Energy and wanted to find a way forward that benefited them and Nevada as a whole, but said the company had continually failed to meet him halfway, and posited that their primary interest was in keeping the current monopoly model in place.

“I just do not understand why they haven’t ever come across the aisle on that in four years of asking,” he said. “That’s the thing, where I’m saying, but not a Pollyanna. Paul (Caudill), come join me or I’m going to do it. Paul, come join me or I’m going to exit. Paul, come join me or not only will I exit, then I’ll help Wynn exit and MGM exit and then Sands is going to figure out their piece and Caesars, so of course they wouldn’t help me and I went, okay, so now I’m exiting.”

“And then what happens? Wynn comes and meets with us and we go ‘here is how you do it,’ and MGM comes and meets with us and we go ‘here is how you do it.’ Peppermill goes, how does that work? Here’s how that works. The school district is going, ‘Rob, can we really save $141 million?’ Yes. Here’s how it works. And then of course they show up and go, here. No, no, guys. But this is it. We need choice. Nothing is more important to the success of Nevada than allowing Nevadans to choose their energy future, and guys, it really matters right now.”

Roy claimed that Caudill, who became CEO of NV Energy in June 2014, told him that the $30 million pledged to defeat the ballot question was “just to start” in a meeting the two had two weeks ago. He said that he has tried to reason with the utility, but said he feared that their primary interest was in keeping their current business model.

“I have no idea. I just think they want to keep the monopoly,” he said. “I have offered them so many pathways forward that would be halfway there, partially the way there, not quite exactly what it is, but change it. Let’s ask the PUC to change those rules. Let’s do this. Let’s do that. Let’s do this. Let’s work on that gigawatt together. We’ll do that. I’ll bring all our big partners, guys that buy 300, 400 MVA (Mega Volt Amp) of power. That’s what we’re doing, bringing it to the state. You know how great that would be for Berkshire to partner with that? And I’d get nothing,” he said. “I have met with the energy company 100 times to talk about the same things, and it gets nothing, because I honestly think they think they have enough power in Carson City to stop it.”

He also pushed back on “fear branding” he claims the utility has pushed, noting specifically concerns about the utility’s $7 billion in long-term power contracts and generation assets that would need to be sold off if the ballot question passes. Roy said that most of the assets could be sold off at price, and that it’d be easy to spread the costs around to get rid of the remainder without harming ratepayers.

“But, even if that was at the end of the day there was a number that’s stranded, it’s very small. You put a 20-year bond on the table, you solve it,” he said. “It raises everybody’s rates .0003 cents a kilowatt hour, but I’m going to lower the rates at your house from 12 to 7 (cents per kilowatt hour). And so, it’s super simple to solve. Everybody thinks it’s complicated, and then of course, all of NV Energy’s lobbyists are, have one goal right now which is to make this complicated to the point where everybody’s afraid of it. And so, that’s why we’re coming out to go after that.”

Roy cited documents filed with Berkshire Hathaway — NV Energy’s corporate parent — showing that the utility had sent more than $975 million back to Berkshire over the last two years in revenue, calling it an “egregious” sum.

“It is virtually impossible for a new thoughtfully re-regulated system to cost the people of Nevada more for energy services than the monopoly has been extracting for years,” he said. “It’s impossible that we would ever do anything so bad that it matches what’s there today. People should be afraid of the status quo. It’s really expensive and it’s much more expensive than we realize.”

Roy also said that Nevada’s laws and policies on energy originated from the utility, given that many of the “gray areas” in state law appeared to benefit the utility as well as the general lack of expertise in energy policy in the state’s part-time Legislature.

“Who wrote something that technical about energy 15 years ago?” he said. “I guarantee it wasn’t some PUC people. It wasn’t Senator Tom or Congressman Susan. It was NV Energy who wrote it. And, it’s made on purpose that way to go forward that way.”

Despite the harsh rhetoric, Roy insisted that he didn’t see the utility or Caudill as adversaries, but said he would continue trying to reach an agreement with them both before and after the ballot measure passes.

“There’s a point where I’m going, well pivot, or you’re going to get steamrolled like Uber did to the taxis,” he said. "And, that’s kind of where we are now. Now, we’re about to move into steamroll mode, but also not, but not with a bunch of weird energy, like, ‘We’ve got to, oh, it’s got to be this.’ I’m just going to go, no, hey, Paul, it’s Rob. Here’s what I’m doing. See, I’m in the steamroller. Paul, it’s Rob, I’m in the steamroller. It’s moving forward. Come and get on the steamroller with me, let’s go steamroll dumb ideas and go forward.”

Energy future

Although the ballot question is the immediate battle facing Switch and Roy, he says his ultimate goal is to create an Alaska-like system where every resident of Nevada receives a benefit from the state’s potentially huge market for solar energy production.

“I believe it is my job to try to get as much money to stay in the borders of Nevada from any set of assets, solar, batteries, infrastructure lines, natural gas, all those things, and if somehow someone went, well, NV Energy didn’t know that when they bought it and it wasn’t fair, then I’ll go, fine, set a number on the table and I’ll buy it with a bunch of my friends that can do that and then we only need 6 percent (rate of return) and then let’s build Gigawatt Nevada with 20 gigawatts of power, and let’s import it and export it back and forth west of the Mississippi and make billions of dollars and actually share it with the people of Nevada like Alaska does,” he said.

“That is 100% my goal. I’m younger than all of them. I’m going to achieve that. 20 years from now that’s what’s going to happen, like if you live in Nevada, your power bill is (going to be) lower than anywhere else in the United States. It’s just something we should do with the solar. We have it. We have something New York can’t have. We have something Minnesota…they’re never going to run their stadium off of that. We’re going to run the Raider stadium, 100% renewable the day it turns on. That’s the kind of stuff that’s exciting about this. These are not bad things.”

Although Switch has filed paperwork with the Federal Energy Regulatory Commission (FERC) to create its own power company (dubbed Switched On), Roy said that the company didn’t have much of an interest in becoming a retail provider for Switch if the ballot question passes. But he left the option open if he didn’t feel that low or fixed income ratepayers were seeing enough benefits from the retail market.

“If ECI opened up and nobody else brought the tool sets that I want, a big part of my philanthropic effort would be to help create an avenue to do that, where we would come in and go, well fine, now I am going to jump in,” he said. “How’s this? We’ll do it at cost, but there’s got to be solar that’s built that’s just designated to these end users, that’s just designated to elderly that have no families.”

Roy also said that he was encouraged by the historical trend of decreasing solar production costs that, barring armed conflict, it would beat out fossil fuels in terms of price going forward.

“All power prices should only go down from this point on,” he said. “Unless there’s some catastrophic, a world war, I mean, or just us getting in a one-off war, that’s the kind of thing that could do it. Just normal business — solar won. Solar panels are cheaper than coal, home run. I mean that’s just, we couldn’t have done it 10 years ago. But, we absolutely, I saw it four years ago, and then, now here we are up to that point.”

Even if a recession or economic downturn was to hit, Roy said he was confident that large, well-financed investment firms had enough money and wanted to invest in long-term infrastructure problems that could easily weather any economic turmoil.

“There’s so much money now in the world, guys, that’s coming into these sovereign type funds, these pension funds. See, because the school in Norway can’t put their money in the stock market anyway because then you could lose it all. So, they’re going, 'I need a 6 percent guarantee. I’ve also got to make sure I never go under 5 (percent).' And so, it can’t be in the stock market.”

“So, all these new funds are that new tool for that. And, there’s so much money that can’t be in the stock market now,” he said. “So, it doesn’t matter if the stock market has the worst day in history, all this money is already pulled out of that forever, and in this new toolset. I think there’ll only be more money in the future. If the stock market got bad, Norges (a Norwegian investment firm) would have $1.6 trillion to go invest in long-term infrastructure. It’s all these new long-term infrastructure funds that are, guys, this is really a perfect storm of new innovation and possibility for Nevada.”

Las Vegas Sands

Although the Sands is another major donor to the Energy Choice Initiative, Roy said he hasn’t met the casino’s chairman and CEO, Sheldon Adelson, to discuss the issue. He said the company’s chief financial officer, Patrick Dumont, Adelson’s son-in-law, was in charge of their energy policy, and like Switch, he has philosophical concerns about paying an “exit fee” to leave the utility.

“They’ve been playing games with us for a decade,” he said. “Talk to any of them. Go, ‘How has your NV Energy relationship been in over 20 years?’” he said. “And they’ll go, 'No, it’s the most frustrating thing we all dealt with.' The hardest thing for me in Nevada in 18 years of building this company, the hardest single thing to work on, not clients, not success, not technology, not politics, not any of those things, it’s been one thing and one thing that’s been the hardest hurdle to overcome has been NV Energy. It’s how I feel. I know it’s how all of them feel. It’s how Caesars feels. It’s how the Peppermill feels. It’s how Barrick felt way before all of us, so much so that they left 10 years before us.”

Emergence from “behind the curtain”

Roy’s comments were unique in not only their blunt assertions against NV Energy, but also because the CEO — estimated to be worth around $1 billion — hasn’t given an interview to a media outlet in more than a decade.

The Switch founder had a simple answer when asked why he had stayed behind the scenes for so long — “I’ve been working.”

Roy expanded a little more on why he’s shied away from the limelight, saying it made him uncomfortable and blamed “keyboard cowards” for souring discourse and the exchange of ideas.

“I’m not real big on the ego of getting on stage, and going ‘look at me,’” he said. “I’m going, no, do something relevant. Just too many people have opinions. There’s too many keyboard cowards. It’s wrecked the world. Everybody with a keyboard in their mom’s basement.”

However, that could change very soon, as Roy said the fight over the ballot question would bring him more into the spotlight over the next year.

“It’s something I’m going to start practicing a little more which is great karma, which is I’m not just going to stay on the white side and hope the bad guys do the right thing,” he said. “I’m going to step into the arena wearing my gray armor and start banging my sword on it going, okay, guys, you know what? You want to fight, I’m going to jump into the fight then.”

Exit fees

It’s been nearly two years since Switch paid $27 million for the right to leave NV Energy’s service territory as an “exit fee,” and making the payment still stings Roy.

“We didn’t create an impact,” he said. “It was actually, there was real data that we impacted the whole grid in a super beneficial way to we, the people of Nevada. I should be able to leave, and then also start to create Gigawatt Nevada, and then start to bring everybody else into that, and still create more benefit for them. We’ll give 10% of all the energy we create back to the people to help for (Housing and Urban Development), to help for grandmas, to help for low income, to help for schools. (But the utility said) ‘Yeah, we can’t do that either.’”

Nevertheless, Roy said the company decided to pay the exit fee and leave the grid to purchase power more cheaply (calling it “completely unfair”), but said that the company’s involvement in the ballot question was to allow every Nevadan and every business in the state the right to purchase power through the market, especially as NV Energy may try to raise rates to make up for the departure of Switch and other large power consumers.

“It does nothing for us going forward. We’re already out,” he said. “I want everybody else to come along. And, I really mean that. I’m going, 'no, we’re not going to give up. I don’t want your grandma or my grandma or my mom getting, charging 15 cents (per kilowatt hour) two years from now' because they go, 'well, all the big guys left. Now, there’s a big hole. We’re going to get it from all you end users.' No, no, we left because you were going to send me to Arizona. I would have had to leave anyways.”

Roy that the other company bankrolling the ballot initiative — the Las Vegas Sands — had similar philosophical issues with having to pay an exit fee to leave the grid (Sands executive Andy Abboud said last year that the exit fees were a major reason why they backed the initiative).

“Isn’t this America?” Roy said. “Can’t I leave and go do what I want to go do? Everything else in the world you can, but somehow not energy, because of how broken that laws are written.”

“Deregulation”

If there’s a single word in the entire debate over the Energy Choice Initiative that truly bothers Roy, it’s the term “deregulation.” Roy said a better term to use is “thoughtful re-regulation,” and said the word was more about stoking fears that accurately describe what the ballot question will do.

“Nothing could be further from what we want to do then ‘deregulation,’” he said. “Deregulation is no regulations. That’s what that word means. And, there were some really silly things done in the 2000’s that still weren’t even what that word is, funny enough. That word is a fear-branding word used by the opponents of choice.”

Instead, Roy said that he plans to call for additional regulations if the ballot question passes, and said the initiative will roll out proposed changes to the state’s Public Utilities Commission and other aspects of energy law that will need to change under the ballot question in future months.

“So on those nuances, I actually am going to ask for more regulations,” he said. “There’s no way asking for more regulations should be called deregulation. So, yeah, you’ve got to brand it. You go, 'well, brand it more towards the truthful side then the non-truthful side.'”

Philanthropy

Of all the perceived misdeeds and problems that Roy identified with NV Energy, none appeared to bother him more on a personal level that what he saw as the utility’s use of so-called “fake philanthropy.” Roy, who has donated millions of dollars to various charitable causes, said he was especially irked when utility representatives said they have donated more than $6 million toward charitable causes in a presentation to the Clark County School District Board of Trustees, which he said was a pittance compared to the money the utility over collects from ratepayers.

“This misleading and disingenuous practice of returning to the people their own money to make the monopoly look good negates all aspects of what giving should be about, because I really do give millions and millions of dollars of my own money for all the right reasons, because we should, because people with money should give back,” he said. “People that made money in any given environment, no way you did it alone, no way it was all you, no way it wasn’t the whole environment helping to create that. People have to give that money back. Interestingly enough, Warren Buffett makes a lot of comment like that too and I think that on his big philanthropic side he does some really big things, but somehow it gets lost in translation through the divisions all the way out here to Nevada.”

Roy mentioned the company’s proposal to the school district — which would see the district apply to leave NV Energy and enter into a 20-year Power Purchase Agreement involving Switch and several large energy firms that it already does business with — several times during the interview, saying it could save the district up to $141 million.

“If somehow, something gets created, on the record I’m saying this, where we would generate some money, we’re going to give 100% of it back to the school,” he said. “NV Energy does not do that.”

Roy said that he designed Switch’s corporate logo to represent the karmic wheel, given his beliefs about proper business behavior, but said that many other businesses didn’t share his values.

“I started at the bottom one percent alone in the world, crawled my way up to the one percent on the other side, and so I know that side now, and when people go, 'well, all big companies aren’t big and bad and all rich people aren’t greedy and all that,' but I’m going to tell you something, a lot of them are,” he said.

Political beliefs

Although Switch has given well over $2 million to state-level candidates since 2014, Roy proudly wears the label of a nonpartisan voter, and said many of employees reflect his values.

“Our top 100 people are all almost identical that way,” he said. “I mean probably about 70% of them were Democrats when they started with Switch and now I’ve fixed them. They’re independent. And 30% were Republicans and I’ve fixed them. They’re now independent.”

Roy expressed admiration for Nevada Gov. Brian Sandoval and New York Gov. Andrew Cuomo for their staunch support of K-12 education funding, but said he largely eschewed political parties and thought most solutions for society’s ills would be found outside the two-party political sphere.

“I actually believe that most of the political parties now don’t even have true definitions anymore of what they are,” he said. “But, I will say this, the far, far right, and the far, far left, are not the right answer for the body politic as a whole. And, I think most independent people, Nevada, understands that.”

If there is a guiding political philosophy behind Roy’s beliefs, it’s that the promise of technology and innovation can solve many of the problems facing Nevada and society as a whole.

“Both sides tend to fear brand to the point where it just makes everything get stuck, and no one will take any steps for it,” he said. “So, one of the things that we can do because we’re different is tech is about innovation. Tech is about the future. I am a tech futurist, and a really good one, one of the best in the world. And so, because of that, we have none of these hang ups on the fear of tomorrow. But, know, guys, if we all get together and we all work really hard, technology is going to make that better. And, if you’re going to fight it, technology is going to steamroll it.”

Still, Roy hinted at a handful of more traditional political beliefs, saying he moved the company’s minimum wage to $15 at least three years ago, and said he and the group backing the ballot initiative would insist that prevailing wage requirements be written into any new laws passed as a result of the Energy Choice Initiative. He also criticized the structure of the 2017 Tax Cuts and Jobs Act championed by President Donald Trump, saying it didn’t do enough to push wage increases down to ordinary workers.

“I actually think that the current tax policy that happened under the new administration should have had a law that said 75% of all the money has to go to the employees,” he said.

Disclosure: Switch, MGM Resorts, Wynn Resorts, Caesars and NV Energy are donors to The Nevada Independent. See all of our donors here.

ECI 2018 by Riley Snyder on Scribd

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