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The Indy Explains: Do businesses that leave NV Energy have to meet renewable standards?

Riley Snyder
Riley Snyder
EnergyIndy Explainers

It’s looking increasingly likely that Nevada lawmakers will push to increase the state’s Renewable Portfolio Standard for the first time in a decade when the 120-day legislative session starts in February.

But one potential obstacle is standing in the way — how to deal with the growing number of businesses that no longer purchase electricity from NV Energy, the state’s primary utility.

An increasing number of companies have filed what’s known as a 704B application — named for the section in state law — that allows large power users to leave NV Energy as a customer and purchase power from another provider. At least eight companies — the most recent being the South Point Hotel and Casino — have filed to leave the incumbent utility this year, the most in a single year since the law was adopted in 2001.

Under state law, companies that depart the utility still have to meet the RPS standard — but only the one in place at the time of their departure.

That means businesses that left NV Energy as a customer last decade, such as Barrick Gold and Newmont Mining, only have to meet the 15 percent RPS that was in place when they applied to leave. It also means that unless legislators make an RPS increase retroactive, large corporations such as MGM Resorts and Caesars Entertainment that filed to leave the utility in the last several years also won’t have to meet higher standards.

Companies that have left NV Energy’s service make up a small but significant portion of energy consumption in Nevada — according to the state Office of Energy’s most recent report, retail power providers made up about 7.5 percent of consumed electricity in 2016. But the percentage is likely higher now, given the larger number of customers who have left the utility.

Efforts are afoot to force companies that have left the utility to meet any higher renewable standards adopted by the Legislature. Democratic state Sen. Chris Brooks, who sponsored the vetoed 2017 bill raising the RPS to 40 percent by 2030, said provisions capturing non-utility customers would likely be a part of the conversation in 2019 — and part of his goal to reduce carbon emissions.

“While they might not make up as significant of a portion of load today, I believe that the future of electrical utility delivery in the state of Nevada is going to look a lot different moving forward,” Brooks said in an interview. “I think laying the groundwork so that all loads are participating in a carbon reduction plan or RPS that recognizes that, it’s prudent policy. If they’re an electrical load in the state of Nevada, they have an impact on carbon output.”

Renewable Portfolio Standard (RPS) basics

It’s easy to conflate the idea of a renewable portfolio standard with an automatic increase in the amount of renewable fuel sources used by a power company, but the reality is a bit more complicated.

In essence, an RPS creates a credit-based system where utilities and other power suppliers are required to hit minimum credit benchmarks of renewable production, typically as a percentage of their total power sold in a year. One portfolio energy credit, or PEC, is equal to one kilowatt-hour of generated electricity (equivalent to a 100-watt television running for 10 hours).

Nevada’s Public Utilities Commission has set up a credit “marketplace” that allows providers to buy and sell credits. The commission is also charged with confirming that energy providers meet the standard every year, and assessing a penalty if the target is missed.

A higher RPS doesn’t necessarily mandate more renewable energy generation, nor match up neatly with the actual mix of renewable and non-renewable in use by a state.

Under state law, energy efficiency measures fully or partially subsidized by the utility can be used to meet the requirement, and electricity created through home solar systems is given a 2.4 times multiplier credit if they were installed prior to 2015. Unused credits can also be banked for use in a future year.

Those aspects of the credit system often mean there is a disparity between fuel mix and RPS compliance. NV Energy reported 23.8 percent clean energy credit compliance in 2017 — above the mandated 20 percent RPS for that year — but the company’s actual fuel mix was closer to 18 percent renewable sources and 76 percent natural gas.

Nevada lawmakers approved an initial RPS in 1997, and in 2009 approved a law gradually raising the standard to 25 percent by 2025. Thirteen jurisdictions have a higher RPS target than Nevada, including Hawaii (100 percent by 2045), California (100 percent by 2045) and Vermont (75 percent by 2032). New Jersey, New York and Oregon have set 50 percent RPS targets by 2030, while Maryland has a 40 percent target by 2030, Colorado has a 30 percent target by 2020 and Connecticut has a 27 percent target by 2020.

Exits and RPS

In 2009, Nevada lawmakers unanimously approved a bill that not only raised the renewable standard to 25 percent by 2025, but also cleared up a pending question: whether businesses that had left NV Energy as a customer still had to meet the RPS minimum.

The law, AB387, specified that if an electric customer filed to leave the utility as a customer, it would still need to acquire renewable portfolio credits needed to meet the RPS effective on the date of the PUC’s order granting the exit.

Prior to that year, the handful of mining customers that had filed to leave the utility were facing some uncertainty over what would happen if the renewable standard was raised. In 2010, the PUC issued an advisory order finding that Barrick Goldstrike Mines, which left NV Energy in 2005, would be required to meet the portfolio standard in place at the time of its departure, which topped out at 15 percent by 2013.

Brooks said that the 2009 clarification on departed customers and RPS compliance was designed to give businesses some level of certainty and shield them from a sudden, unexpected ramp-up in renewable minimums. But he said times and technology have changed significantly, and that those companies shouldn’t be allowed to stay at a lower level of renewable compliance.

“I understand that motivation,” he said. “But as far as I’m concerned at the end of the day, we’re all part of Nevada and we need to all participate in what’s best for all of Nevada.”

In his veto message of the 2017 bill, Gov. Brian Sandoval said part of his opposition stemmed from the fact that companies who left NV Energy had already paid a substantial “impact fee” for the right to do so, and that the bill would “dramatically change the terms associated with their decision to exit” and would impose “additional costs on top the millions of dollars they have already paid to exit the Nevada power grid.”

Both Brooks and Senate Democratic Majority Leader Kelvin Atkinson have said they want to raise the RPS much higher; Atkinson has said he’ll back moving to a 100 percent renewable standard over time. Governor-elect Steve Sisolak, also a Democrat, said on the campaign trail that he supported the ballot question raising the standard to 50 percent by 2030, and NV Energy also has said it would support raising the standard to 50 percent by 2030.

Brooks said that several of the exited companies opposed being required to meet a higher RPS during the fight over the 2017 bill, but that he was confident similar language would make it through in 2019.

Another factor at play is Question 6, the proposed constitutional amendment to raise the state’s RPS to 50 percent by 2030. Approved with around 59 percent of the vote, the actual language of the ballot question states that it would apply to every “provider of electric utility service that is engaged in the business of selling electricity to retail customers for consumption in this State” — including those serving customers that have left NV Energy. As the language would be added to the constitution, its provisions would supercede those approved by the Legislature or any PUC orders on RPS compliance.

Updated at 11:32 to correct the number of states with a higher RPS than Nevada.


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