More choice is usually considered to be a good thing for consumers. In the energy space, messaging around choice is also often aligned with greater access to renewables.
But four environmental groups say that’s not the case when it comes to Nevada’s Energy Choice Initiative. Question 3 on the state’s ballot in this fall’s election would end NV Energy’s monopoly and open up the electricity market to competition.
The Natural Resources Defense Council, the Sierra Club, Southwest Energy Efficiency Project, and Western Resource Advocates said Thursday that they oppose deregulating the Nevada’s electricity market because of the disruption it will cause to the state's clean energy progress.
NV Energy is also opposed to the ballot measure, and has vowed to spend $30 million to defeat it.
In May, NV Energy released a plan to double its current level of renewable energy generation by 2023 by contracting for more than 1,000 megawatts of new renewable energy resources. The utility also committed to deploying 100 megawatts of battery energy capacity. NV Energy described the clean energy expansion plan as a step forward in the company’s long-term goal of serving Nevada customers with 100 percent renewable energy.
The utility has already contracted with vendors to build the new clean energy projects, including NextEra Energy Resources, Cypress Creek Renewables, and 8minutenergy Renewables — with 8minutenergy's Eagle Shadow Mountain Solar Farm locking in a record-low price. However, CEO Paul Caudill said NV Energy still has the option to cancel in the event Question 3 passes, in order to avoid increasing the liabilities for NV Energy customers.
If Question 3 passes, NV Energy would no longer be in the energy supply business and would have to sell off its power plants. Environmental groups say that will stall the deployment of new renewable energy resources. They argue deregulation will also undermine the future of utility-sponsored energy efficiency programs and introduce uncertainty into the state’s rebounding rooftop solar sector.
The Energy Choice Initiative would create uncertainty across the energy sector, said Howard Geller, executive director of the Southwest Energy Efficiency Project, in an interview. If the ballot measure is approved, the Nevada state legislature will have until 2023 to establish a new deregulated electricity market. Not only would that put NV Energy’s clean energy plans on hold for several years as policymakers work out the details, but it’s also unlikely renewables and efficiency will advance as aggressively once deregulation is in place, he said.
The environmental groups also said there is no evidence that the new market structure would lower rates for residential customers.
“'Choice' is a nice word. But choice doesn’t necessarily mean lower rates and a cleaner energy future,” said Geller.
The push for a competitive electricity market in Nevada dates back to 2016, to when several large corporate energy customers — MGM Resorts, Wynn Resorts, Caesars Entertainment and the data company Switch — opted to pay large exit fees in order to leave NV Energy territory and purchase electricity on their own. That same year, Las Vegas Sands Corporation almost exclusively funded a ballot measure to deregulate the state, which also attracted support from MGM and Switch, as well as Tesla, which operates its giant battery Gigafactory in the Silver State.
This time around, Question 3 is backed by $2.35 million from Sheldon Adelson’s Sands Corp. and $1.7 million from Switch, according to the Nevada Independent.
Voters approved Question 3 on the 2016 ballot by a wide margin — the same Question 3 that’s up for a vote again this year. In Nevada, measures that would change the state constitution are required to pass in two successive even-numbered election years in order to be adopted.
As corporations in the state were pushing for ways to procure their own energy — much of it expected to be competitively priced renewable energy — regulators were starting to work through a policy blowup over rooftop solar. In 2015, Nevada utility regulators voted to phase out net metering credits and hike fixed fees on all residential solar customers, which undercut the economics of investing in home solar, halted Nevada’s booming rooftop solar market, and led to layoffs and market exits at solar companies.
Many Nevadans turned out to protest the solar policy shift, which was painted as a battle of epic proportions between energy titans: Tesla CEO Elon Musk and NV Energy’s owner Warren Buffett. In response to public outcry, state lawmakers passed legislation that reversed the rate increases. Governor Brian Sandoval appointed a roster of all-new utility commissioners. The reformed commission subsequently put new, favorable net-metering rules in place.
In this context, public support for energy choice in Nevada has soared. According to an April poll conducted by The Nevada Independent, 68 percent of respondents said they supported deregulation, 20 percent said they opposed it and 12 percent said they were undecided.
A strong majority of respondents who identify as liberal were in favor of the ballot initiative, in large part because it has been pitched as a way to accelerate the deployment of clean energy resources. The problem, according to several environmental groups, is that that characterization is incorrect.
“Question 3 has been sold to voters as a way to get more renewable energy online in Nevada, but it will actually make it more difficult,” said Dylan Sullivan, senior scientist at the Natural Resources Defense Council, in a statement. “There will be years of market uncertainty as the legislature figures out how to implement complex restructuring, and even after that, electricity retailers have shown a reluctance to sign the long-term contracts it takes to get new renewables built.”
Geller noted that “mistakes were made” several years ago when utility regulators undercut Nevada’s rooftop solar market. But the policies have changed and the market is now moving forward again
The real reason energy choice is advancing is so corporations can avoid paying hefty exit fees in order to procure the energy they want.
“Sands, which is behind this ballot question, wants to get out without paying the exit fee,” he said. “The exit fee is to reimburse the remaining residential customers and low-income households for the investments the utility has made for the large electricity consumers,” he said.
With fewer parties paying for NV Energy’s existing contacts, the more it will cost for customers who continue to receive service from NV Energy, unless there’s some kind of reconciliation. If the ballot measure passes, the market will be opened up, and Sands and others can avoid the exit fees.
Supporters of the Energy Choice Initiative clearly have a different view of the situation. That group of supporters is largely made up of commercial energy customers, including Patagonia, Walmart and Squaw Valley Alpine Meadows, as well as a bar and a couple of coffee shops.
The campaign website describes the effort as “a statewide coalition representing Nevada voters, large and small employers, community leaders, and consumers with a goal to open Nevada’s energy markets and give consumers the option to purchase renewable energy and lower overall energy costs.”
Before NV Energy released its ambitious renewable energy plan, it was easy to see how clean energy might see greater adoption in an open market. The utility suffered reputational damage from pushing back on the rooftop solar fight and for providing a corporate clean energy offering that came at a significant premium. Plus, there’s an appeal to undercutting the monopoly utility, which answers to its stockholders as well as its customers.
Warren Buffett, the chairman of Berkshire Hathaway, NV Energy’s parent company, has noted that government-incentivized renewables “may eventually erode the economics of the incumbent utility.”
The fact that four environmental groups are now backing the utility position shows that opposition to the incumbent may be fading as utilities are boosting their clean energy credentials.
“The utility world is changing, particularly in the Southwest where we have plentiful solar, wind and geothermal,” said Geller. “We have investor-owned utilities that were largely coal-based…that have moved away from coal in a big way and are replacing it with renewable energy.”
“Public policy and pressure from environmental groups and the public are important factors in why they’re changing,” he added.
In Arizona, for instance, regulators put a hold on new gas development earlier this year as the state considers increasing its renewable energy portfolio standard. A ballot initiative that would require the state’s electric utilities to get 50 percent of their energy from renewables recently made it onto the Arizona election ballot for November. Separately, Arizona utility commissioner Andy Tobin has proposed an 80 percent renewable energy portfolio by 2050.
Meanwhile, Arizona Public Service, the state’s largest investor-owned utility, expects coal’s contribution to its energy mix will fall from 21 percent to 11 percent over the next 15 years, while solar and energy efficiency will meet 50 percent of new energy demand over the period. Also, one of the largest coal plants in the West, which is based in Arizona, is slated to shut down in 2019 as the power plant’s primary customer shifts to solar.
A little to the northeast, Colorado’s Xcel Energy recently proposed to retire two of its coal-fired units.
Back in Nevada, uncertainty around deregulation has already had an impact on clean energy policy. Last year, the Nevada state legislature passed a bill that would have increased the state’s renewable energy mandate to 40 percent by 2030 and created new incentives for energy storage. But Governor Brian Sandoval vetoed the bill, stating it would be premature to approve it amid Nevada’s pending shift to a competitive energy market. Sandoval also vetoed a bill that would have established a 200-megawatt community solar program by 2023.
Staying with the regulated utility will eliminate concerns around market disruption and will enable renewables to take off in Nevada at a much faster pace, said Geller. When asked if that will be a difficult case to make after nearly two years of discussion around how choice will promote clean energy in the state, he was unconcerned.
“I don’t think it’s difficult to message,” he said. “Choice is uncertainty.”