During the first week of April, Thomas Mitchell’s weekly commentary was titled “Customers should be able to shop for electricity.” The commentary was a general support of the Energy Choice initiative. This initiative will appear as Question 3 on the November ballot. Like many of you who read his column, I respect Thomas as a columnist and generally agree with his commentaries. But in this case I think he overlooked an important issue. The underlying basis for his overall conclusion is that competition is good and that it usually leads to lower costs. Therefore, by extension he concludes Energy Choice should be good in rural Nevada. I too generally support competition, but what Thomas and others sometimes forget is the unique nature of the rural electric utilities operating in Nevada and how Energy Choice will affect the folks served by these rural utilities.
In the days following the publication of his column, I struck up a dialog with Thomas on the unintended impacts of Energy Choice. True to his nature, he was willing to consider a different perspective. My arguments to Thomas generally revolve around two issues. Governance and rates. First, I contend that Energy Choice will essentially eliminate decision making by locally elected rural electric utility boards. Second, I believe Energy Choice will actually increase the cost of electric service for the current customers served by these rural electric utilities.
Let’s start with the governance issue. Most rural Nevadans are served by a rural electric utility, not by the investor-owned utility (IOU) serving Las Vegas, Henderson, Reno, or Carson City. Rural electric utilities are not-for-profit power districts or cooperatives. In either case, we were created by and for the people we serve. We serve our friends, neighbors and communities. Our decisions are made by our customers, by participating in our local meetings and serving on our boards. In contrast an IOU is a for-profit business with shareholders. They are in the business to make money for their shareholders. The IOU’s decisions are made by a board of directors and a parent company based in Nebraska. I fully understand why someone in Las Vegas or Reno would want competition.
But rural utility customers already have a voice in how we operate, where we buy power from, and how we set rates. If our customers don’t like what we are doing, they vote in new board members. If Energy Choice passes, that decision making authority will largely shift from rural Nevada to four new parties. The first will be the new business which will sell energy. Under Energy Choice these are called retail energy providers. They will most likely be an out-of-state, for-profit corporation. The second party will be the Public Utility Commission of Nevada. They will regulate the rates in Nevada for energy from the retail energy providers and the power line maintenance charge for rural electric utilities who will be relegated to just owning, operating, and maintaining the local wires. The third party is most likely the California Independent System Operator. They operate the only wholesale market in the entire western U.S. and will likely operate the wholesale market in Nevada. The final party will be the Federal Energy Regulatory Commission who will regulate the rates of the wholesale market. The decisions that are currently done in rural Nevada, under Energy Choice will be done in Carson City, California, Washington, D.C. and in the board room of an out-of-state corporation.
Now let’s turn to the rates issue. The electric power rural Nevadans receive from their local utility is largely from Federal hydropower generated from either the Columbia River or the Colorado River systems. Allocations of Federal hydropower are by law or regulation limited primarily to public, not-for-profit organizations such as rural electric utilities. Federal hydropower creates very little carbon emission and is among the lowest priced wholesale energy available. The retail energy providers, who will be the new companies selling energy in rural Nevada, will not have access to this Federal hydropower. They will be buying much higher priced natural gas or other types of generation on a wholesale market designed by Californians for Californians, adding a profit margin to that power, and then paying a wires charge to the local rural electric utility to have that energy delivered. It is pretty clear the price rural Nevadans will pay for electric service under Energy Choice will not be less than the current rates they pay for service. Which, by the way, are already less than the rates paid in states with Energy Choice, including Texas which is touted as the poster child for Energy Choice success with its average residential rate of 10.85 cents/kwh.
David Luttrell is general manager of the Lincoln County Power District #1, president of the Nevada Rural Electric Association and a member of the Governor’s Committee on Energy Choice
Mr. Luttrell’s comments are well taken. I wondered how the Energy Choice could conceivable lower power rates for rural power customers when I read Mr Mitchell’s article. These power districts were created precisely because none of the for-profit energy providers were interested in providing power to rural areas because there wasn’t enough profit in the process to satisfy their shareholders.
The only advantage I can see might be more professional management of the process, based on some past bad decisions made by the part-time boards that have lead to imprudent decisions to sign long-term power contracts that end up being a bad idea (as Overton Power District #5 did some years ago). When that happens;, we users are stuck paying the costs of that bad decision. Still and all, I believe we should NOT hobble the rural power districts with another layer of bureaucracy, which will ultimately only cost us more money.
Good article, it points out that local non-profit electric utilities buy power on the wholesale market, The energy choice providers will add a profit on top of wholesale rates where local utilities do not add profits and consumers get the wholesale rate. The initiative was put up by the big powers users (Casinos and data centers) so they can buy wholesale power leaving the homeowner to pay higher rates. The local utilities are guided by local people so we have local control, all that will go away.
David Luttrell of the Lincoln County Power District is correct as to all of his points in regards to Nevada Question 3, the deregulation of electric generation.. As a retired financial analyst with the Nevada PUC, I can assure all Nevada ratepayers, whether they receive service from a nonprofit cooperative or NVEnergy, their electric bills will rise if Question 3 passes. Question 3 is essentially a license for electric generation companies to game the system, and legally steal from businesses and residential customers. We saw it happen in California and around the nation in the 90’s when deregulation was all the rage. How short our memories are!