Part 2
If the Energy Choice Initiative (ECI) amending the state Constitution to create a competitive market for electricity passes again in the fall its impact on power bills in rural Nevada will depend on how the Legislature writes the rules to make it happen.
David Luttrell — general manager of the Lincoln County Power District No. 1, president of the Nevada Rural Electric Association and a member of the Governor’s Committee on Energy Choice — notes that proponents of the ballot measure insist existing utilities should divest themselves of their power generating assets and current contracts to purchase power.
Luttrell says there is uncertainty about what energy choice would look like in the coming years, saying, “The vast majority of it will be written by the next couple of sessions of the state Legislature. The only thing that really you can point to in that document and that amendment language is that a single person in the state of Nevada will have choice of some sort.”
One of the problems faced by the rural cooperatives Luttrell points out is fixed cost. While NV Energy has 40 to 50 customers per mile of power lines, rural cooperatives statewide only have five customers per mile, while in Lincoln County there are only two per mile.
The way the cooperatives keep rates competitive is that many get as much as 80 percent of their power from very low cost hydroelectric generation, such as that from Hoover Dam. That hydropower is limited to public, not-for-profit organizations such as rural electric utilities.
“If we are precluded in any way from doing that there’s going to be a negative impact. Does ECI mandate that, that we have to get rid of your Hoover power? No it doesn’t, as it is currently written in that one paragraph constitutional amendment,” the power district manager says. “But what it does is it puts that uncertainty to a future Legislature to make that decision. We know the proponents of the ECI are saying is all utilities need to get rid of their power sources, otherwise they have an unfair competitive advantage.”
Jon Wellinghoff, a consultant to the ballot question and former Federal Energy Regulatory Commission chairman, has said in an interview with the news website The Nevada Independent that lawmakers could designate existing rural nonprofit power companies as the provider of last resort and allow them to keep their existing power contracts.
“It’s virtually a non-issue if we structure the legislation correctly,” he said.
And that’s Luttrell’s fear. Will the lawmakers structure the legislation correctly?
If his cooperative is required to divest its power contract for inexpensive hydropower in order to allow competitors to come in, Luttrell warns the rates in rural Nevada are going to go up dramatically.
“It leaves it all up to the Legislature to decide, but again proponents are saying you’ve got to make these utilities divest their generation, whether they be assets or power supply contracts in order to allow fair competition in all areas of the state,” he says.
“The real message I am trying to get out right now is that rural Nevada is a kind of unintended consequence,” he continues. “Energy choice was the brainchild of the casinos and Switch (a data processing firm that using huge amounts of electricity). They’re the ones who put this thing together. They’re the ones who largely funded it.”
Luttrell says industrial and commercial customers already have retail choice. Any customer with electrical needs greater than 1 megawatt, such as casinos, mines and industrial operations, already have the right to buy their own energy. “The problem, and this is why Switch and Sands and MGM and others don’t like it, is in order to exercise that right they have to pay an exit fee from the grid, from the NV Energy system and they don’t like paying that exit fee,” he says.
He notes that the Public Utilities Commission of Nevada demands exit fees to protect other customers, such as residential customers, who would have to bear the burden of paying for more generation capacity than is needed when large customers leave.
“Should a person in Wells, or a person in Ely or a person in Pioche, Nevada, pay part of those stranded costs? … We weren’t part of the planning that went into creating those assets, but we’re certainly part of the discussion of where they’re going to get spread. We don’t like that.”
Voters will decide. If approved, lawmakers must make fair rules.
Thomas Mitchell is a longtime Nevada newspaper columnist. You may email him at thomasmnv@yahoo.com. He also blogs at http://4thst8.wordpress.
Tom, I’ve always be a little concerned to leave anything to the government. But if it passes almost all residential customers will pay more. Just look at the numbers; every utility has operating cost that are fixed and we all must pay those costs, then all energy supplying utilities go to the wholesale market and get their power. The only one making a profit is Nevada Energy. All the rest of the state is served by non-profits. So now we bring in an outsider who also buys on the wholesale market then adds their profit (just like Nevada Energy). Today the NV profit is controlled by the PUC but not under this proposal, the outsider is free to offer any price they want. Also the non-profits stop buying power and just provide wire service only and the profit maker steps in and now makes a profit on the energy sales which the non-profits do not do. All this because some big energy users think they can buy cheaper and leave the little guy behind.