By VERNON ROBISON
Social media is being flooded these days with ads recommending a ‘Yes’ vote on Nevada Ballot Question 3, otherwise known as the Energy Choice Initiative (ECI). These brief ad spots break the issues down into a single concept that most people can understand: that competition is good and monopoly is bad. They always end with the reassuring words: “It’s that simple.”
The trouble is, the energy markets, and the public policies regulating them, are anything but simple. The energy sector requires tremendous technical knowledge to grasp how it operates. There may be a reason why the ‘regulated monopoly’ has historically been the preferred method of dealing with major utilities. But it certainly can’t be explained in a 15 second commercial spot.
So where can the average ratepayer go for reliable and understandable information? A good first step is to the entity tasked to look after the ratepayers’ interests against the monopoly of public utilities. In Nevada the Public Utilities Commission (PUCN) has been doing that, and doing it well, for more than 100 years.
In April, the PUCN released a report with its findings on Question 3. Far from a series of 30 second soundbites, this detailed report goes on for 126 pages. But given the fact that the PUCN was established to protect and safeguard the interests of ratepayers, this report is something that ratepayers in Nevada ought to consider.
What follows are some of the high points of that report, up against a few of the claims being made by the “Yes on 3” ads. I’ll try to keep them simple. But it’s a complex subject. If you crave further details, rest assured that there are hundreds of words behind each of these points waiting for you in the full report.
Claim #1: ECI will bring lower rates.
First off, Nevadans currently enjoy some of the lowest average electricity rates in the country. Nevada ranked no. 7 for the lowest annual average per-kilowatt-hour cost in 2016. The average retail price for a kilowatt-hour in Nevada was 8.39 cents. That is compared to, say, California where the same average price was 15.23 cents.
Rather than lowering those rates further, though, the PUCN report projects that ECI is likely to increase rates during the first ten years of its implementation. The report also calculates huge transition costs as hundreds of millions of dollars in power generating plants are quickly divested from NV Energy. This would leave Nevada ratepayers liable for any financial losses incurred as “stranded costs” in those transactions.
So what about those lower rates promised in the ads? If they come at all, it probably wouldn’t be until after a decade of recovering these enormous costs.
Claim #2: ECI will provide an open market with more choice.
Yes, Nevada ratepayers may have broader options in choosing their retail providers. But choice alone isn’t much of a benefit if there is no price advantage.
Under ECI, Nevadans are likely to have much less representation in determination of energy rates. Since NV Energy will be forced to divest all of its power generation, the state will need a wholesale market to supply the new retail providers. The PUCN report recognizes the California Independent System Operator (CAISO) as the “most viable option” of a retail market for Nevada. But this is an already-established California entity with a board of trustees appointed by California’s governor. There is uncertainty on just where Nevada ratepayers will stand in the pecking order of that body. The PUCN report states that there would be a need “for bi-state legislation and changes to CAISO’s governance structure to ensure Nevada’s interests are represented.”
OK! Two state legislatures involved in regulating a bi-state energy exchange: well, that sounds simple, right? Wrong! Given the obvious disproportion in population between California and Nevada, and the vast spread in the average retail price of power in each state (see Claim #1 above), it is hard to imagine an arrangement where the Nevada ratepayer is going to be adequately represented. In short, though we may have more choices in providers, Nevada will likely be put at the mercy of California market regulators in its power rates. Is that really what we want?
Claim #3: ECI will provide less government regulation.
This one may be true, but it is not necessarily a good thing. ECI would remove regulatory authority from the PUCN and, by extension, the Nevada Legislature. That would “cause new exposure for Nevada ratepayers to market volatility and profit-driven ratemaking practices.”
The PUCN report admits that this arrangement “may also bring theoretical benefits of open market competition to Nevada.” But isn’t that a tremendous risk to take, given we would be giving up the relatively successful track record of our current regulatory system?
In any case, as discussed in Claim #2, we are turning over much of the regulation of underlying rates to a California wholesale market. And knowing that great state to our west, does that sound like it will bring LESS regulation? Hardly.
Claim #4: ECI will open doors to more renewable energy options in the state.
The ads always equate the status-quo with dark, dirty coal plants and the ECI with bright clean renewables. But there is nothing in the language of Question 3 that promotes the development of renewable energy. To hitch up ECI to the trendy renewable energy bandwagon is simply political manipulation and misinformation.
In any case, Nevada is already “a leader in solar and renewable energy development” even without ECI. Nevada ranks no. 4 overall in the country for total solar generation and has been identified as a “top solar state” by the Solar Energy Industries Association. Nevada also ranks no. 2 in the country in utility-scale geothermal generation. Finally, it ranks among the top 10 best states for lowest carbon dioxide emissions.
So if you are a renewable energy activist, ECI is not really relevant to your cause. It shouldn’t be a factor in your vote.
Claim #5: ECI won’t harm the rurals.
OK, I admit it. You won’t really see this one in the ads. And why is that? Because the originators of Question 3 didn’t know, nor did they care, what ECI would do to the rurals.
Of course, they will say over and over that ECI was never intended to harm the rural districts in the state. But it will. At the very least, the measure doesn’t even try to take the rural entities into account.
Rural districts like OPD are not part of NV Energy monopoly in the first place. So rural residents don’t have any of the same complaints that are behind the ECI.
While these small districts are usually the only supplier of power to their service territories, they are not a monopoly. Rather they are non-profit, quasi-government entities.
For nearly a hundred years, these districts have regulated themselves quite well, thanks very much. They are each governed by a locally elected board of community members who have a vested interest in keeping rates low. None of these entities have to worry about maximizing a return for shareholders.
Thus the rural entities are already modelled on many of the ECI’s supposed principles. There is really no need, nor any desire, for Question 3 in the rurals. Nevertheless rural residents; who were doing just fine; have all been dragged into this mess without ever being asked.
ECI would hurt the rural folks the most.
In short, Question 3 will not accomplish what is being promised. It certainly won’t for rural residents in the state. But it will also fall short for the urban ratepayers under NV Energy.
Yes, in a simple world, monopoly busting would be a good thing. But the world of energy markets is NOT a simple world. Anyone who claims it is, has something to sell you. And in this case, you don’t want to buy it!
The only beneficiary that might gain from ECI is the largest-of-the-large commercial/industrial interests in the state. And that’s not surprising when you look at who is funding all of those manipulative social media ads. Everyone else; including residential ratepayers, municipal entities and the state’s small businesses; will be hurt by the measure.
To make the long story short, here is simply no reason that a resident of Nevada – especially of its rural communities – should support such a scheme. And on that point alone, the choice truly is just that simple.