Can Nevada lawmakers actually correctly introduce energy choice?

By Thomas Mitchell
Let’s get one thing straight, the Energy Choice Initiative — Question 3 — on the November ballot is not deregulation of the electricity market. It would replace Nevada’s regulated energy monopoly with a regulated competitive energy market.
It would amend the Constitution to require lawmakers by July 1, 2023, to “establish an open, competitive retail electric market, to ensure that protections are established that entitle customers to safe, reliable, and competitively priced electricity …” This would include provisions to reduce costs to customers, ensure reliable service and prevent unfair practices. It would not require competitive transmission and distribution systems.
The initiative passed in 2016 with 72 percent voting in favor, but, since it amends the Constitution, voters must again approve of it this fall.
The ballot measure is being pushed by several large power users — chiefly the Las Vegas Sands hotel-casino company and the data company Switch. NV Energy, the monopoly power company that serves 90 percent of Nevada was silent on the issue in 2016, but has now pledged to join with opponents in spending $30 million to defeat Question 3. This past week four organizations that favor renewable energy — the Sierra Club, Natural Resources Defense Council, Southwest Energy Efficiency Project and Western Resource Advocates — announced opposition to the measure, saying they feared it would hamper efforts to increase “clean power” generation.
Republican gubernatorial candidate Adam Laxalt supports Question 3, while Democratic opponent Steve Sisolak opposes it.
Recently the Guinn Center — named for former Gov. Kenny Guinn and self-described as a nonprofit, bipartisan research and policy analysis center — put out an analysis of the ramifications should Question 3 pass that squarely straddles the fence.
In a conference call with the press, Meredith Levine, Guinn Center’s director of economic policy, said the organization was not taking a position but was providing historic and analytical data for the voters.
As to whether the initiative would result in lower or higher power bills, Levine said, “We have no idea what will happen. We could only say this is what could happen, what may happen, what other states have experienced.”
The report indicates the success or failure of Question 3 depends on how lawmakers write the rules.
One of the principal concerns seems to be whether NV Energy would be required to divest, or sell off, its generating plants and its power purchase contracts — possibly at a loss that would have to be passed on to customers.
“Question 3 does not require divestiture explicitly,” the Guinn report states. “However, as one industry expert explained to the Guinn Center, it might be inferred: in order to afford meaningful choices among different providers and ‘to promote competition and choices,’ if the utilities were to retain control over generation assets, it would contravene the spirit of the initiative petition.”
NV Energy has estimated this so-called stranded cost to be as much as $7 billion that would have to be paid by existing customers. The Public Utilities Commission of Nevada estimates those stranded costs could cause electricity rates to rise $24.91 a month in Southern Nevada and $6.52 Northern Nevada for residential customers.
But a report by the Garrett Group presented to the Governor’s Committee on Energy Choice recently on behalf of the initiative backers said such a sell off should be profitable, and, when coupled with the recent tax law changes, should cause power bills to drop by $11.16 a month.
The Guinn Center reported that some states that have instituted competitive power markets have seen prices rise due to fluctuations in fuel costs and other factors.
But it also noted that a Pennsylvania PUC commissioner reported its introduction of competition resulted in residential and commercial customers in Philadelphia and Pittsburgh paying 40 percent to 56 percent less for power in inflation-adjusted dollars than they did in 1996 and residential customers saved $818 million in 2016.
A 2015 study found that overall competition has been beneficial. From 1997 to 2014 states that had adopted customer choice for power saw inflation-adjusted residential rates fell 5.2 percent, while monopoly states saw those rates rise 3.9 percent.
So, the question for voters this fall may not be whether Question 3 is good or bad but whether we trust our lawmakers to be able to learn from the experiences of other states and write regulations that will be beneficial. Of course, that may also depend on what lawmakers are elected on the same ballot. Frankly, we are torn.

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