Time to let free market work for electricity

Thomas Mitchell is a former newspaper editor who now writes
conservative/libertarian columns for weekly papers in Nevada

The Energy Choice Initiative — Question 3 on the November ballot — would amend the Nevada 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 it this year.
It had virtually no opposition in 2016 but now NV Energy, the monopoly power company that serves 90 percent of Nevada, is spending $63 million to defeat Question 3. Under the monopoly system, NV Energy is assured a 10 percent rate of return on investments. Profits without risk.
The ballot measure is being pushed by several large power users — chiefly Las Vegas casinos and large mining and data companies.
The opponents of Question 3 make the spurious claim: “In fact, in the 14 states that deregulated electricity, average residential electricity rates are 30 percent higher than ours in Nevada.”
That is entirely due to factors such as fuel costs that have nothing to do with what a change to a free market system could provide. The better comparison is to look at how electricity prices have changed over the years since competition was introduced.
According to a 2017 analysis by the Retail Energy Supply Association, the average electricity price in those 14 competitive states fell 8 percent from 2008 to 2016, while the price of power in the monopoly states rose nearly 15 percent.
NV Energy also claims passage of Question 3 would require it to sell off its generating facilities and purchase power contracts at a loss that would have to be covered by ratepayers, but nothing in the language of the amendment requires this. In fact, lawmakers could require NV Energy for a period of time to be the provider of last resort.
NV Energy estimated that it would lose $7 billion by selling assets. The Public Utilities Commission of Nevada estimated those stranded costs could cause electricity rates to rise $24.91 a month in Southern Nevada and $6.52 in Northern Nevada for residential customers.
But a report by the Garrett Group presented to the Governor’s Committee on Energy Choice 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.
Nevada and many other states were well on the way to breaking up their electricity generation monopolies 17 years ago until the Enron market manipulation debacle led to blackouts and price spikes that scared lawmakers into backing off, even though the free market was not the problem. The problem was collusion and manipulation.
According to a Wall Street Journal article at the time, Enron charged California’s Independent System Operator for relieving power congestion without actually doing so. The company also avoided in-state price caps by moving power out of state and then reselling it to California — fraud. Enron violated the rules.
Free markets tend to reduce cost and encourage innovation.
For example, since Pennsylvania introduced a competitive electricity market residential and commercial customers in Philadelphia and Pittsburgh are 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.
Let the free market system do what it does best, vote for Question 3.
Thomas Mitchell is a former newspaper editor who now writes conservative/libertarian columns for weekly papers in Nevada. You may email Mitchell at  thomasmnv@yahoo.com. He blogs at http://4thst8.wordpress.com/.

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