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NV Energy signals opposition to deregulation ballot question, as regulators prep for first major study of the Energy Choice Initiative

Source: 
The Humboldt Sun

Without stating it outright, NV Energy has taken its most adversarial stance yet against a proposed ballot initiative that would entirely reshape Nevada's energy market and usher the state into a future where consumers choose their electricity provider.

The utility submitted some of its most strident criticism to date of the Energy Choice Initiative as part of a 256-page filing it submitted to the state's Public Utilities Commission, which has been charged with authoring a recommendation report on how to best implement the pending ballot question, up for final approval in 2018.

In the filing, NV Energy - which has thus far maintained neutrality on the ballot question - estimated that the change to a retail energy market would cost between $5 and $7 billion to successfully implement, and panned the ballot measure's proposed constitutional change as "costly, complex and uncertain."

"Nevadans thus face a critical choice – to abandon the system that has provided a reliable and low-cost service that is essential to the health, safety and welfare of Nevadans, or undertake an undefined and risky experiment with a key input to the State's economy," the utility wrote. "There is a better way to advance the State's goal of providing low-cost electricity and adding renewable energy."

In an email, Energy Choice Initiative advisor and former Federal Energy Regulatory Commission chairman Jon Wellinghoff said the utility's filing was based on "largely unfounded claims" designed to scare people, and that the argument that keeping with the same market structure was beneficial was "simply not true."

"It was shocking to see NV Energy use a Commission proceeding to campaign against a ballot question ratified already once by an overwhelming majority of Nevada voters," he said. "One has to question what has so radically changed from this time last year when NV Energy openly stated it was neutral on Energy Choice for Nevadans and claimed they only wanted to be a wires company."

The utility's filing wasn't the only comment submitted to the PUC. At least 40 filings, from major businesses, small counties and major Nevada cities and industry groups seeking a transition to a retail market all sent testimony to the commission last Friday - the deadline for comments on an investigatory docket studying the potential implementation of the ballot question.

The ballot question - which passed on a 72-28 percent margin in 2016 and is backed by a who's who of Nevada political heavyweights, from former Sen. Harry Reid to the Las Vegas Sands, has the backing of most major 2018 gubernatorial candidates and appears well on the way to becoming part of the state's Constitution. Though many industry groups and retail electric providers in other states submitted filings strongly backing the shift to a retail market, many renewable energy advocates and producers stayed neutral in the filings, expressing mostly a desire to keep the state's renewable production targets and generation in place.

Outside of NV Energy, opposition in the filings came from an eclectic group of sources, from tiny White Pine County to the Nevada branch of the AARP, listing concerns with the availability of electricity in rural areas under a retail market as well as with prices for seniors on fixed-incomes.

Friday marked the first deadline for the PUC's docket - replies to written comments are due on Dec. 29, and the commission has scheduled a workshop on Jan. 9.

The commission's final report, expected to be published sometime next year, is widely considered to be one of the most important initial steps in preparing for a possible retail energy choice future - it will likely play a major role in determining the recommendations made by the Governor's Commission on Energy Choice to the 2019 Legislature, which would be charged with designing and approving a retail market structure by 2023.

Here's an initial look at what the Commission will be analyzing, discussing and weighing over the next month:

NV Energy

The utility's lengthy filing with the PUC attempts to accomplish two goals - to promote NV Energy's current activities and future goals, and contrast them with what it calls "experimental, unregulated retail markets - but without a road map."

The filing lays out an overall view of the utility, from its service territory (most of Nevada), to taxes paid ($232 million in 2016) to total number of employees (2,465).

It also laid out a number of concerns that it already raised to members of the Energy Choice Commission in the past several months - from the potential for large "stranded costs" to the need to divest in generating plants to the need to transition the state into a wholesale electric market, which could take years to accomplish.

"Nevada would be the first western state to expose residential and small commercial customers to the risks and volatility of unregulated markets," NV Energy wrote in the filing. "Nevada would be the first state to experiment with unregulated markets through a constitutional amendment. Nevada also would be the first state to open an unregulated retail market before the state is participating in a properly structured wholesale electric market."

The utility estimated that joining an ISO or other wholesale market would take until 2025 at the earliest, and estimated that costs as a whole would range between $5 and $7 billion. Most of the costs would come from divesting and selling off existing generation plants and long-term power agreements, but also from terminating an estimated 30 percent of its workforce, creating a "data clearing house" and educating consumers about the new retail marketplace.

Renewable groups

Clean energy advocates and trade groups have, for the most part, stayed away from taking a position on retail energy choice, though several groups filed comments in the docket. They urged utility regulators to consider policies that enhance renewables if voters approve retail competition.

The Natural Resources Defense Council expressed neutrality on the ballot measure, and it outlined steps that policymakers could take to protect renewable programs. The organization said the state should increase its renewable portfolio standard and designate one entity to run its energy efficiency program. The Environmental Defense Fund, a nonprofit that generally approaches market-based solutions, also said it had no position on the energy choice measure.

Like other renewable groups, Western Resource Advocates wrote that it was neutral on retail competition but supported the idea of creating competitive wholesale markets. It views these markets as a prerequisite to retail choice and essential to keeping Nevada's clean energy policies intact.

"The Energy Choice Initiative was intended to reinforce, rather than replace, Nevada's existing public policies on clean energy," the organization wrote in its filing. "If approved a second time by voters in 2018, it should be implemented in a way that aligns with Nevada's renewable energy and energy efficiency goals and policies."

Another question these groups addressed is the future of energy efficiency programs in a restructured market. The Southwest Energy Efficiency Project recommended that these programs, which offer incentives for energy-efficient appliances and smart thermostats, should remain under the purview of NV Energy rather than handing them off to a third-party.

The Solar Energy Industries Association - a trade group representing the U.S. solar industry - also submitted comments relating specifically to the state's current renewable energy policies and how to best transition them into a retail choice environment. The group specifically stated that Nevada's net metering program - a favorable reimbursement for electric energy produced by rooftop solar panels - would be an important and necessary part of any future retail market.

"As such, it is emblematic of the essence of customer choice," the group wrote in a filing. "And there should be no question that the program should continue in an energy choice future."

Solar, geothermal and hydropower producers

Utility-scale renewable developers First Solar, EDF Renewable Energy, Enel Green Power North America and Pattern Energy Group wrote in a joint filing that they plan to stay neutral on the Energy Choice Initiative. But all of the companies operate large-scale solar and geothermal plants in Nevada, and they expressed concerns about their power contracts with NV Energy.

"The [companies] have concern over the potential divestiture of these agreements by NV Energy," they wrote. "Any such divestiture could affect the long-term viability of financing renewable projects in Nevada, which could in turn adversely affect the cost of renewable energy in the state."

The Colorado River Commission of Nevada, which manages the state's allocation of low-cost Hoover Dam power, also didn't take a position on retail competition. The commission did file a presentation with utility regulators noting that NV Energy receives some of its power from a long-term Hoover Dam contract. The Colorado River Commission, which plans to add to its filing this week, said energy choice raises some legal questions that may require a legislative fix.

Energy suppliers

A trade group that represents some big players in the retail energy space, including Constellation and NRG Energy, submitted an extensive 275-page filing that outlined its case for a competitive market.

The Retail Energy Supply Association (RESA) argued that a market-based approach creates a more efficient market where energy supply companies are incentivized to keep rates low and are given flexibility to respond to customer demand. But the organization noted that whether or not retail markets are successful often comes down to their design and the rules that govern them.

"The two fundamental elements necessary for a vibrant competitive market are willing buyers (consumers) and sellers (competitive energy suppliers)," the organization stated in its filing. "Buyers must be free to choose the competitive supplier that will best meet their needs, supply their electricity services as promised, and enter into a clear and concise contract for these services. Sellers must be free to develop products and services based on competitive market necessities (reliable supplies) and signals."

If implemented properly, RESA makes a case that the market could benefit consumers, with more options, create natural incentives for conservation and bolster the Nevada economy.

As for the transition to retail competition, the trade group supported the use of a competitive auction to sell NV Energy's generation assets. One big question that NV Energy has raised is around what to do with about 46 power-purchase deals, long-term contracts in which the utility has committed to buying a certain amount of energy at a fixed price for dozens of years.

"How to transition the existing long-term power contracts from the utility is one that will require additional review and discussion among policymakers and stakeholders," the trade group wrote.

One suggestion has been to sell the contracts on the newly created market and recover any remaining costs. Regulators, who approved the deals, could then ensure they are honored.

It also supported some consumer safeguards, such as licensing requirements for suppliers.

The trade group said its filing was intended as a "guidebook" for the process: "By using the experience of numerous jurisdictions that have transitioned from the historical monopoly regulated structure and in which many of RESA members compete to provide the products and services that consumers desire, Nevada will be well-positioned to ‘get it right' on day one – enabling Nevadans to reap the benefits of a vibrant competitive market for decades to come.

Calpine Energy Solutions, a member of RESA, submitted additional comments to say that its retail supply arm "strongly supports the Nevada Energy Choice Initiative." In its 26-page filing, the company offered commissioners recommendations on how the market should be set up.

Counties/Cities

Many of the filings also came from localities, many of which have a vested interest in the outcome of the Energy Choice Initiative.

Tiny White Pine County - population 9,811 - submitted a comment in the docket, asking for an exemption to be made for areas served by electrical cooperatives, or essentially small member-owned utilities. The letter noted that rural areas of the state were unlikely to receive the same level of service in a competitive market.

"Residents voted against an open, competitive retail electric energy market because the presence of our existing rural electric cooperative provides the necessary services in an efficient, cost-effective manner," White Pine County Commission Chairman Richard Howe wrote.

Not all electric cooperatives submitted letters of opposition to the PUC - Valley Electric Association, which covers Pahrump and other parts of rural Nye County, submitted a letter stating the cooperative's support for a retail market, while still recognizing and asking for the Commission to not "erode the existing legal framework."

The Nevada Rural Electric Association, which represents nine electric cooperatives, power districts and a municipal utility, also submitted a letter that expressed neutrality on the ballot question but asked the commission that implementation does not interfere with existing federal regulations on power acquisition by cooperatives.

"Members of the NREA know how to purchase power on the wholesale market and their ability to do so should not be impeded," the group wrote.

The city of Las Vegas also submitted a letter expressing neutrality on the ballot question, and supporting a concept similar to California's "community choice aggregators"  - a type of city or county based utility that allows for the grouping of individuals customers' purchasing power by geographic location.

Others

Several other groups without a seemingly direct connection to Nevada's energy market also issued comments as part of the docket.

The Christian Coalition of America, a 501(c)4 organization formed by former presidential candidate and minister Pat Robertson, sent a letter touting the dual benefits of the "American free market" and affordable clean energy the group said would be inherent in a competitive retail market.

"By welcoming this type of competition, Nevada will open the doors to innovation and create more jobs for Nevada's families," Keith den Hollander, a director with the group, wrote in a letter.

While purportedly not taking a stance on the ballot question, the AARP of Nevada branch noted that the organization had a national policy stating the following - "states that have not introduced retail competition should refrain from doing so."

Still, the organization laid out several consumer protection guidelines for states with or considering retail choice, including a standard default service, prohibiting variable rates in electric contracts and addressing "unfair terms and conditions in provision and marketing" in retail energy plans.

Two chapters of the International Brotherhood of Electrical Workers also filed a response detailing their opposition to the ballot question. The unions, which bankrolled the effort to defeat the 2016 ballot question, called it a "loaded question" that was "fundamentally flawed," and lead to nearly 400 lost jobs.

Story provided courtesy of The Nevada Independent www.nevadaindependent.com .

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