Las Vegas Sun

March 19, 2024

Switch’s power play is a win for both sides

Switch

Courtesy of Switch

Switch and NV Energy reached a deal on July 10 in which the power company will build a 100-megawatt solar array to feed green power to the data company.

It was a lunch years in the making.

Rob Roy and Paul Caudill, who run data center Switch and NV Energy, respectively, had been grappling since Caudill took control of the power company in December 2013. Roy, whose company is one of the utility’s largest and most lucrative customers, wanted to cut ties with NV Energy and buy renewable power on his own. Caudill, afraid of a stampede of other defectors, wanted to stop him.

As the heads of two of Nevada’s most influential companies, the two didn’t feud publicly. But their companies’ lawyers and operatives waged a long and expensive back-and-forth. Both sides claimed they were fighting in the name of protecting consumers.

But now, at SoDo, a restaurant in downtown Reno, it was time to celebrate a deal.

Two days before the lunch, Roy and Caudill hashed out an agreement to end their fight. Switch would stay with the utility. In exchange, NV Energy would charge Switch a premium to install a 100-megawatt solar array 15 miles north of Las Vegas, to be named Switch Station, and offer access to wind and geothermal power for the data center.

The compromise marked a rare moment — a utility customer happy to learn about a bill increase and a utility grateful to keep a nagging customer.

Switch, which stores data and provides other technology to companies such as eBay and Sony, won’t save on power costs, as it had hoped. But it will join a group of tech companies whose data centers run on 100 percent green energy. It’s a recently adopted standard practice for Facebook, Apple and Google.

Storing data requires round-the-clock electricity and reliability — a demand that traditionally is met with a big carbon footprint. As an expert close to the Switch case described: Data centers are like toasters that never make toast; the electricity keeps flowing, and the toast never pops.

So, while the clean energy is a victory for Switch, the power company also scored big. Switch’s ongoing relationship with NV Energy sets a precedent for several major Las Vegas resort companies that also applied with the Public Utilities Commission to cut ties with the utility.

The resorts also are 24-hour, power-hungry businesses that rank among the utility’s most valuable customers. A Switch exit, coupled with departures by Las Vegas Sands, Wynn Resorts and MGM Resorts International, would mean a 10 percent decrease in demand for NV Energy, utility officials have said.

Roy first broached the idea of breaking from NV Energy four years ago, an idea former NV Energy CEO Michael Yackira largely ignored.

Switch then looked to state law for help. According to a statute that dates to the energy crisis of 2001, the Public Utilities Commission can vote to allow large-scale companies to leave public utilities. Mining companies Barrick Goldstrike and Newmont Mining have done it, but requests by Boyd Gaming and MGM Resorts International never came to pass.

Switch applied in November. Eight months later, the PUC denied Switch’s application, 2-1. Chairwoman Alaina Burtenshaw wrote that an exit would be contrary to the public interest because remaining customers would have to pick up the costs associated with Switch’s absence.

Switch filed an appeal and considered a lawsuit, but the new deal makes both moot.

The utility’s compromise with Switch was savvy, observers said. While it locks in a valuable customer, it also fulfills a state mandate requiring the company to bring more renewables on the grid. It also signals to the casinos that NV Energy is willing to work out compromises.

Former state Sen. Randolph Townsend, who wrote the exit law, praised Caudill.

“In the utility business, thinking changes slowly,” Townsend said. “He was able to see the world a little bit differently than a traditional utility CEO.”

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