PUC at odds on Switch after last-minute proposal is issued

By Kyle Roerink

Tuesday, June 9, 2015 | 10:50 p.m.

The three-member Public Utilities Commission heads into a controversial vote on Wednesday with conflicting opinions and one swing vote that will ultimately decide if a Las Vegas tech company can purchase and create power without NV Energy, the state’s dominant power company.

The commission will vote on whether Switch, which houses data for companies like eBay and Sony, can exit its current power purchasing agreements with the utility. Switch is one of NV Energy’s biggest customers and at the forefront of a push by several casinos who recently applied to sever ties with the utility. The final order will set the stage for what Wynn Resorts, Las Vegas Sands and MGM Resorts International can expect from the PUC and its regulatory operations staff — which is independent from the commissioners — during their application procedures and vote in the coming months.

The chairwoman of the commission, Alaina Burtenshaw, issued a draft order on Monday that denied Switch’s exit application, saying it was not in the public’s interest.

Commissioner Rebecca Wagner on Tuesday issued a rebuttal, asking for a modification to the draft that would allow Switch to leave as long as it paid a $27 million exit fee.

Commissioner David Noble will now be the influential swing vote, potentially passing Burtenshaw’s order, adopting Wagner’s amendment or finding another solution in the Eleventh Hour.

The draft order and proposed modifications follow an eight-month application process where PUC regulatory operations staff, the utility and others investigated the potential impacts of a Switch exit on consumers and the power company. All parties calculated exit fees to find a fair value that would not cause rates for other NV Energy customers to increase. Switch proposed $18 million. NV Energy made one suggestion that neared $60 million. The PUC regulatory operations staff suggested $27 million.

Wagner’s proposal says the exit fee suggested by the PUC regulatory operations staff strikes a “reasonable balance among the interests outlined in the [statute].”

“Staff conducted extensive analysis to conclude that an impact of approximately $27 million is reasonable,” she wrote.

Conversely, Burtenshaw’s draft order suggested the three-year forecasting model to estimate exit fees — which the commission used in past exit applications for mining companies and other casinos — is outdated for current conditions in the state and may not give the best estimates to protect ratepayers who will remain with the utility. Two mining companies — Barrick and Newmont — were the only companies to exit.

During the case, regulators or their staff never mentioned potential problems the forecasting model could pose.

Wagner’s order also suggests Burtenshaw’s order does not provide “a reasonable path forward” for Switch or any other entity wishing to exercise its rights under the law, which first came into effect in 2001.

Wagner proposed that the PUC should investigate how it assesses exit fees and whether the law should change as currently written.

The statute, dubbed NRS 704b, allows companies to cut ties with the utility if they consume more than 1 megawatt of power per year, pay an exit fee and receive PUC approval. (A Super Walmart consumes about three-quarters of a megawatt per year. Switch uses 34.)

The law was an effort to provide large-scale power consumers with more options for buying and creating power. Lawmakers passed it during the California energy crisis spurred by Enron, the defunct energy company that manipulated power markets in Western states to improperly control the price and availability of electricity.

The PUC will begin the Switch case at 9:30 am Wednesday.