Las Vegas Sun

March 28, 2024

Sun Editorial:

Energy conundrum needs resolution so businesses, residents can move on

During Southern Nevada’s explosive growth, it was all a power company could do to keep up with demand by building electric plants, buying power from other sources throughout the Intermountain West and weaving a network of power lines to distribute it all. Planning was done years in advance, committing to capital investments that would be justified over time. The goal was to provide a reliable source of power and avoid the kind of manipulated market prices foisted on customers by the conniving energy traders at Enron.

The task facing what is now NV Energy was big and costly but not necessarily confusing. The growth rate could be charted, power demands projected and infrastructure developed accordingly. The capital investments would get the blessing of the state Public Utilities Commission, whose job was to make sure nobody — neither consumers nor the utility — was getting the shaft. In fact, the electric company was guaranteed a profit, and the customers were assured steady delivery of power.

State law adopted in 2001, during these heydays of growth, allowed companies to look outside the utility to create or buy power. Barrick Gold Corp. and Newmont Mining both have taken advantage of the law and built their own power plants.

But the energy landscape has changed. We’ve seen a shift in fuel sources, leading to the current blending of coal with natural gas, subterranean steam and overhead sunshine.

This energy evolution has, in turn, triggered a pitched debate pitting NV Energy against some of the state’s biggest companies. It’s not some arcane tiff steeped in political wonkiness, but a financial conundrum that will touch all of us. It has to do with what price we pay if we want to leave NV Energy’s monopoly and strike out on our own.

Indeed, with technological advances that made solar cells more efficient and affordable, the power industry is being upheaved. Homeowners and businesses are installing solar panels on their own property to make their own electricity. But while there is declining need for NV Energy’s services, its umbilical cord is still a necessity. Until homeowners can afford batteries to store solar power generated during the day, they will likely need some of NV Energy’s electricity at night. And if they produce more electricity than they use during the day and have no way to store it, the excess can be directed onto that same grid for others to use (earning homeowners credit for their contribution to the energy pool).

Nevada legislators have asked the PUC to determine how much money these runaway residential customers should still pay toward the cost of the utility’s infrastructure. After all, the grid and power generators were constructed to serve these customers; is it fair for them to now bail and leave others stuck with the mortgage payments? For any one residential customer, the cost — once it is determined — likely wouldn’t dissuade someone from embracing rooftop solar panels as a home’s primary energy source.

But there are big electricity users in town — the massive data center Switch, Wynn Resorts, Las Vegas Sands and MGM Resorts international — that also want to divorce NV Energy and turn to other energy providers. Figuring out how much they should pay to take their business elsewhere is a whole other ballgame.

The reason: The companies looking to leave NV Energy account for about 10 percent of the utility’s customer base. With that level of a reduction in power demand, does it make sense for NV Energy to still spend $2 billion in the next two years, as it plans to do, on new power generation? Probably not. The utility, which is owned by Berkshire Hathaway Energy, is growing around 1 percent a year — equaling roughly the amount of energy that Wynn alone will stop using if and when it leaves the grid.

If Switch, the Sands and MGM also leave NV Energy, as they want to do, there will be even more available power for remaining customers. So the notion of needing money to build more infrastructure seems dubious.

So how much should one of these companies have to pay to leave NV Energy? Using a three-year forecasting model, the PUC staff says Switch should pay a $27 million ransom, to cover its share of the cost of the infrastructure.

But this is a math problem with no answer key. Switch put its pencil to paper and offered to pay $18 million to get out. NV Energy, using a different model, said something close to $60 million would be more fair. That’s a big disagreement.

So the three PUC commissioners last week told Switch it can’t leave the grid, at least not yet. There’s homework still to be done. The commission ordered Switch and NV Energy to conduct an “investigatory workshop” to determine how the tech company’s departure could affect the utility’s remaining customers.

It’s important that this issue be resolved because we’re at a turning point in the evolution of the energy industry in Nevada and the state needs to know how to go forward. Rob Roy, the founder and CEO of Switch, remarked last month, “The earth’s environment does not have the luxury of waiting years for us to figure this out.”

Indeed. It’s fair that homeowners and big companies alike be allowed to unplug from NV Energy in a way that doesn’t burden the remaining customers. But neither should customers seeking energy independence for both economic and environmental reasons be held captive while analysts struggle with the math.

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