Switch could file lawsuit over denial to leave NV Energy

By Kyle Roerink

Monday, June 15, 2015 | 2:17 p.m.

Days after regulators denied its attempt to buy and generate power without NV Energy, a Las Vegas tech company has signaled it may file a lawsuit against the Public Utilities Commission.

Switch, a data center for companies like eBay and Sony, sent a “document destruction hold” on Friday to the PUC, the Bureau of Consumer Protection, NV Energy and one of the power company’s lobbyists from R&R Partners, Pete Ernaut.

Switch’s request to maintain documents — while not filed in court — indicates that Switch is likely to take its battle to court.

The PUC’s three regulators voted 2-1 on Wednesday to deny the company’s exit from NV Energy. The decision was the culmination of an eight-month application process for Switch — one of the power company’s largest customers.

The potential litigation underscores Switch’s concerns about how the PUC interpreted a 2001 law that allows large-scale customers to sever ties with the utility. The call to hold documents in the case also raises questions about how the PUC communicated behind closed doors with NV Energy, the power company’s lobbyists and consumer advocates.

The notice, written by Switch’s legal counsel, says Switch intends to “take additional actions” against the PUC and that “destruction of discoverable information is evidence of culpability and misconduct.”

“This obligation extends to a duty to preserve all emails, instant communications, SMS or text messages, phone call records, invoices, payments, meetings including lunch or dinner meetings, between you and Nevada Energy or Nevada Energy’s agents, lobbyists or representatives,” according to one of the notices.

Switch, the PUC, the Bureau of Consumer Protection and NV Energy all declined to comment on the memo.

Lawsuits against the PUC don’t frequently happen. In recent years, NV Energy and the Bureau of Consumer Protection filed suit against the PUC on matters relating to customer rates and the cost of new power plants.

Switch could still file with the PUC for reconsideration of its application to cut ties with NV Energy.

The PUC decision, while denying an immediate exit for Switch, also mandated regulators, PUC staff, Switch and other parties conduct an “investigatory workshop” to further study a large-scale exit. A starting date for the workshop was not announced.

The PUC previously approved exits from NV Energy by Newmont Mining and Barrick Gold to build a coal power plant and a natural gas plant, respectively. About that same time, casino companies such as Boyd Gaming, Caesars Entertainment and MGM Resorts International applied to leave but ultimately stayed with the utility.

Lawmakers passed the law allowing large customers to leave NV Energy when the West was reeling from the energy crisis spurred by Enron, the Texas-based company that manipulated power prices and caused a drastic spike in cost for companies purchasing electricity on the spot market.

At the time, the power company was doing just that.

The utility has since been purchased by Warren Buffett’s Berkshire Hathaway Energy and now generates or has power purchase deals for more than 4,000 megawatts of power — the equivalent used by about 7,000 Super Wal-Marts a year.

Switch’s exit battle is at the forefront of an attempt by some gaming and resort companies to create and purchase power on their own. Wynn Resorts, Las Vegas Sands and MGM Resorts International filed applications with the PUC in May. Their combined effort could mean a nearly 10 percent reduction in power consumption for the utility.

The effort raises questions about how much money the utility should spend on new infrastructure like natural gas plants, solar arrays and geothermal facilities. The PUC recently approved plans for a new 200-megawatt solar array. A last-minute bill in the Legislature delayed the implementation of at least 100 megawatts of new solar projects.

The debate weighs consumer choice in a market dominated by NV Energy — a regulated monopoly — and the potential impact on remaining ratepayers if large customers leave the utility.

During Switch’s application, the PUC’s regulatory operations staff determined a Switch exit would not harm ratepayers if the company paid a $27 million fee.

The exit fee would cover costs for paying off new power plants and fill the gap for revenues the utility expected from Switch in the coming years.

The PUC’s regulatory operations staff used a three-year forecasting to determine the $27 million figure. The PUC used that model in past cases.

Switch, meanwhile, proposed it pay an exit fee of $18 million. NV Energy proposed figure that ranged between $27 million and $60 million.

At last week’s hearing, Commissioners Alaina Burtenshaw and David Noble said they didn’t trust the forecasting model.

Noble said he did not have enough information to let Switch leave the grid. Commissioner Rebecca Wagner, who voted in favor of Switch, said her colleagues were straying from precedent by denying Switch’s exit.

NV Energy earned more than $700 million in income last year, which is more than all the resorts on the Las Vegas Strip.