Switch and NV Energy strike deal to end battle

By Kyle Roerink

Tuesday, July 14, 2015 | 8:15 p.m.

After more than eight months of debate, Las Vegas data center company Switch and NV Energy have reached a compromise that will keep the tech firm as a customer of the power company.

The deal, which still awaits approval from the Public Utilities Commission, will end an attempt by a large-scale electricity consumer to cut ties with the power company in order to produce and buy energy from other sources.

It mandates the utility build a 100-megawatt solar array in North Las Vegas that will generate power for Switch by the end of 2016. NV Energy will partner with First Solar to build the array. When the sun is down, Switch will be able to access the utility’s geothermal and wind resources to power its operations.

Recently, NV Energy hashed a 20-year power purchasing agreement with First Solar for a 100-megawatt plant in Clark County's Solar Energy Zone.

The company will pay a premium to use the renewable energy and will no longer purchase power from carbon emitting sources. That premium is expected to help offset the costs of building the array, theoretically blocking increases in electricity bills for other NV Energy customers. Until its completion, Switch will be able to use credits to buy renewable electricity on the wholesale market. Both sides penned the agreement on Friday night.

“We plan on being 100 percent green immediately,” Adam Kramer, Switch’s vice president of government affairs, said.

The company, whose data centers serve an array of Fortune 1000 companies, currently has facilities in Southern Nevada but recently broke ground on another facility near the site of the Tesla Motors batter factory near Reno. This deal will not provide energy to that facility.

Switch wanted to cut ties with NV Energy as part of a plan to consume 100 percent renewable energy and save money on energy costs. Switch filed an application with the PUC to leave in November and three commissioners denied it last month. Switch then signaled that it would take legal action while also filing a petition for reconsideration, but the deal will put an end to those attempts.

Switch, which consumes the equivalent of more than 50 Super Wal-Marts annually, is among the state’s largest energy users, and the commission worried that prices for remaining customers would rise if the tech company exited. The utility said during negotiations with the PUC that if Switch paid at least $27 million, its exit wouldn't hike costs for other customers. Switch suggested it pay around $18 million. In its decision, the PUC said those forecasts did not provide enough assurance that power bills for remaining customers would not increase.

Switch’s attempt sparked a battle unseen in Nevada in more than a decade. Two mining companies, Barrick Goldstrike and Newmont Mining, took advantage of a law that allows large-scale companies to exit the grid if they consume more than one megawatt of energy, bring new generation into the state and receive PUC approval. The mining companies built coal and natural gas plants to create their own energy. Casino companies attempted exits but failed to receive PUC approval.

The law, dubbed as 704b, passed in 2001 at a time when NV Energy was largely buying power on the wholesale market. The company has since built and signed into power purchase agreements in which it supplies at least 80 percent of its power needs, calling many to question a Switch exit in the current market conditions.

Switch had been mulling an exit for more than four years. When news of the deal broke on Tuesday, Kramer thanked NV Energy CEO Paul Caudill for coming to an agreement. Caudill arrived at NV Energy in December 2013, replacing Michael Yackira.

"Not until Paul came in were we able to come to this solution,” Kramer said.

In the agreement, Switch and NV Energy requested the PUC to expedite its decision on the deal.

The Switch decision doesn’t end the exit debate. Three casino companies — Wynn Resorts, Las Vegas Sands and MGM Resorts International — have all filed applications to exit. They are holding a workshop with NV Energy at the PUC offices on Thursday to discuss their applications.