Las Vegas Sun

September 18, 2018

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Ballot measure to restructure energy market spells uncertainty, report says

A new independent report shows a restructured energy market in Nevada could benefit or hurt consumers, depending on a number of factors.

Lawmakers may need to implement consumer protection measures if Ballot Question 3 passes, just one of the policy decisions that could be required if Nevada decides to restructure its energy market, according to a report released today by the Guinn Center. The report is titled “Restructuring the Electricity Market in Nevada? Possibilities, Prospects, and Pitfalls.”

Nevada voters OK’d the energy choice initiative once before and could make it law by approving it once again in November.

Levine said rates could go up or down depending on how the initiative is implemented and where programs like net metering are placed in the new structure. Lawmakers revived the state’s net metering program in the 2017 legislative session, setting up a system for rooftop solar customers to be credited for excess energy they put back onto the grid.

Supporters of Question 3 say energy choice will lower rates, while opponents argue that customers will bear the burden of the billions of dollars that the change would cost to implement.

“What we see here is a very clear sense from both sides of this is what will happen,” Levine said. “What we want to say here is we have no idea what will happen.”

Using comparisons to other state that restructured their markets to draw conclusions about what would happen in Nevada isn’t necessarily helpful, said Meredith A. Levine, director of economic policy for the center. States vary widely in the ways they restructured their markets, and Nevada is the only state that has sought to do so by amending its constitution.

Voters must approve constitutional amendments twice, which means they would have to go through the same process if they ever wanted to repeal energy choice.

Some states implemented restructured markets along with rate caps, which have since expired but depressed prices while they were in place, Levine said.

“There’s some evidence for lower rates; there’s some evidence for higher rates,” she said. “We don’t take issue with the methodology that anybody used. They’re all absolutely fair assertions.”

Levine said that in other states, consumers signed up with companies offering cheap energy without realizing their rates were variable. She said lawmakers can implement consumer protections to mitigate these situations, but generally these customers can simply pick a different provider that offers fixed rates.

The idea that energy markets could be restructured for competition stretches back to the late 1970s, Levine said, in line with the deregulation of railroads and telecommunications.

“There was sort of a sense that, hey, could energy be part of that?” Levine said.

Technology advances spurred the idea that generation could be competitive, and “extraordinarily” high prices in the 1990s furthered the desire among consumers for cheaper energy, Levine said.

Some states pursued competitive energy generation structures in the belief that they would lower prices. More than half a dozen states reversed course and repealed restructured energy markets, and some are now considering repeal.