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October 21, 2018

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Explaining Ballot Question 3, the Energy Choice Initiative

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L.E. Baskow

Power lines run from panel fields into the sub station and beyond as seen during the Moapa Southern Paiute Solar Commissioning Project ceremony on Friday, March 17, 2017.

Millions have been spent in Nevada on each side of the Energy Choice Initiative, a measure that passed overwhelmingly in 2016 and could be amended into the state constitution if voters approve it this year.

Ballot Question 3 asks the Nevada Legislature to create a competitive energy market in place of NV Energy's monopoly by July 2023. The measure seeks to give choice to all energy customers, not just rural cooperatives that get exemptions and large companies that pay to exit the system. If it passes, lawmakers will grapple with how those choices can be added without putting consumers at risk as they choose from dozens, if not hundreds, of plan options.

In a nutshell

Voting “yes” asks the Nevada Legislature to create a competitive energy market that would open doors for other energy companies—not just NV Energy—that wish to do business in Nevada.

Voting “no” leaves the market as is.

The measure is largely supported by Switch, which has a data center in Nevada and is moving forward with plans for a large solar project. NV Energy is opposing energy choice, putting millions toward the Coalition to Defeat Question 3.

What would be deregulated under the proposed law? There are three aspects to the energy market: generation, transmission and distribution. The measure requires competition in the generation category. Transmission and distribution do not need to be deregulated to create the competitive market, according to the measure.

What happens to NV Energy? NV Energy would no longer have a monopoly over generating power and marketing it to consumers. The utility may need to divest itself of its generation assets to make room for others if energy choice passes.

What happens to the Public Utilities Commission of Nevada? Under energy choice, the market itself would set its own prices based on competition. Setting prices was the Public Utilities Commission’s responsibility, and energy choice would shift the focus of the group to consumer protection, according to proponents.

What happens to rates? Both sides of the energy choice debate say their plan is the best for rates. Supporters point out that rates went down in some states that switched to energy choice, such as New York, while opponents say Nevada’s rates are already lower than many parts of the country. A Guinn Center report did not side with energy choice, citing uncertainty and saying prices could be swayed by the ballot measure’s implementation and oversight.

What states have already switched to competitive markets? Nevada is one of 24 states offering some type of energy choice. Proponents in Nevada have pointed to restructured energy markets in Texas and Pennsylvania as examples. Opponents point to California’s deregulated market and the “brownouts” that resulted after.

Would choice increase renewable energy use in Nevada? Energy choice would give Nevada consumers three options: a competitive market, self-generation or collaborative efforts such as community solar projects. These local cooperatives could give residents, who otherwise could not afford or accommodate panels, access to solar power. In Texas, customer demand in the competitive market prompted an increase in renewable energy. About 20 percent of Nevada’s energy consumption comes from renewable sources and its renewable portfolio standard is 25 percent by 2025. NV Energy has proposed renewable projects that it will pursue if energy choice fails.

Would energy deregulation benefit education? The Clark County Education Association and Nevada State Education Association have come down on either side of energy choice. While proponents say NV Energy overcharges large consumers such as the Clark County School District, opponents of the measure say the uncertainty of a deregulated market could cause costs to increase.

How much could it cost to implement? The Legislative Counsel Bureau could not determine the fiscal effect of the ballot question, citing uncertainty in the timeline, uncertainty about what laws would need to be enacted to restructure the market, and which agencies would be involved. A PUC report says implementing energy choice could cost more than $100 million and an additional $45 million annually to operate. Supporters of the measure say the Legislature has the ability to pass laws creating the restructured market over three sessions, and the PUC can shift responsibilities from rate-setting to oversight.

Why would consumers need to be protected? Retail energy providers could offer a customer more than a hundred plans based on their household size, address, energy needs and renewable portfolio. The choices could be hard to navigate for some customers. Supporters of the measure say the cost savings would outweigh the time customers would need to sort through these options, and those that manipulate the market can be fined by the Federal Energy Regulatory Commission. Penalties can reach $1 million, up from $10,000 in 2005. Supporters of the measure acknowledge that the state would need to create a system to handle consumer complaints and ensure the PUC, or any other agency determined by the Legislature, can have oversight.

Why a constitutional amendment? Nevada is the first state to pursue energy choice by seeking to amend its constitution. Opponents say this makes the move even riskier, taking another two elections to reverse if voters are unhappy with the new system. Supporters say this is a way to force the Legislature to create a system that gives “meaningful choices” for consumers.

Who says yes?

• Sen. Dean Heller, incumbent candidate for U.S. Senate: “As a supporter of deregulation, open markets and more choices for consumers, Sen. Heller supports Question 3 because he believes it will bring more alternative energy to Nevada,” campaign spokesman Keith Schipper said.

• Adam Laxalt, candidate for governor: “I supported the ballot initiative when it was on last year, and I support it this year as well. I hope choice will make our state dynamic and give people more options.”

• Former Sen. Harry Reid: “The people of Nevada, along with all Americans, are beginning to recognize that they are being held captive—it is time to end energy monopolies once and for all.”

• Nevada Resort Association: “We support a yes vote on Question 3 because we believe that our employees and residents should have the same opportunity for choice that we had.”

• Clark County Education Association: “CCEA wants the best for our community and the people of Nevada. We believe NV Energy has leveraged its monopoly power to overcharge the Clark County School District by millions of dollars every year, whereas a good corporate partner would use their influence to assist the district in times of financial strain.”

Who says no?

• Rep. Jacky Rosen, candidate for Senate: “I have serious concerns about Question 3 and am planning to vote no. I support increasing renewable energy production in Nevada, but I’m concerned about moving to a more deregulated electricity system and the potential of higher costs and less protection for Nevada consumers.”

• Steve Sisolak, candidate for governor: “After listening to the concerns of Nevadans across the state, I believe Question 3 is harmful to Nevada and I cannot support it. I have long had concerns about the negative impact the initiative could have on consumers, labor, the environment and our economy. Question 3 risks the reliability of our electricity system, threatens the jobs of hardworking men and women and could slow our growing renewable energy sector. It provides too much risk without guaranteeing rewards of lower rates for consumers.”

• Ruben Murillo Jr., a special education teacher in Clark County and president of NSEA: “We oppose Question 3, because electricity deregulation is a failed experiment that has resulted in higher electric rates in other states. At a time when education budgets are already squeezed, our school districts simply can’t afford to have our limited resources diverted from the classroom to pay for increased electricity costs.”

• Dana Bennett, president of the Nevada Mining Association: “Nevada mines are still recovering from record losses in mineral values, while costs to operate continue to climb, and the time frame to permit a new mine extends into 10 years. Question 3 will create substantial uncertainty for both industrial and residential ratepayers. Adding another layer of uncertainty to the challenges already faced by miners at this time would be irresponsible.”

• Sam Mori, president of the Nevada Cattlemen's Association: “We are deeply concerned that Question 3 would put Nevada’s cattlemen and our rural communities at risk. Question 3 would raise electricity rates and harm the rural electric co-ops that Nevada farmers, ranchers, and cattlemen depend on for reliable electricity in these hard-to-reach areas. To build and preserve our local agricultural community and maintain access to affordable electricity, we urge our fellow Nevadans to oppose this risky and costly ballot measure and vote no on Question 3.”

Yes and no

• Gov. Brian Sandoval: “I voted for Question 3 in 2016 and will vote for it again in 2018,” he has previously said, but spoke in favor of NV Energy’s proposal to pursue renewable energy projects if the ballot question fails.

This story originally appeared in the Las Vegas Weekly.