NV Energy to pay $1.1 million annually to keep Clark County in the fold

Clark County Government Center

Clark County Commissioners have adopted a five-year agreement with NV Energy that will see the state’s primary utility pay the county $1.1 million a year for promising not to leave its electric service.

Commission members voted unanimously on Tuesday to adopt the proposed contract, which makes the county at least the fourth government agency to receive direct cash payments from NV Energy in return for a promise not to consider leaving NV Energy for another electric provider.

Already, the utility has entered into similar contracts with the city of Henderson, the Las Vegas Convention and Visitors Authority and the Clark County School District exchanging cash payments for both a commitment not to leave the utility and a promise to enroll in a special Optional Pricing Program Rate (OPPR) for large utility customers by 2022.

In a statement, NV Energy spokeswoman Jennifer Schuricht said that approval of the contract would help the utility “actually protect other customers from potential cost increases.”

“NV Energy is pleased that the Clark County Commission is considering a multi-year agreement to remain a customer, which will provide them with long-term value without increasing rates for other customers,” she said in an email on Monday. “Our large business and government entity customers are seeking tailored solutions that meet their unique needs and we are responding to this demand.”

Since May, NV Energy has announced similar long-term arrangements or deals with several other customers, including Station Casinos, the Cosmopolitan, Las Vegas Sands, the Atlantis, Golden Gaming and South Point. NV Energy has declined to say whether those deals, which are not required to be publicly disclosed to the Public Utilities Commission, included similar payments as part of their arrangements to stick with the utility.

The additional $1.1 million that will flow annually to Clark County every year would bring total payments from the utility to government agencies up to $3 million a year, including $1.5 million to CCSD, $250,000 to Henderson and $650,000 to the LVCVA. If similar financial payments are part of the deals struck with private businesses, the utility could be paying tens of millions of dollars annually to keep the business of its largest customers.

The contract itself largely follows the same outline as the contracts with other Southern Nevada agencies — guaranteeing $1.1 million in payments for 2019, 2020 and 2021, and requiring the county enroll in the OPPR program by 2022. The proposed OPPR pricing program, which would offer a flat rate based on new large-scale solar projects, has been touted by the utility as an alternative for large businesses that have flirted with leaving the utility, but has faced criticism as too generous to participants (the utility temporarily withdrew its OPPR application in June).

The exact savings under the OPPR program are still unclear, though in at least one example, the utility estimated that the Nevada System of Higher Education would save $381,000 on its power bills every year under the initially proposed program.

The growing number of large customers who have sought to leave the utility for another power provider under the 704B process — the state law allowing large power users to use an alternative power provider in return for an exit fee designed to keep other ratepayers whole — has prompted worries from NV Energy, which has warned in rate filings and public statements that the departure of its largest customers would cripple future electric demand and likely shift millions of dollars in costs to its other customers.

Since mid-2018, at least 14 large Nevada businesses and government agencies filed 704B applications with the PUC; six have withdrawn their applications, seven were granted the right to leave and one (the under-construction resort The Drew) is still pending.

The contract with Clark County — which never filed a 704B application — also contains language noting the utility plans to file for a $120 million rate reduction in 2021 and includes a requirement to reduce incentive payments based on estimated savings if the PUC approves a higher rate reduction. It also contains a promise to continue cash payments into 2022 and 2023 if the savings from the OPPR rate don’t reach at least $1.1 million annually, and a requirement that Clark County refund all “incentive” payments if the five-year agreement is terminated early for any reason.

And as with the other contracts, the proposal with Clark County contains a confidentiality notice prohibiting either party from issuing “press releases or similar public announcements” without prior written consent of the other party.

Updated at 10:59 a.m. to reflect that the county commission approved the contract.

Proposed contract would see NV Energy pay Clark County School District $1.5 million annually to remain a customer

Front view of the building front of the Clark County School District administrative building

NV Energy will pay $1.5 million a year to the Clark County School District over the next five years in return for the district promising not to depart utility electric service under a proposed contract up for a vote later this week.

Members of the Clark County School District’s Board of Trustees have scheduled an agenda item and possible vote during their upcoming Thursday meeting on a contract that would lock the district into an agreement to remain an NV Energy customer for the next five years, in return for annual $1.5 million in either direct cash payments or through a special rate program for large customers.

The proposed arrangement is at least the third such deal with large municipalities that includes direct cash payments in return for remaining utility customers; the city of Henderson and the Las Vegas Convention and Visitors Authority entered into similar arrangements with NV Energy in past weeks.

"NV Energy is pleased to have the school board considering a multi-year agreement with us to be their energy provider," utility spokeswoman Jennifer
Schuricht said in an email. "We believe the agreement meets the unique energy needs of the school district at a low price to ensure more money can go into the classroom."

Since May, NV Energy has announced similar long-term arrangements or deals with several other customers, including Station Casinos, the Cosmopolitan, Las Vegas Sands, the Atlantis, Golden Gaming and South Point. An NV Energy spokeswoman declined to say in an earlier email whether arrangements with those businesses — which are not required to be publicly reported to the Public Utilities Commission — included similar payments as part of their deals to stick with the utility.

If the contract is approved by trustees, the utility will be on the hook for at least $1.9 million in annual payments to Henderson ($250,000), the LVCVA ($650,000) and CCSD ($1.5 million) for the next five years. If similar arrangements were made with private businesses that have announced similar deals with the utility, NV Energy could be directly paying up to tens of millions of dollars every year to some of its largest customers.

The proposed contract with the school district contains many similar provisions to contracts entered into by Henderson and the LVCVA, including running for five years and requiring the district enroll in the proposed Optional Pricing Program Rate (OPPR) by 2022. The pricing program, which was proposed by the utility last year but withdrawn temporarily last week, is aimed at offering large NV Energy customers a special, renewable power-backed flat rate but has been criticized by Public Utilities Commission staff and the Bureau of Consumer Protection as overly beneficial to larger customers.

In past months, NV Energy has taken increasingly aggressive steps to stem the tide of large businesses filing so-called 704B applications to leave the utility and purchase power from other providers (in return for a typically substantial exit fee to ensure other utility customers don’t face suddenly higher costs). 

The contract requires the school district to enroll in the OPPR program by 2022 if it is available and approved by the commission, and it would promise to continue paying the incentive if the program is not available or if the savings under the program are less than $1.5 million. It also contains provisions nullifying incentive payments in 2022 and 2023 if the district does not take service under the OPPR system.

It also contains language noting the utility’s plan to file a $120 million revenue reduction during its 2021 general rate case, and requirements to reduce the incentive payment based on the amount of estimated savings if the PUC approves a rate reduction greater than $120 million.

And as with Henderson and the LVCVA, the only requirement for the school district is to remain a full service customer of the utility for five years and not seek a so-called 704B exit application to depart utility service.

Another similar contractual provision concerns confidentiality; the proposed contract requires neither party to disclose information about the contract, make public announcements or disclose information exchanged regarding the contract without prior written consent, unless otherwise required by law. Unlike the agreements with Henderson and the LVCVA, the proposed contract with the school district does not contain any provisions related to helping the school district meet its renewable energy goals.

Last year, CCSD heard a presentation from a group of outside companies to have the district leave the utility and possibly entering into a long-term power purchase agreement. Trustees took no action at the time to move away from the utility.

NV Energy paying nearly $1 million a year to keep Henderson, LVCVA as customers

A picture of Henderson City Hall Sign

NV Energy will make annual cash payments totaling nearly $1 million to the city of Henderson and the Las Vegas Convention and Visitors Authority over the next five years as part of unique and unprecedented deals to retain the government entities as utility customers.

Contracts approved by the Henderson City Council and LVCVA in recent weeks will allow both entities to annually bring in hundreds of thousands of dollars from NV Energy, in return for a promise to not file any application to leave the utility’s service and purchase electricity from another power provider.

The two contracts offer a unique view into just how far NV Energy — which is owned by the Warren Buffet-run Berkshire Hathaway conglomerate — is willing to go to entice large Nevada power users to remain utility customers, as many of the largest businesses in the state have openly weighed or taken proactive steps to buy power from other electric providers.

Since May, NV Energy has announced similar long-term arrangements or deals with several other customers, including Station Casinos, the Cosmopolitan, Las Vegas Sands, the Atlantis, Golden Gaming and South Point. An NV Energy spokeswoman declined to say whether arrangements with those businesses — which are not required to be publicly reported to the Public Utilities Commission — included similar financial payments as part of a deal to stick with the utility.

“NV Energy has always treated customer information as private and will continue to do so in the case of customer agreements,” utility spokeswoman Jennifer Schuricht said in an email. “These customer agreements with governmental entities are subject to public record laws, and we and the customer abide by the laws applicable to the customer.”

If the contracts with Henderson ($250,000 a year) and the LVCVA ($650,000 a year) scale up to the other businesses with similar arrangements but larger electric loads, the amount of payments made annually by NV Energy to its largest customers could easily run into the millions or tens of millions of dollars. Schuricht, who noted the utility is seeking a $120 million rate cut for Southern Nevada customers in its upcoming general rate case, said the cost of complying with the contracts are not currently recovered through electric rates and that the PUC would need to approve any possible future recovery for cash payments made to those customers.

“NV Energy believes that we present the best energy value for our customers, and that retaining our commercial and industrial customers benefits all other customers,” she wrote in an email. “Any costs associated with the customer agreements are not included in electric rates. If NV Energy ever decided to seek recovery in the future, it will be done through an open and transparent public process with the Public Utilities Commission of Nevada, who will decide what is in the public’s best interest.”

Since 2014, NV Energy has dealt with a steady trickle of its largest customers filing applications to leave its electric service under the 704B law, which allows large customers to file applications to leave utility service and purchase electricity from other entities, provided they pay a usually substantial impact fee determined by the PUC to ensure other utility customers aren’t left with higher costs.

The exits began in earnest in 2014 with the departures of MGM Resorts, Switch and Caesars Entertainment, but more than a dozen large businesses filed to leave in late 2018 and early 2019, leading to increasingly vocal concerns from NV Energy as to the effect the departures would have on the utility’s financial health and future load growth, likely creating upward pressure on rates for its other customers.

The direct payments are one of several tools the utility has unleashed during a campaign to keep its largest customers from jumping ship, including development of a special, renewable power-backed Optional Pricing Program Rate, proposed across-the-board rate cuts and support for a law passed by the 2019 Legislature adding new barriers for large power users wishing to depart utility electric service.

But unlike the other tools, the deals made with the city of Henderson, LVCVA, and potentially other businesses aren’t required to be publicly reported or approved by the PUC, and instead have only been revealed through public records requests or as supporting material for public meetings.

The LVCVA — the government-backed tourism agency that operates Cashman Field and the Las Vegas Convention Center — had filed a 704B exit application in February but withdrew it in May, at the same time publicly announcing a five-year energy services agreement with NV Energy.

As part of the contract approved on May 22, the agency will receive $650,000 annually for the next three years and $525,000 for two subsequent years in the form of either cash payments or lowered energy bills under the proposed Optional Pricing Program Rate (OPPR) offered to large utility customers.

The contract contains language requiring the LVCVA to consider taking electric service under the OPPR program starting in 2022, with any shortfall in electric savings under $525,000 a year made up in the form of cash payments from the utility to the agency. NV Energy withdrew its application for the OPPR program earlier in June amid concerns from PUC staff and the Bureau of Consumer Protection, but says it plans to refile the application soon.

Language in the contract requires that the “incentives” be paid out of the utility’s retained earnings and requires the provisions and payments to be voided if the agency decides to opt out of the OPPR program in 2022. It also requires the incentive payment amount to be lowered if the PUC approves any revenue reduction greater than $120 million during NV Energy’s next general rate case, with any cost savings from lower electric prices taken out of the amount the agency would get from NV Energy as an incentive payment.

The contract also includes language requiring the utility to help the agency satisfy “renewable energy objectives,” including the possible purchase of renewable energy credits, as well as energy efficiency rebate programs. It also contains language automatically lowering the amount of financial payments made to the LVCVA if the agency installs any on-site generation, such as solar panels.

In return for those benefits, the LVCVA’s only contractual requirement is to not file a 704B exit application with the PUC or any other application to purchase electric service from another provider.

It also includes a “confidentiality” section, noting that while the agreement must be publicly noticed and approved by the LVCVA’s board in a public meeting, the “customer otherwise will attempt to maintain confidentiality of this Agreement.” It also limits press releases or announcements about the contract without prior written consent of the other party.

The contract and dollar amount of the incentives were not included in supporting material posted for the agency’s May 22 meeting, and the contract was only obtained through a public records request submitted by The Nevada Independent on Friday.

The contract with Henderson, which was approved during a City Council meeting on Tuesday, is substantially similar — the city will receive roughly $250,000 a year for the next five years in the form of either cash payments or lowered energy bills under the proposed OPPR program.

Under the terms of the contract, the utility agrees to give $250,000 in “incentive payments” to Henderson through 2022, after which the city will either be granted the special OPPR rate or continue to pay the quarter million dollars if the rate structure is not approved. If savings from the new rate structure are less than $250,000 a year, the contract requires NV Energy to make up the difference in direct cash payments.

As with the LVCVA, those provisions are void if Henderson opts not to take up the OPPR rate, with the contract also requiring a reduction in the incentive rate in 2022 and 2023 equal to whatever savings the city would see under a planned $120 million revenue reduction the utility plans to file in its next general rate case.

The contract also includes language requiring the utility to “continue pursuing solutions” toward electric infrastructure demands toward development in west Henderson, including building out substations and installing other facilities. Typically, approval of specific transmission or other infrastructure projects by the utility must be approved by the Public Utilities Commission as part of the public Integrated Resource Plan (the contract language indicates both specific projects as well as a reference to working before the PUC for approval of the construction projects).

And like the LVCVA contract, it also includes general language requiring the utility to help the city satisfy “renewable energy objectives,” including the possible purchase of renewable energy credits.

“NV Energy’s willingness to help the City of Henderson find savings through energy efficiency, to work with us on meeting our renewable energy objectives, and their pledge to continue to advance economic development in West Henderson by expanding existing or building new electric infrastructure, demonstrated an unwavering commitment to do what is best for our citizens,” Henderson Mayor Debra March said in a statement announcing the contract on Thursday. “This is a mutually beneficial public-private partnership that extends benefits to our community as a whole.”

It’s unclear whether other businesses or entities that have announced similar agreements with NV Energy have also received such direct financial benefits.

The Nevada System of Higher Education Board of Regents voted earlier in June to open negotiations with the utility and forego filing a 704B application, with the utility promising that its special OPPR rate could save the system up to $381,000 in power bills every year. Michael Flores, chief of staff to NSHE Chancellor Thom Reilly, said negotiations on the scope of any new arrangement or contract with the utility has not begun, but said that “everything is on the table at this point.”

Henderson NVE Contract by Riley Snyder on Scribd

Lvcva Nve Agreement by Riley Snyder on Scribd

NV Energy withdraws, plans to re-file program offering special lower rates for large customers

NV Energy has withdrawn and plans to rework its application to create a new, renewably powered special rate designed to keep large power customers in the company’s fold.

In a filing last week, NV Energy attorneys withdrew the utility’s pending application for its Optional Pricing Program Rate (OPPR), stopping regulatory approval on an alternative pricing mechanism proposed by the utility last year as a way to keep multiple large businesses from filing or continuing with applications to leave the utility.

In a statement, NV Energy spokeswoman Andrea Smith said the company was still working on the pricing program and planned to eventually refile a similar application with the Public Utilities Commission.

“We understand we still have some work to do with various stakeholders to reach a balanced outcome on this program and have withdrawn our original filing in order to take the time to work toward that balanced outcome,” she said in an email. “We fully intend to resubmit the program in the very near future so we can offer this important product to our customers.”

Although the company had already opened up an application window for the program (fulfilled in 20 seconds of opening in Southern Nevada), the program was never approved by the Public Utilities Commission, and commission staff and the Bureau of Consumer Protection had raised concerns that the program would end up costing normal residential ratepayers and benefited an arbitrarily-picked group of customers.

NV Energy filed a motion to delay processing of the OPPR application in late May, before withdrawing the application entirely on June 14.

As proposed, the OPPR rate would have been available only to utility customers eligible to leave its service through the 704B process, used by a handful of major casinos and other large-scale energy users to depart the utility and buy power from other third party providers in return for a usually substantial “exit fee” to ensure new costs aren’t fostered onto other utility customers.

The rate would have been composed of certain non-bypassable charges (such as gas transmission) but would have replaced the standard electric rate with a flat charge based on the utility’s six new major solar power plants adding 1,001 megawatts of solar electricity to the company’s fuel mix.

Although the projected price savings from the program were largely kept private, the Nevada System of Higher Education (which is eligible for the program) estimated that it could save roughly $381,000 a year from enrolling in the program statewide.

But the pricing program has been criticized by commission staff and the Bureau of Consumer Protection, which called it “inconsistent with the very premise of planning and operating the utility as a system for all ratepayers.” The agency estimated that the initial version of the program would have seen roughly 48 percent of the benefits from the new renewable energy contracts — or roughly $65 million — go to OPPR customers, who only represent roughly 5 percent of total electric sales from the utility.

Since initially proposing the OPPR program last year, NV Energy has announced arrangements with some of its largest customers who had flirted with leaving utility service but ultimately decided to stay, including Station Casinos, the Cosmopolitan, Las Vegas Sands, the Las Vegas Convention and Visitors Authority, Grand Sierra Resort, the Atlantis, Golden Gaming and South Point.

NV Energy also supported a bill in the 2019 Legislature that added multiple barriers and new requirements for businesses seeking to leave NV Energy, but allowed the roughly dozen or so businesses that have pending applications before the commission to continue under the old system. That measure was approved nearly unanimously and signed into law by Gov. Steve Sisolak.

Station Casinos to drop exit application, stick with NV Energy for electric service

Yet another major Nevada business has backed away from efforts to leave NV Energy’s electric service and has announced it will stick with the state’s incumbent electric utility.

In a joint statement sent Tuesday, NV Energy and Station Casinos announced they had reached an agreement on fully bundled electric service and that the casino company — which owns multiple properties in the Las Vegas area including Red Rock Casino Resort and Spa, Palace Station and Green Valley Ranch — would withdraw its application before the state’s Public Utilities Commission to depart from utility electric service and purchase power from another provider.

The withdrawal comes amid numerous other large power users announcing decisions to stick with the utility after flirting with a departure from NV Energy; in recent weeks, the Cosmopolitan, Las Vegas Sands, the Las Vegas Convention and Visitors Authority, Grand Sierra Resort, the Atlantis, Golden Gaming and South Point have all announced plans to stay with NV Energy.

“The existing long-term relationship between our companies, together with our shared commitment to the Southern Nevada community, were important factors in making our decision,” Station Casinos executive Stephen Cootey said in a statement. “That, combined with NV Energy’s commitment to meet our evolving energy requirements in a price-effective way, created a partnership that is truly valuable and one that we want to continue in the future.”

The casino company initially filed its application to leave the utility in June 2018, and received a draft order in September with a roughly $15.2 million immediate impact fee if it wished to depart the utility. Such fees are required under Nevada’s 704B law, which allows large power customers to file applications to leave the utility in return for paying an “impact fee” designed to ensure higher costs are not fostered on other utility customers.

The company filed and was granted a request to delay compliance reporting with taking electric service from another provider in May of this year, citing a desire to consider NV Energy’s Optional Pricing Program Rate as an alternative option. The program, which still needs to be approved by the PUC, would offer a stable subsidized rate to a subset of utility customers eligible to depart the utility.

“We value their business and appreciate the opportunity they gave us to reach an agreement that retains Stations Casinos as an important fully-bundled electric service customer,” NV Energy CEO Doug Cannon said in a statement.

Raiders reconsidering leaving NV Energy for future Las Vegas stadium's electric service

Photo rendering of Las Vegas Stadium

Months after receiving approval from state regulators to pre-emptively leave NV Energy’s electric service, the Raiders and their future stadium are re-considering leaving the utility.

According to filings made with the Public Utilities Commission over the last month, attorneys for the Raiders have requested and received permission to suspend compliance with the terms of the under-construction stadium’s departure from its planned exit from NV Energy in order to assess an alternative offer by NV Energy.

In a letter sent to the commission last week, the Raiders stated that after the Commission approved their requested “exit” from NV Energy and be granted the right to purchase electric service from another provider in January, the organization was approached by NV Energy to enroll in a special tariff program “similar to how service is provided under” the current process for companies that have left the utility, but with NV Energy still providing the electricity.

The request made by the Raiders was to suspend the current compliance requirements — which it argues are unnecessary as the stadium is still under construction — to give the organization time to consider the new proposal, details of which are likely to become public sometime in June.

“Instead, if the Commission considers the new tariff to be in the public interest, there may be a benefit to NV Energy and its remaining customers from the Raiders staying in the NV Energy system under such tariff,” attorney Curt Ledford wrote in a motion to the Commission.

In a draft order published Thursday, the commission agreed to the arguments made by the Raiders and will allow for the extension of compliance reporting out to September 2019. The commission granted the Raiders the ability to contract with an outside electric utility without having to pay any exit fee in late January, deciding against an NV Energy request that the team pay $7.3 million to avoid other costs rising for other customers.

"We continue to work closely with the Raiders on a solution that retains them as a fully bundled customer of NV Energy and appreciate their openness to evaluating the proposed new tariff," NV Energy spokeswoman Andrea Smith said in an email.

Although the pricing program offered to the Raiders has yet to be introduced to the commission, NV Energy has already opened enrollment to companies eligible to leave the utility under a new Optional Pricing Program Rate. It’s also reached agreements to continue service in past weeks with large customers including the Las Vegas Sands, the Atlantis Casino Resort Spa, the Las Vegas Convention and Visitors Authority, Golden Entertainment and the South Point.

LVCVA to stick with NV Energy, drop exit application

The Las Vegas Convention and Visitors Authority is withdrawing its application to depart NV Energy and instead announced it will stay with the incumbent utility under a five-year energy services agreement.

The two entities made the announcement in a joint press release sent Wednesday, ending the LVCVA’s flirtation with leaving the utility to purchase power from another electric provider and keeping another large customer within the utility’s folds.

The LVCVA — the government agency that operates Cashman Field and the Las Vegas Convention Center — filed an initial application to depart the utility in February. Agency CEO Steve Hill previously told The Nevada Independent that the LVCVA spends around $6 million a year on electricity, and was looking for the best-value contract for the agency including the utility’s proposed Optional Pricing Program Rate.

“The LVCVA and NV Energy identified a sustainable solution that benefits our community, allowing us to allocate more funds towards our mission of promoting tourism,” Hill said in a statement. “NV Energy is a commendable community partner and our collaboration resulted in this excellent opportunity for the LVCVA to both reduce energy costs and increase the use of renewable energy.”

The LVCVA’s decision to stay with the utility is the latest company to announce a long-term partnership with NV Energy amid a number of businesses filing applications to leave the utility. Businesses that have announced similar arrangements with the utility or have dropped their applications to leave the utility in the last two months include the Las Vegas Sands, Golden Entertainment, the Atlantis Casino Resort Spa and the Grand Sierra Resort.

“We truly believe we are the best energy partner for all of our customers and are pleased that we were able to reach an agreement with the LVCVA that epitomizes that value,” NV Energy CEO Doug Cannon said in a statement.

Last-minute bill would severely curtail ability of businesses to leave NV Energy

The ability for large businesses to leave NV Energy would be made much more difficult under a proposal introduced with only weeks to go before the end of the legislative session.

Introduced by Democratic Sen. Chris Brooks on Wednesday, SB547 would substantially alter the state’s so-called 704B law for the first time since it was created in 2001, adding numerous new restrictions and requirements — including a new licensing structure, additional payments and more requirements for a departure — for businesses that already have or are in the process of departing NV Energy’s electric service.

Notably, the bill would now require any business applying to leave the utility prove that such an exit would be “in the public interest” — raising the current bar of only having to prove an exit isn’t “contrary” to the public interest.

Current 704B structure allows for large electric customers of the utility to file an application with the Public Utilities Commission (PUC) to obtain power from another source, as long as the commission determines the exit isn’t contrary to the public benefit and the departing business agrees to pay a typically sizable “impact” fee to offset any financial burden that other customers would have to pay.

The law was put in place in 2001 amid questions related to the ability of NV Energy to meet energy supply needs in the aftermath of the Western U.S. energy crisis of 2000 and 2001, and it was used by mining giants Barrick and Newmont to leave the utility and construct their own power plants. After a dormant period, the process was dusted off in 2014 and 2015 and used by large companies including Switch, MGM Resorts, Wynn Resorts and Las Vegas Sands to apply to leave the utility, but to do so by purchasing power from a third-party wholesaler as opposed to constructing their own power plants.

The number of exit applications swelled during the last two years — 13 companies filed to leave in 2018 and 2019, including the Grand Sierra Resort, SLS Las Vegas, Boyd Gaming, MSG Las Vegas, a building supplies company north of Las Vegas, the under-construction Raiders stadium, Atlantis Casino Resort Spa, Fulcrum Sierra BioFuels and Station Casinos.

But under SB547, exits would be much more limited and require several more steps before they take place.

The bill first requires that NV Energy include in its Integrated Resource Plan — filed every three years and detailing the utility's expected electric supply and demand — details on the total amount of energy that departed customers can purchase from outside providers.

It requires the utility to use a “sensitivity analysis” in developing its plan, one that addresses load growth, import capacity, potential strain on existing infrastructure and the projected effect of customers purchasing less electricity than the maximum outlined in the plan. It also requires the plan to calculate impact fees applicable to electricity costs paid for by end-use customers of the utility.

Under the bill, the PUC would need to determine several factors — including renewable energy development and furthering “safe, economic, efficient and reliable electric service” — when considering the utility’s plan for how much electricity should be made available for outside providers to sell to departed customers.

The bill would also restrict the submittal of new exit applications to a 30-day period between Jan. 2 and Feb. 1 of every year, setting a 280-day period in which the commission would either approve the exit application. If no approval is granted, the business would receive an automatic denial; current law sets a 180-day review period and requires the application be granted if the commission takes no action.

It’s in this section that the bill makes some of the most dramatic changes to the 704B process. The bill reverses current law — requiring the commission to grant an application if it is found “contrary” to the public interest — to requiring the commission to determine whether the application is in the public interest; a minor tweak in wording that raises and asks companies to prove that their exits benefit the public, as opposed to not actively harming the existing system.

The bill also requires the commission to consider the following issues before approving any exit application:

  • That the amount of energy and capacity required doesn’t exceed the limits set by the utility set in its Integrated Resource Plan
  • Whether NV Energy will experience (rather than “be burdened by”) increased costs as a result of the transaction
  • Whether any customer of the utility will pay increased costs for electric service or — in a new requirement — forgo benefits of a reduction of costs for electric service as a result of the exit application

It also removes the requirement for the commission to determine whether a company’s exit application adds energy or capacity to the state’s overall electric supply.

Such language, coupled with NV Energy warnings that approval of all pending exit applications would cripple expected electric demand for decades and cost the utility millions of dollars, essentially means departing the utility will either become much more expensive or procedurally much more difficult.

In addition, the bill expands the categories that must be considered when determining the impact fee charged by a departing company — including “identifiable but unquantifiable risk” to the departing customer, and ensuring that departing customers pay for any deviance caused by their exit from what the utility would otherwise pay under least-cost resource planning.

The bill also sets a deadline of July 1, 2019 for current pending applications to be approved by the commission, or else they will be automatically denied.

And in a change that will affect future and already departed customers, the bill requires any provider of new electric resources — the third-party provider that contracts with departed businesses — to receive a license from the PUC prior to purchasing electricity for any departed customer.

The bill also creates a licensing structure for the third-party providers, including requirements that they show the PUC evidence of their financial stability and technical and managerial competence in energy markets, while also requiring the commission hold a hearing prior to granting a license at which they can request information like past legal actions or consumer complaints against the provider. The commission is also granted the ability to adopt regulations requiring that new electric providers show that they have the ability to provide safe and reliable service, and to meet whatever electric demand is required by the departed customer.

The requirements for licensing will apply retroactively, so all companies that currently provide power for large Nevada businesses will have 30 days to register and receive a license from the PUC if the bill is passed. Such licensed companies would also be required to meet the same standards required of NV Energy to file an annual vulnerability assessment and emergency response plan with the commission.

The measure also includes provisions allowing the commission to adopt a process for a company that departed the utility to return to utility service, as well as giving the PUC power to limit the number of times a company can switch between NV Energy and an alternative electric provider.

Additionally, the bill requires any provider of a new electric resource to pay any mill taxes or assessments to the Public Utilities Commission that existing utilities are required to pay, and more significantly requires them to pay any costs or fees — determined by the commission — associated with programs for energy efficiency, renewable energy or other speciality programs paid for through a surcharge on rates. That change is important because the absence of those fees typically helps third-party providers lower electric prices beyond what is offered by NV Energy.

The measure also clears up several ambiguities in the current law, including expressly allowing new electric providers to sell electricity made through market purchases (something done in current practice but not clear in law) and allowing new businesses with more than 1 megawatt of generating capacity to apply to preemptively purchase power from a non-NV Energy provider. The commission has granted orders allowing some new companies to preemptively depart the utility, but has taken care to say the decisions were not binding in future cases.

The bill also contains provisions that essentially clarifies data centers cannot be regulated like a public utility — a clear link to the recent investigation (and subsequent lawsuit) by the PUC into whether Switch should be regulated like a utility.

Atlantis withdraws exit application from NV Energy, will stay utility customer

The Atlantis Casino Resort Spa has withdrawn its application to depart NV Energy and has instead announced it will stay with the utility as an electric customer, the second company to do so this month.

In a joint statement released by the utility and the casino on Monday evening, the Atlantis announced it would stay a fully bundled customer of NV Energy and withdraw its application (initially filed last September) to depart utility service and purchase power from a new provider.

“Over the last several months, we undertook an effort to explore efficiencies in our own business and also asked NV Energy some very tough questions about how they will operate theirs going forward to the benefit of all their customers,” Atlantis CEO John Farahi said in a statement. “It became clear to us that receiving energy services from NV Energy is the best value for our business.”

The withdrawn application comes a week after fellow Northern Nevada casino Grand Sierra Resort also pulled out of its application to leave the utility, amid unexpected “transmission capacity concerns” that the utility said could cost years and millions of dollars if additional exit applications are approved. Additional withdrawn applications, including some submitted by southern Nevada businesses, are expected in the coming weeks.

Regardless, the two withdrawn departure applications mark a positive sign for the utility, which has warned the Public Utilities Commission that allowing additional departures from utility service — more than a dozen businesses have filed to leave in the last two years — could lead to substantial upward pressure on rates for remaining utility customers.

The announced withdrawal actually came nearly a month after the PUC granted the company’s application to leave the utility, assessing a $1.76 million impact fee. But approval of the order does not lock the company into exiting the utility; the Las Vegas Sands similarly walked away from an exit application in 2014.

The departures are allowed under a 2001 state law that allows large electric customers to leave utility service after filing an application with the PUC and paying a usually substantial “impact fee” to offset any costs that would otherwise be paid by remaining utility customers.

Outside of a handful of large mining companies, few entities took advantage of the law until 2014 and 2015, when Switch, MGM Resorts and Wynn Resorts all took advantage of the law to leave utility service and purchase power from providers on the open market. An additional 10 businesses filed to leave the utility in 2018.

Those attempted departures led to NV Energy to begin questioning the policy and calling for an alternative analysis used to determine exit fees — claiming that they covered too short a period and could lead to increased rates down the line. At the same time, the utility has begun offering a revamped special reduced-cost rate with renewable energy for its largest customers.

NV Energy calls for higher exit fees on growing list of departing companies

Unless NV Energy is allowed to impose significantly higher impact fees on departing businesses, the utility will lose millions of dollars, cripple expected electric demand for decades and likely result in higher costs for residential customers, the company said in regulatory filings.

In a strongly worded, 29-page “alternative impact analysis” submitted last week by the utility as part of the South Point Hotel and Casino’s application to leave the utility’s electric service, NV Energy made clear its concerns with the legal process (dubbed 704B after the section in state law) used by more than a dozen businesses in the last two years to leave the utility’s electric service.

“In summary, all signs point in one direction: a comprehensive review and reform of the 704B process is needed,” the utility wrote in the filing. “Until such a review is completed and reforms are made, the (Public Utilities Commission) should insist upon a compelling showing by the applicant that the proposed transaction is in the public interest or use a much longer period for analyzing the impact of 704B transactions on base tariff general rates to protect the interest of remaining consumers.”

The utility’s filing isn’t immediately binding, but if adopted by energy regulators could price out multiple large Nevada companies applying to leave NV Energy’s electric service, the utility’s finances and, potentially, on power bills for the company’s residential and business customers.

In the filing, the utility said that if all pending exit applications were approved, its expected electric load would not recover to 2015 levels for up to two decades, and the multi-million dollar loss of expected revenue would mean the utility’s other customers would need to pay higher power costs.

“All other things being equal, (NV Energy’s) remaining customers will pay base tariff general rates that are $17 million higher than they otherwise would be in the next general rate review proceeding and potentially $30.3 million higher than they otherwise would be in the subsequent general rate review proceeding,” the utility wrote.

The filing comes amid a growing cascade of the company’s large power users taking advantage of a 2001 state law to depart as a utility customer, as long as the Public Utilities Commission finds the departure to not be contrary to the public interest and if they pay a typically substantial “impact fee” to offset future costs that other customers would otherwise be forced to pay. Departed companies remain with the utility as a transmission customer.

NV Energy has typically not opposed exit applications filed by its major customers, including applications sought and granted in 2014 by MGM Resorts, Las Vegas Sands and Wynn Resorts. But 2018 saw a record 10 companies file to leave as an electric customer, including the Grand Sierra Resort, SLS Las Vegas, Boyd Gaming, MSG Las Vegas, a building supplies company north of Las Vegas, the under-construction Raiders stadium, Atlantis Casino Resort Spa, Fulcrum Sierra BioFuels and Station Casinos. Another three have filed to leave so far in 2019.

NV Energy executive Shawn Elicegui hinted at the company’s antipathy toward the departures in January filings, citing both a transmission shortage in Northern Nevada as limiting capacity for additional departures as well as an argument that proposed departures were not in the “public interest.”

In the filing last week, the utility gave a more complete picture of how the departures were affecting its business model. It testified that sales to large commercial and industrial customers — the sector that saw the bulk of departures — had declined by 28 percent between 2013 and 2017.

NV Energy also said the commission decisions granting new or under-construction businesses such as the future Raiders stadium or a possible Google data center the ability to preemptively leave the utility without paying any kind of exit fee would further reduce the company’s expected load over the next several decades.

Those factors, according to the company, throw a wrench in fundamental assumptions around load growth that have “crumbled” since the initial set of 2014 applications were filed, when commissioners allowed the departures assuming that the utility would recover whatever lost load growth over the next six years.

In effect, the utility is calling for the Public Utilities Commission’s formula for determining impact fees to be substantially restructured, asking that it increase the time period for which the impact fee is calculated for base electric rates from six years to 18 years, and extending the time for non-bypassable charges from six years to nine years.

Those changes would likely substantially increase the exit “impact fee” that departing businesses are required to pay, including South Point. PUC staff recommended a $3.23 million impact fee for the company in an earlier filing; the cost under NV Energy’s recommended methodology was filed under seal and isn’t public.

The utility also questioned whether the current interpretation of the law fulfilled the “public interest” portion of the law as envisioned by lawmakers when they created the law in 2001, when the utility struggled to obtain enough electricity to meet its customer demand and flirted with bankruptcy. Initial companies that filed to leave the utility such as Barrick or Newmont did so in order to construct power plants of their own, but more recent businesses that have filed to leave contract with an outside provider who buys power on the open market, as opposed to constructing their own power plants.

NV Energy wrote in the filing that no company attempting to leave its electric service had proven “affirmatively” that departing the company would lower the price of electricity for other customers.

“Today, in contrast, the 704B process does not advance the public interest.,” the utility wrote in the filing.

The request to change the methodology for determining impact fees comes as state lawmakers may be set to amend 704B law. Democratic Sen. Chris Brooks has requested a bill draft request related to the issue, but has not yet introduced a bill on the topic.