Question 3 on the 2016 General Election ballot — the Energy Choice Initiative — passed by an overwhelming 72.4 percent to 27.6 percent. The measure failed in only one county, White Pine, but by only four votes.
Because the measure would amend the state Constitution it is back on the ballot this fall for final voter approval, but this time around a coalition headed by the state’s largest power monopoly, NV Energy, has vowed to spend $30 million to defeat it.
The Energy Choice Initiative proposes that the Constitution be amended to require the Legislature to pass a law providing an open, competitive retail electric energy market by July 1, 2023. The law must include provisions to reduce customer costs, protect against service disconnections and unfair practices, and prohibit the granting of monopolies for power generation, but could leave in place regulation of transmission or distribution systems.
One of the chief arguments for the measure is that competition would drive down cost.
Nevada and many other states were well on the way to breaking up their electricity generation monopolies 17 years ago until the Enron market manipulation debacle that led to blackouts and price spikes that scared lawmakers into backing off, even though the free market was not the problem. The problem was collusion and manipulation.
According to a Wall Street Journal article at the time, Enron charged California’s Independent System Operator for relieving power congestion without actually doing so. The company also avoided in-state price caps by moving power out of state and then reselling it to California — fraud.
Expect to be inundated in the coming months with “facts and figures” that are wildly contradictory and warnings of another Enron debacle.
Michael Yackira, the former CEO of NV Energy, recently penned an op-ed for the donation-funded news website The Nevada Independent that argued the initiative could jeopardize energy dependability and not lower power bills.
“Fourteen states plus the District of Columbia have implemented deregulation,” Yackira writes. “The result: Not one of these has lower rates than Nevada and 11 of these places have higher rates than the national average. When compared to prices throughout the country, Nevada’s prices are below the national average. For example, California’s electricity prices per kilowatt hour are nearly double Nevada’s.”
Days later, Jon Wellinghoff, a backer of the Energy Choice Initiative as well as former general counsel to the Public Utilities Commission of Nevada and chairman of the Federal Energy Regulatory Commission, fired back at the same website, saying the initiative is not “deregualtion” at all, because the grid would still be regulated and still operated by the power company and the various rural power cooperatives around the state.
Wellinghoff said it is a basic economic principle that competition lowers costs. “Consider the case of Pennsylvania,” he writes. “Since it enacted energy choice, consumers have saved close to $1 billion per year on their power bills and the residents of Pittsburgh are paying 50 percent LESS for energy than under the monopoly utility, according to former Pennsylvania Public Utilities Commissioner John Hanger.”
He also cited a 2015 study by two veteran utility regulators titled “Evolution of the Revolution: The Sustained Success of Retail Electricity Competition.” That study found that from 1997 to 2014 the states that had adopted customer choice for power saw inflation-adjusted residential rates fall 5.2 percent, while monopoly states saw those rates rise 3.9 percent.
Opponents of the ballot measure like to point out that Nevada’s rates are below the national average and nearly half that of California’s, which has driven up costs by demanding that a huge proportion of its power come from more expensive renewable energy sources, such as solar and wind.
According to the U.S. Energy Information Administration, as of December 2017 Nevada power rates for all sectors ranked in the middle of the 11 western states, but since commercial and industrial users get lower rates in Nevada, our residential rates were the third highest in the region 12.34 cents per kilowatt-hour. Arizona’s residential rate was 12.85 cents and California’s 18.48. The lowest was in hydropower rich Washington at 9.63 cents.
Wellinghoff points out that large power consumers such as MGM, Switch, Caesars and Barrick Mining are already paying millions of dollars for the privilege of buying power on the open market — in the case of MGM, $87 million, which must mean they are going to save more than $87 million on the open market.
Why shouldn’t residential customers be able to shop for cheaper power?
A version of this column appeared this week in many of the Battle Born Media newspapers — The Ely Times, the Mesquite Local News, the Mineral County Independent-News, the Eureka Sentinel and the Lincoln County Record — and the Elko Daily Free Press.
Update: An alert reader points out that a 2003 investigation of the power market manipulation determined that the underlying cause was poor regulatory plans. “Staff concludes that supply-demand imbalance, flawed market design and inconsistent rules made possible significant market manipulation as delineated in final investigation report. Without underlying market dysfunction, attempts to manipulate the market would not be successful,” the staff report concluded.