Editorial: Time to let free market work for electricity

The Energy Choice Initiative — Question 3 on the November ballot — would amend the Nevada Constitution to require lawmakers by July 1, 2023, to “establish an open, competitive retail electric market, to ensure that protections are established that entitle customers to safe, reliable, and competitively priced electricity …”

This would include provisions to reduce costs to customers, ensure reliable service and prevent unfair practices. It would not require competitive transmission and distribution systems.

The initiative passed in 2016 with 72 percent voting in favor, but, since it amends the Constitution, voters must again approve it this year.

It had virtually no opposition in 2016 but now NV Energy, the monopoly power company that serves 90 percent of Nevada, is spending $63 million to defeat Question 3. Under the monopoly system, NV Energy is assured a 10 percent rate of return on investments. Profits without risk.

The ballot measure is being pushed by several large power users — chiefly Las Vegas casinos and large mining and data companies.

The opponents of Question 3 make the spurious claim: “In fact, in the 14 states that deregulated electricity, average residential electricity rates are 30% higher than ours in Nevada.”

That is entirely due to factors such as fuel costs that have nothing to do with what a  change to a free market system could provide. The better comparison is to look at how electricity prices have changed over the years since competition was introduced.

According to a 2017 analysis by the Retail Energy Supply Association, the average electricity price in those 14 competitive states fell 8 percent from 2008 to 2016, while the price of power in the monopoly states rose nearly 15 percent.

NV Energy also claims passage of Question 3 would require it to sell off its generating facilities and purchase power contracts at a loss that would have to be covered by ratepayers, but nothing in the language of the amendment requires this. In fact, lawmakers could require NV Energy for a period of time to be the provider of last resort.

NV Energy estimated that it would lose $7 billion by selling assets. The Public Utilities Commission of Nevada estimated those stranded costs could cause electricity rates to rise $24.91 a month in Southern Nevada and $6.52 in Northern Nevada for residential customers.

But a report by the Garrett Group presented to the Governor’s Committee on Energy Choice on behalf of the initiative backers said such a sell-off should be profitable, and, when coupled with the recent tax law changes, should cause power bills to drop by $11.16 a month.

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 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. Enron violated the rules.

Free markets tend to reduce cost and encourage innovation.

For example, since Pennsylvania introduced a competitive electricity market residential and commercial customers in Philadelphia and Pittsburgh are paying 40 percent to 56 percent less for power in inflation-adjusted dollars than they did in 1996 and residential customers saved $818 million in 2016.

Let the free market system do what it does best, vote for Question 3.

A version of this editorial appeared this week in some of the Battle Born Media newspapers — The Ely Times, the Mesquite Local News, the Mineral County Independent-News, the Eureka Sentinel,  Sparks Tribune and the Lincoln County Record.

7 comments on “Editorial: Time to let free market work for electricity

  1. Bill says:

    This has no business in the State Constitution. Monopolies are not always bad nor are free market solutions always best. We have no idea what the final version will look like after the Legislature and the Lobbyists perform their version of crony capitalism. The system we have would arguably have prevented a debacle like the Enron scandal.

  2. If California had enforced its own rules there would have been no Enron debacle.

  3. Anonymous says:

    Blame the victim?

    How about if Enron hadn’t broke the law, there wouldn’t have been any Enron debacle?

    Geez.

  4. HighflyinBrien says:

    Be careful what you wish for. The reason why this “disaster waiting to happen” passed in 2016, is because the public is woefully ignorant of the generation and transmission of electical energy and all that it entails…and because of the false and misleading commercials flooding the airwaves promising the moon if this passes. They dangled the bait of cleaner and greener energy choices for less money. That is utter balderdash. The only source of renewable energy that is cheaper than fossil fuel generated power is hydro generation. Which is all but a relic of the past except for large dams like the Boulder Dam which is federally distributed to the rural electric entities in small cities. And as if I mentioned before…if question 6 passes also, (and it will because of the same bait and ignorance) all bets are off…and you WILL be paying a lot more for your monthly power bill…you can take that one to the bank. I’m still scratching my head…Harry Reid and Thomas Mitchell pushing the same pipe dream. Go figure…

  5. Anonymous says:

    The lesson, unfortunately, never seems to be learned by some.

    Which is evidenced by the repeated calls in some quarters for deregulation. Followed closely by calls for reducing enforcement, and staffing of the EPA, the SEC, the FDA, and any number of agencies put in place to enforce the rules.

    And viola’

    The takeaway is that you can’t allow the very companies who are incentivized to break the laws, to voluntarily follow the laws, because the market driven economy we have puts those who follow the laws at a competitive disadvantage.

  6. HighflyinBrien says:

    A little more rain for the proponent’s of Question 3’s parade…https://www.powerlineblog.com/archives/2018/10/reminder-wind-power-blows-and-also-sucks.php

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