A Highly Consequential Decision from the Public Utilities Commission

In the last three years, no legal or policy area in Nevada has seen more consequential change than energy. Since 2014, we have seen a wave of large customers (1 MW or more) exit NV Energy’s system in search of lower prices and greener energy. We have also seen Nevada’s net metering policy substantially restricted through legislative and regulatory action, and then opened back up again in the same forums. And we have seen a ballot question providing for competition in Nevada’s retail electric markets pass with overwhelming popular support (approximately 72% of the popular vote). In addition, the legislature has taken action to spur the growth of the electric storage and electric vehicle markets, modernize Nevada’s regulatory framework to account for developments in distribution level technology and provide for more renewable energy in Nevada. The dynamic nature of the legal and policy landscape reflect the fact that energy is important; energy constitutes a major cost for business and it is a product many businesses want to be able to manage better from an economics and resource perspective.

Nothing reflects this reality more than the impact of NRS 704B on the current climate. Established in 2001 in response to the Western Energy Crisis, the provisions of NRS 704B provide a framework for large commercial customers in Nevada to exit NV Energy’s (monopoly) system and procure energy from providers of their choice. Until 2014, few customers availed themselves of the process. However, with competitive electric markets producing lower prices than NV Energy along with the option to incorporate higher percentages of renewable energy, leaving NV Energy’s system has become a more appealing option. Northern Nevada companies like Switch, Caesars and Peppermill have all gone through the process, and more are likely on the horizon. The key question for each of those entities was whether and to what extent it would be required to pay an impact fee associated with their departure. The law authorizes the Commission to impose such a fee to hold remaining ratepayers harmless for the financial effects of a customer departing. While these fees can be considerable, the attractive economics of market based purchases of electricity can make the endeavor worthwhile.

As Northern Nevada has grown, however, a key question has arisen with real economic development implications for Northern Nevada. Specifically, the question is should a company new to Nevada be required to pay an impact fee at all. After all, if a company has never been a customer, why should it have to pay a fee for departing—a fee that has generally been viewed as a departing customer’s share of the electric system resources built to serve the departing customer’s needs.

Recently, Google, as part of its consideration of whether to build a major data center facility in Northern Nevada, asked the Commission to address this very issue, and the Commission provided important guidance that, at least in theory, is applicable to other potential customers in our region. Indeed, the Commission seems to have established a protocol that new customers can follow to obtain zero impact fees for taking electric service from independent power provider.

In articulating this protocol, the Commission reached three consequential conclusions. First, the Commission said there is no minimum duration of time required for an end use customer to receive bundled service from NV Energy in order to be eligible to exit the utility’s system pursuant to NRS 704B. Prior to this, one reading of NRS 704B included a requirement that to exit NV Energy’s system, an entity would have to be a customer for some minimum period of time. In rejecting this notion, the Commission went further and said potential customers do not actually have to receive bundled service to eligible to apply for 704B; instead, a potential customer need only file and execute an application for service with NV Energy.  The customer can then cancel the service the next day and maintain its eligibility for 704B.

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Northern Nevada Business Weekly Law Journal

Issue No. 9, October 30, 2017

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