The Nevada 2017 legislative session has been dubbed the “Energy Session” by participants and observers, due to potential legislation that might fundamentally change the way electric energy has been generated, distributed and regulated in the past 20 years.
A Nevada Energy Choice initiative during the 2016 election cycle sought to restructure NV Energy into a “wires-only” transmission utility by stripping its power-generation responsibilities through an amendment to the Nevada Constitution.
After gathering enough signatures to be placed on the state ballot, the Question 3 initiative passed during the November election by a vote of 74 percent to 26 percent. Voters will decide again on this initiative during the 2018 election cycle, but legislators during this legislative session will take a hard look at its costs and benefits.
In February, Gov. Sandoval signed an executive order that created a Governor’s Committee on Energy Choice, chaired by Lt. Gov. Mark Hutchison.
“This committee will help prepare us for the complicated changes that lay ahead if Nevadans approve energy choice,” Gov. Sandoval said during his State of the State address. “It will include members of the Legislature, major customers, organized labor, renewable energy experts, senior citizens representatives and others. I will ask that they prepare a transition plan enabling us to enter the new markets by 2023.”
The 2017 legislative session will consider bill draft requests that attempt to reshape electric energy grid infrastructure throughout the state.
■ AB 5 requests creation of a Property Assessed Clean Energy program through lenders within Nevada, which would allow homeowners and commercial business owners to more easily finance energy-efficient and renewable energy improvements to their buildings.
■ AB 206 seeks to increase the renewable portfolio standard over the next 15 years, in order to require NV Energy to invest in more renewable energy projects statewide. This bill assumes that the Nevada Energy Choice initiative will not become approved by voters in 2018 and that the utility will retain its monopoly business model to provide electric power generation, transmission and distribution. The existing standard approved during the 2005 Nevada legislative session had called for a mix of 25 percent renewable energy generation resources by 2025. AB 206 seeks to review and increase the standards very two years, with a goal of 50 percent by 2030 and 80 percent by 2040.
In 1997, state lawmakers enacted a “Net Energy Metering” policy to encourage the growth of a rooftop solar generation industry but capped participation at just 3 percent of total utility power generation to minimize the shift of the costs of maintaining grid infrastructure to non-NEM customers.
After a decade of slow growth, plunging costs of photovoltaic solar panels and a 30 percent federal tax incentive, the valley was hit with a boom in rooftop solar installations. This growth spurt helped pull the state construction industry out of the Great Recession by creating new jobs and opportunities for commercial businesses.
From 2013 to 2105, the rooftop solar industry grew in Nevada. The 3 percent cap limitation began approaching rapidly. Meanwhile, NV Energy became overwhelmed with administration requirements, particularly regarding requests for inspections of utility grid connections to new photovoltaic rooftop solar installations.
“Inspection applications grew from about 200 per year to as many as 200 per day,” said Jesse Murray, director of Renewable Energy Programs at NV Energy, during a panel discussion in October 2016 hosted by the Green Alliance of Nevada. Scheduling of installation inspections became delayed from two weeks to more than two months to accommodate the growing demand.
During the 2015 Nevada legislative session, representatives from the rooftop solar industry urged the state to raise the cap or eliminate it entirely, accompanied by activist demonstrations in Carson City and at NV Energy facilities.
The Legislature passed SB 374 in June 2015. The new law removed the cap on rooftop solar installations but also required the Nevada Public Utilities Commission protect non-NEM customers from cost shifts that the 3 percent cap was intended to limit, by imposing NEM rates that were “just and reasonable.”
During December 2015, the three-member PUC ruled to establish a new rate schedule that would increase connection costs to the grid for residential NEM customers in Southern Nevada from $12.75 per month to $17.89 per month during 2016. Over the next four years, that connection rate was scheduled to increase incrementally to $38.51 per month by 2020.
Reimbursement credits for excess energy returned to the grid from rooftop photovoltaic solar panels also would drop from a retail rate of about 11 cents per kilowatt-hour down to about 9 cents kilowatt-hour during 2016 and then continue to drop incrementally over the next four years to under 3 cents per kilowatt-hour.
The 2015 NEM rate decision by the PUC affected about 15,000 NV Energy customers in Southern Nevada out of 1.3 million customers statewide. Returns on investment for installations of existing rooftop photovoltaic solar panels were now delayed and could even become a liability. The Southern Nevada business community experienced volatile change along with residential solar customers.
New, start-up solar installation companies, such as SolarCity and Sunrun, immediately shut down statewide operations and began laying off hundreds of employees because their business models relied on NEM rates remaining relatively stable to homeowners in order to generate consistent profits.
Commercial homebuilders, who planned to integrate rooftop solar installations on energy-efficient new-home communities across the state, began pulling solar panels off their demonstration models.
“It is hard to know what to tell our customers at this time,” said Frank Wyatt, who was the 2016 president of the Southern Nevada Home Builders Association and founder of Las Vegas-based Pinnacle Homes.
Large corporations, such as MGM Resorts International, Wynn Resorts, Caesars Entertainment, and Switch petitioned NV Energy and the PUC to allow them to leave the retail utility grid service under Nevada Revised Statute 704B.130, which allows eligible customers to seek “providers of new electricity resources.”
MGM Resorts International, Caesars Entertainment and Wynn Resorts agreed to pay administrative fees to NV Energy of $86.9 million, $44 million and $15.6 million, respectively, after the PUC approved grid-exit strategies proposed by the three gaming companies. All these corporations intend to purchase electric power directly from providers at wholesale prices in order to save money on daily operating expenses. Switch Communications was approved by PUC to exit NV Energy at the end of last year for an exit fee of $27 million. The group plans to go 100 percent renewable energy at its Las Vegas data center.
MGM expanded a solar farm installation on the rooftop of the Mandalay Bay Convention Center to 8.3 megawatts of power, which could harvest 25 percent of the resort’s daily operating requirements directly from the sun.
Meanwhile, NV Energy and its parent company, Berkshire Hathaway Energy Services, were leveraging the falling cost of photovoltaic solar power. The utility negotiated new power purchase agreements with utility-scale solar farms at costs that were cheaper than other power generation resources in the state. Most electricity-generation facilities in Nevada burn natural methane gas or coal to create steam that drives generator turbines.
A 20-year agreement with SunPower for electricity from the Boulder Solar Project, a 150-megawatt solar farm in the Eldorado Valley of Boulder City, was negotiated at an average cost of 4 cents-a-kilowatt-hour during 2015 and came online in December.
NV Energy also lowered the retail cost of electric power to Southern Nevada residential customers by about a penny, down to 10.1 cents per kilowatt-hour, during February 2017.
“We are proud of the fact that we have increased renewable energy, reduced coal generation and kept our prices lower than they were in 2007,” said Paul Caudill, president and CEO of NV Energy.
Gov. Brian Sandoval and his administration actively intervened during the political and economic upheaval by forming a New Energy Industry Task Force that brought together all the concerned businesses, government agencies and utilities in the state to recommend changes in legislation that would allow for an agreement about common ground and a path forward for the state’s economy.
The task force helped mediate compromises to the NEM rate design by the PUC during 2016 that included pushing out the effective dates of NEM rate changes from four years to 12 years. The PUC also agreed to a recommendation by the NEITF that existing NV Energy customers who had installed rooftop photovoltaic solar panels before the end of 2015 be “grandfathered” in order to lock in existing NEM rates from that year and keep them stable over the next 20 years. The goal of this exemption was to ensure a reasonable rate of return for customers’ rooftop solar investments.
Nevada residents can employ the Nevada Electronic Legislative Information System, or NELIS, to follow the progress of the 79th legislative session hearings on these bills, and even directly endorse or criticize pending legislation, by logging onto leg.state.nv.us/App/NELIS/REL/79th2017.
Southern Nevada residents also can participate directly in video conferences for subcommittee hearings on new bills by attending these sessions remotely at the Grant Sawyer State Office Building on 555 E. Washington Ave. in Las Vegas.
The Las Vegas Review-Journal and Las Vegas Business Press are owned by the family of Sheldon Adelson, chairman and CEO of Las Vegas Sands Corp.