by Corrine Casanova
On November 6, voters will vote yes or no on Question #3, “The Energy Choice Initiative.” The debate is heating up on both sides. Essentially, it is about deregulating Nevada’s energy market and allowing consumers to make a choice on their electrical provider. The measure seeks to amend the Nevada Constitution by adding language that would open the state’s energy markets to competition. It is one of the hot-button issues on energy that’s dominating the state of Nevada.
To gain a better perspective on Question 3, I spoke with James Wadhams, a government affairs attorney at Fennemore Craig; Bradley Mayor, a spokesperson for Yes on 3; and Tracy Skenandore, a spokesperson for the Coalition to Defeat Question 3.
As you may recall, in the last general election in 2016, Nevadans voted yes on Question 3 by a whopping 72 to 28 percent vote. Because it amends the constitution, it has to be voted on again. “This sort of process of getting a constitutional amendment takes longer than to change a legislative statute. For example, if the legislature thinks they did something wrong in 2017, they can go back in 2019 and change it. However, as a constitutional amendment, it will take two general elections requiring votes by the people to do that. Once you amend the constitution it kind of locks things in,” said Wadhams. If it passes, they have three legislative sessions in 2019, 2021 and 2023 to create laws that will allow a competitive marketplace.
Question 3 has turned into a multimillion-dollar public battle that goes way beyond party lines. A big proponent for Yes on Question 3 is Sheldon Adelson, chairman, and CEO of Las Vegas Sands Corp. In contrast, a big supporter of No on 3 is Phil Satre, Chairman of the Board at IGT and former Chairman & CEO of Harrah’s. Warren Buffet who is chairman of NV Energy’s parent company, Berkshire Hathaway Energy who acquired NV Energy in 2013 is also a No on 3 proponent. If the “Energy Choice Initiative” passes, NV Energy has been vocal about selling off their power plants and no longer being an energy provider in the state of Nevada. At the time of this writing, Governor Brian Sandoval and Senator Dean Heller are undecided.
Attorney James Wadhams (JW), Yes on 3’s Bradley Mayor (BM) and Coalition to Defeat Question 3’s Tracy Skenandore (TS) weighed in on some of the biggest topics–making a change with a constitutional amendment, rate implications, and what happens when a monopoly goes away.
Q: Why use a constitutional amendment to make the change?
TS: We are the only state to use a constitutional amendment to deregulate an electric system and no state in 20 years has attempted something like this. Locking it into our state constitution is too risky and would take a minimum of four years to undo when things go wrong. The Public Utilities Commission of Nevada found that 2,200 statutes would have to be amended if Question 3 passes. Imagine the time it would take to do this. Also, a lot of those statutes related to renewable energy programs and incentives would be dismantled.
BP: All that is being put in the constitution are really two items: a ban of electric generation monopolies in the state of Nevada and having the legislature create the new market by July 1, 2023. In that sense, the legislature maintains full authority to implement the market just like they’ve done in the 14 other energy choice states. In fact, the Governor’s Committee on Energy Choice came up with a 52-page report of recommendations on implementing the plan to give the legislature a head start.
Q: How will this impact electrical rates for consumers?
TS: Nevadans currently enjoy some of the lowest average electricity rates in the country and are 17 percent lower than the national average. It is likely to increase the average monthly electric bills of Nevadans, at least in the first 10 years. In deregulated states, average residential electrical rates are 30 percent higher than Nevada’s, and there is less reliable service.
BP: Free market principles drive costs down, not up, in competitive markets across the country. A July 2015 study shows that consumers in choice states have seen their power costs fall 4.5 percent against inflation on average. In contrast, consumers in monopoly states have seen their price rise 8.5 percent more than inflation. The data really proves that energy choice lowers prices. In our current system, businesses with more than one megawatt of usage can leave NV Energy, but it comes with a price tag. For example, MGM paid $87 million for the right to leave NV Energy. That tells me they must be saving more than $87 million getting their power somewhere else in a relatively short time. Switch left NV Energy and not only are they saving 40 percent on their power bills, but have gone 100% green.
Q: What happens when a monopoly system like NV Energy is dismantled after over 100 years of service? Will it impact the quality of service and reliability?
JW: The proponents argue two things: the monopoly is always self-benefiting, and the customer can usually do better for himself or herself. Regular voters might ask if the big guys can find better deals, will I too? As a monopoly, NV Energy has built the infrastructure—the poles and wires that give us access to electricity.
BP: NV Energy is trying to hold onto their monopoly. If I had a monopoly, I’d want to keep it too. We want to bring choice to Nevadans and allow them to take control of their energy future and really that is to access lower power bills, access more renewable energy and the jobs that come with having more renewable energy. NV Energy will still operate and maintain the poles and wires. If the power goes out, you will still call NV Energy just as you do today. The difference is you will choose your energy provider and choose the plan that fits best for you. In Texas, for example, they have something like 250 providers offering over 2,000 different types of plans. As far as reliability, NV Energy’s own CEO Paul Caudill in August 2016 said that energy choice would have no impact on reliability because ‘the backbone of the system are the poles and wires.’
TS: Electricity requires significant infrastructure. Deregulation has shown that it brings higher rates, less reliable systems, rolling blackouts, etc. There is something to be said for a provider like NV Energy that provides reliable service to consumers with affordable rates. From an economic development perspective, can we truly recruit corporations and businesses to consider our state [as their home] if we no longer have that reliable electricity system? That is one thing these corporations look into when considering relocation to another state. They want reliable utility options to keep their operational costs affordable, fair and manageable. For example, if a huge manufacturing facility is looking to move to Nevada and because of deregulation realizes that we no longer have a reliable electricity system in place, they may choose another state for relocation because they have a more reliable system. In April 2018, NV Energy announced they will invest $2 billion in six new solar projects. The reality is, this will not move forward if Question 3 passes. There are so many implications to this that we really want voters to look into and understand before they vote.
As the debate continues, so does the passion on both sides. Voters will make the final determination about how to proceed with Question 3 this November.