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Nevada Think Tank: Electric Choice Accompanied By "Variability In Rate Behavior"

July 23,2018

The Guinn Center, which describes itself as, "a nonprofit, bipartisan policy institute that delivers independent, fact-based, and well-reasoned analysis of critical policy issues facing Nevada and the region," released a technical report entitled, "Restructuring the Electricity Market in Nevada? Possibilities, Prospects, and Pitfalls"

The Guinn Center did not take a position on the Nevada Energy Choice Initiative in the report, and also stressed that its analysis was not predictive

The report's executive summary states, "The Guinn Center notes, however, that the transition to a restructured (or 'energy choice') electricity is accompanied by variability in rate behavior, implementation challenges, and, for residential ratepayers, increased uncertainty resulting from heightened exposure to wholesale electric prices."

The report states, "the evidence on the effect of restructuring on electric prices is mixed and inconclusive."

The report states, "Many Nevadans likely want to know what will happen with their electricity rates. This report finds that this question cannot be answered with any certainty, because there are too many variables that interact with one another even to produce a reasonable forecast or projection of what may happen to rates under restructuring in Nevada. We do know, however, that residential electricity rates in a restructured wholesale market will be more directly dependent upon the underlying prices of different forms of power generation, such as natural gas, solar and geothermal, than under the current monopolistic utility structure. Thus, for example, for states like Nevada that currently depend heavily on natural gas, their electricity rates in the wholesale market will vary more (up or down) with natural gas prices."

The report states, "The residential retail electric choice experience in other states has had its complications. Many consumers have lacked the expertise to make informed decisions about retail suppliers. That the states have provided official sources to help with the process speaks more to the obstacles that consumers have faced than to a facilitation of the process of retail supplier selection. In addition, a recurring theme is that consumers have not conceptualized well the distinction between variable-rate and fixed-rate contracts, and, relatedly, the impact of wholesale electric prices on the former."

The report also said that restructuring is not needed to increase renewable energy development, and that restructuring would cloud net metering policy

The report states, "This report also finds that research indicates that restructuring has no bearing on the increased integration of renewables onto the grid, nor does it hinder progress toward Nevada’s clean energy future."

The report states, "It is not clear that approval of Question 3: The Energy Choice Initiative, in fact, would invalidate preexisting statutory authority, formally. But, to the extent that the ballot initiative requires competition and choices, it would seem to imply that NV Energy not remain an electric supplier— this is why divestiture has been presumed, as well. If NV does not supply generation, then, by definition, it is not a supplier than can provide retail rates. Therefore, there would be no entity in the market with the ability to provide the net metering service. In the absence of further clarification, the right to energy choice seems incompatible with the rights guaranteed to net metering customers."

The report states, "The discussion of default service suggests one caveat to the idea that the elimination of the monopoly service provider from the electricity supply market means that no entity would exist to ensure that the rights of net metering customers are upheld. While it may be true that NV Energy might not be that company, either the Nevada Legislature, through enabling legislation, or the PUCN, through regulatory order (if delegated that responsibility by the Nevada Legislature), could enforce net metering rules on some entity that wants to participate in the market or enter it anew. This sort of designation may be true for the default service provider, as well, and since that entity would remain in the generation business, either as the POLR or via provision of an SOS option, one possibility might be to assign it net metering obligations, pursuant to AB 405. Ohio offers an example of a restructured state in which its law requires the wires companies to provide net metering to customers who generate several types of renewable energy; the Public Utilities Commission of Ohio issues related rulings and provides oversight."

See the report here

Nevada   Electric Choice   Deregulation  

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