The struggle for clean energy in Nevada

July 30, 2016

The Public Utilities Commission of Nevada (PUCN) decided last December to restructure net metering. This decision, perhaps the biggest setback to solar in the industry’s history, sent shockwaves through the state’s solar community that will be felt for years to come. In response, activists, major energy users, and local governments have worked to lessen the fallout from the PUCN decision

The Commission voted to gradually lower the credit to net metered solar customers for the excess power they produce from the retail rate (11 cents per kwh) to the lower wholesale rate (2.6 cents per kwh). This lowering would take place over the course of four years. In addition, they allowed the utility, NV Energy, to raise its fixed service charge for solar customers more than threefold over the same time period. The increase would be from $12.75 per month to $38.51 per month.

As a result, Nevada has seen its solar industry grind to a halt. Several solar providers, including such major players as SolarCity, Vivint and SunRun, have virtually abandoned the state in the wake of the ruling, saying that adopting solar no longer makes financial sense for Nevada homeowners.

“The PUC has made solar unaffordable in Nevada,” said Chandler Sherman, spokesperson for the advocacy organization Bring Back Solar Alliance, which, according to its website, seeks to “restore Nevadans’ right to generate their own clean energy affordably.” “There were 1368 applications for solar in December and only twenty applications in May,” Sherman continued. “Businesses can’t operate in such a climate.”

Sherman pointed out what her organization considered to be flaws in the process by which the PUC arrived at its decision.

“The PUC said they had insufficient time and data, and they made the decision without the full data. They had 11 variables to consider, and they only picked two. Also, an NRDC study had said that solar gives a benefit of $7 Million to the state,” but this was ignored by the commission. Bring Back Solar is now working to support the current “grandfathering” proposal, which would restore the previous rate structure for those who already owned solar systems at the time of the ruling.

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While net metered residential customers scramble to save their net metering rate, one of Nevada’s most notable businesses, the MGM Grand Casino, is looking to leave the utility all together. This spring, the company announced it would seek cheaper and greener energy on the open market. This decision does not come without complications. A law passed during the 2001 energy crisis prevents a major energy user like like the MGM Grand from simply quit the utility. The law forces MGM to pay an exit fee. This fee is designed to prevent NV Energy either from being damaged by significant losses, or from passing on the costs of those losses to other ratepayers. Nevada Power derives five percent of its total energy sales in the state from the MGM Grand. The casino and the utility agreed to a one-time exit fee of $86.9 million, with the MGM Grand exiting October 1 of this year. Furthermore, it was agreed that Nevada Power, though no longer to be the MGM Grand’s chosen producer of energy, it would continue serving as the carrier of its energy through its existing transmission system.

An official at the MGM Grand forwarded to us the official letter the company had addressed to PUCN Commission Secretary Breanne Potter, in which it formally announced its decision to terminate its relationship with the utility as an energy producer. (Note that as the action of severing its business relationship with NV Energy has not yet been completed, the MGM Grand is limited in what it can legally say about the utility.)

In a letter sent by MGM Grand to the PUCN, said: “Energy management is a core component of MGM Resort's overall sustainability strategy,” the letter said. “It is our objective to reduce MGM's environmental impact by decreasing the use of energy and aggressively pursuing renewable energy sources. Our imperative is heightened by increasing customer demand for environmentally sustainable destinations. Additionally, as a socially responsible company, our objective is to ensure that our decisions have a positive impact on our communities, and the people who work and live in them.

“After careful thought and analysis over many months,” the letter goes on, “we have concluded our objectives are best met by purchasing the energy required to operate our resorts, and serve our customers and guests, from a source other than NV Energy.”

Sherman tied this issue to NV Energy’s previous move to limit energy choice for Nevadans by proposing to the PUCN the changes in net metering rates that were approved in December.

“What you’re seeing in Nevada is that everybody wants to be able to have energy choice,” said Sherman. “MGM wants to use clean energy because it makes them more competitive. This is an issue that really resonates with people. People want to use natural resources, and have Nevada be clean. MGM said that the utility had $84 million profit over what the utility was allowed to have and that this was a factor in its decision to get off the grid.”

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A month after the PUCN’s decision on net metering, Las Vegas announced its decision to establish an Energy Improvement District (EID) program. This was done as an explicit reaction to the PUCN’s decision. According to this article, under the EID program, homeowners who opt into this financing program could spread the upfront cost of installing a solar system – typically between $15,000 and $20,000 – over a span of 20 years. If a particular homeowner chooses to move, the loan would be tied to the property, not the homeowner.

Marco Velotta of the Office of Sustainability of the City of Las Vegas said the PUCN’s net metering decision served as an incentive for the EID proposal. Referring to the program under its federal name, PACE (Property Assessed Clean Energy), Velotta observed that, although the proposal had been discussed for several years, it was during the 2015 legislative session that renewable energy was seen as a major topic. This was due to the extraordinary success of solar power in the state. So successful was solar, in fact, that it became increasingly clear that NV Energy would, by the end of 2015, reach its statutory net metering “cap” on the amount of solar power that could legally be installed in the state under existing rules. It reached that cap in August, so that the PUCN was forced by law to adopt a new net metering structure by December. (Please see this CPN article for more information.)

“The culmination of these events,” said Velotta, “coincided with Councilman Ross’s proposal to find a new solution for renewable energy in the City [of Las Vegas]. When the PUCN’s decision was released, the solar industry immediately felt the impact. The natural response was to find a solution to re-open the door and get people back to work installing solar panels and providing the City’s homeowners and businesses an opportunity to invest in renewable energy. This program was seen as that catalyst solution.”

Although the councilman was eager to enact the PACE program as soon as possible, some unanticipated setbacks emerged, according to Velotta. The City Council’s staff researched the topic with the City Attorney’s office and outside experts and came to the conclusion that additional state-level legislation was required to create the program. Governor Sandoval’s New Energy Industry Task Force has recommended that the program be put into a bill for consideration in the 2017 Nevada legislative session.

Velotta believes that the PACE program, when and if enacted, will go some way towards reversing the devastating effects of the PUCN’s ruling.

“There is definitely a gap this program could fill,” he said. “Because of the PUCN’s decision, some financing methods weren’t as accessible… Over time, as the industry regains momentum and grows again, this will be another financing tool homeowners and businesses can take advantage of to make installations.” Velotta emphasizes that the EID/PACE program and the net metering rate decision by the PUCN are two different issues, and states that Las Vegas would continue to pursue the former program even if the PUCN reversed itself on the net metering issue.

Sherman sees the City of Las Vegas’ PACE proposal as a very favorable development.

“It’s great to see these positive decisions by municipalities,” Sherman said. “The people of Nevada overwhelmingly oppose the PUC’s decision. Las Vegas is saying, ‘If the regulators won’t step up, what can we do to help?’. We are seeing input from all parties that say the PUCN’s ruling is not good for Nevada. Ninety percent of Nevadans want to reverse the decision, people all around the state from every walk of life, from homeowners to business leaders.”

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