Nevada Rate Fight Shows Failure of Monopoly Power Model

A new dispute among Nevada’s largest utility, Nevada electricity regulators, and the solar power industry highlight why Nevada voters this November approved an initiative to break up the state’s electric utility monopoly structure.

NV Energy is petitioning the Nevada Public Utilities Commission to reverse its December 2016 decision that NV Energy must pay the owners of small solar power equipment full retail rates – rather than wholesale rates – for power supplied to the utility. NV Energy argues paying the owners of small solar power equipment higher prices than the utility would pay to other providers and higher prices than it would cost for NV Energy to generate its own electricity will raise electricity rates for state electricity customers.

Nevada, like most other states, assigns electricity customers to a single monopoly utility and then oversees and regulates the utility’s rates and major business decisions. In return for such heavy government oversight, monopoly utilities are promised approximately 10-percent in profits on its business costs. The utilities have largely supported such a system because it insulates them against the risk of losing money or turning only a small profit. Consumer groups have raised concern that the government-protected monopoly structure discourages innovation and gives utilities an incentive to inflate their business costs.

In November of last year Nevada voters approved a ballot initiative that breaks up the monopoly electricity structure and gives consumers the right to purchase electricity from competing power providers. The implementation of consumer choice will still take some time, however.

In the meantime, disputes about what is a fair price for Nevada’s largest monopoly utility – NV Energy – to pay electricity generators remain resolved by politically appointed bureaucrats rather than open competition and market forces. NV Energy is complaining that Nevada regulators made an unfair ruling against them last December, but NV Energy and the utility industry have long supported the monopoly system that gives government bureaucrats such control over the terms of electricity purchases and sales.

In a promising development for the state’s electricity customers, Nevada’s electricity structure is about to change.