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Our electricity monopoly was once again kept at bay

Vaseline September 27, 2024

Jon Wellinghoff
| Reno Gazette Magazine

Re: “PUC denies NV Energy bid to triple service costs in Northern Nevada,” September 19:

For-profit monopoly companies are a rarity in our capitalist economy. Sometimes they happen by default when one entity so dominates an industry and they drive out the competition – like Google or Amazon. In other cases, monopolies are explicitly authorized by law to provide essential services.

This is the case with the Sierra Pacific Power Company, which provides electric service to Northern Nevada for profit. Under the law, electric service is considered a monopoly service by the Legislature and Sierra Pacific is granted an exclusive monopoly franchise by the Nevada Public Utilities Commission (PUCN) to provide these services in the northern part of the state, including the Reno-Sparks. -Carson City area. Sierra Pacific’s sister company, Nevada Power, provides similar monopoly services in the Las Vegas area. Both companies fall under the umbrella company NV Energy. NV Energy is in turn owned by parent company Berkshire Hathaway Holdings. While electric services can be offered competitively and do so in some other parts of the country, our electric services here in Nevada remain a monopoly.

Without competition, monopoly power must be regulated. Otherwise, there would be no control over the level of electricity rates Sierra Pacific charges, the profits it makes from us, or the quality of the service it provides. You can’t just switch companies if you don’t like Sierra Pacific. There is no one else to turn to unless you can afford to provide your own power with solar on your roof and a battery or electric vehicle in your garage to power you 24/7.

Fortunately for us, however, there is someone charged by the legislature with keeping this profit monopoly in check. It is the same entity that grants Sierra Pacific their monopoly power in the first place: the PUCN. This committee consists of three individuals appointed by the governor to act as a surrogate for the competition. They do this by regulating the rates and level of profits that the monopolies that provide Nevadans with electric services are allowed to make. The commission also oversees other monopolistic utilities, such as methane gas services and water.

Not a consumer-friendly proposition

The need for this regulator recently became painfully clear when Sierra Pacific attempted to expand its monopoly power. Sierra, in its latest rate case, tried to convince the PUCN to increase the base rate for residential consumers from the current rate of $16.50 per month to a whopping $45.30, or an increase of 175%! This basic service charge only applies to connecting to Sierra Pacific cable from your home. No electricity is paid, only the connection. It’s similar to the membership fee you pay at Costco for the privilege of shopping at their store. But you can go to Walmart, Target or WinCo instead and pay nothing to shop at those stores. With Sierra Pacific, it’s a one-stop/only-stop shop for electrical services.

At a hearing before the PUCN, the Nevada Attorney General’s Bureau of Consumer Protection (an office I once headed) testified that the base rate proposal for Sierra Pacific’s basic services was of great importance to the Bureau because it “…energy conservation would penalize, and possibly reward, higher consumption, reduce participation in distributed energy resources and demand-side management programs, harm low-income customers who use FlexPlay, be unpopular with customers, and result in higher energy rates. It is clear that this was not a consumer-friendly proposal.

In addition to the Bureau’s concerns at the hearing, PUCN staff (I was also once a PUCN staff advisor) testified that they were concerned that Sierra Pacific’s proposed service fee increase would “…benefit to private customers who use more energy than to those who use more energy.” less.” Staff also expressed surprise at Sierra’s proposal in that “…Sierra aims to recoup distribution costs with this increase (service charge), something staff has not seen before in a rate case.” According to staff of PUCN, Sierra Pacific attempted to raise rates in a way that would primarily benefit the largest residential energy users on the grid, at the expense of small users. And it did so with a proposal unprecedented in the history of the UCN To be so daring requires an entity with a strong sense of entitlement. Such an attitude brings back flashes of Ernestine the telephone operator in the 1970s TV sitcom “Laugh-In.”

PUCN did its job – this time

Fortunately, the PUCN did its job on Tuesday and rejected Sierra Pacific’s proposal to increase base rates for residential services by an exorbitant amount. Instead, it awarded Sierra Pacific only a $2 increase, or 12%, instead of 175%. In doing so, however, the PUCN did say that the size of the proposed Sierra Pacific increase was “…not appropriate at this time…” – which of course begs the question: will this be appropriate at a later date? The PUCN also mentioned in its decision the rate-setting concept of gradualism – which basically means $2 today, maybe $2 in the future, and after that, who knows? It reminds me of the story of the frog in the pot of water that is slowly rising to the boiling point. Ouch!

So on Tuesday the PUCN did its job. The current three commissioners we have are independent, intelligent and honest public servants who work for salaries far below their counterparts in Sierra Pacific. This includes PUCN staff and the attorneys and experts who work for the Bureau of Consumer Protection. But we must all remember that by giving Sierra Pacific the mantle of a state-sanctioned monopoly, we are creating an entity that gets to spend our money, get all of it back in the rates it charges us to advocate for change that primarily benefit the state. regardless of the impact on the consumer.

Will the PUCN and the staff and the BCP do their job next time? We all hope so. What we can count on is that Sierra Pacific will come back again and again – think Terminator, doing what its monopoly status forces it to do: using our dollars to maximize profits for its parent company, Berkshire Hathaway. The only way to break that cycle is to change the nature of the animal.

Jon Wellinghoff was Nevada’s first consumer attorney representing utility consumers before the Nevada Public Utilities Commission (PUCN). He also served as a staff advisor to the PUCN and as a former chairman of the Federal Energy Regulatory Commission in Washington, DC. Jon is currently CEO of the consulting firm GridPolicy and lives in Reno with his wife and daughter.

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