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Switch reaches agreement with Nevada regulators to leave NV Energy

CARSON CITY — Data storage company Switch and state regulators have reached an agreement to allow the company to leave as a retail customer of NV Energy.

The agreement, which must be approved by the Nevada Public Utilities Commission, would essentially reverse the PUC’s 2015 denial of Switch’s original “exit application.”

The company could pay as much as $27 million in an “exit fee” to leave as a customer of the utility, which does business in Southern Nevada as Nevada Power. The fee is intended to protect remaining utility customers for investments already made in electricity infrastructure to meet demand.

The company would leave by Aug. 1 at the latest. Switch made no comment on the proposed agreement, which is expected to come up for a vote this month.

The agreement also allows Switch to secure its own energy supplies for its massive data storage facility being built at the Tahoe Reno Industrial Center near the Tesla gigafactory east of Reno.

Switch’s Northern Nevada data center is expected to cost $3 billion when fully built and will house seven buildings totaling 6.49 million square feet. The project broke ground in September 2015.

Switch in 2014 became the first company in years to file an exit application with the PUC, relying on a 2001 law passed by the Nevada Legislature. But the PUC denied the application on a 2-1 vote, citing concerns about whether the amount of the exit fee was appropriate and would protect remaining ratepayers.

Since then, however, three large gaming companies — Wynn Resorts Ltd., MGM Resorts International and Las Vegas Sands Inc. — were approved to leave as retail customers of the utility. Wynn and MGM did so Oct. 1, while Sands opted not to pursue a departure.

MGM was required to pay an $86.9 million exit fee and Wynn had to pay $15.7 million.

Just last month Caesars Entertainment Corp. also applied to withdraw as a retail customer of NV Energy and purchase power on the wholesale market.

The intent of the 2001 law was to lessen pressure on electricity rates during an energy crisis that was occurring at the time. Those circumstances no longer exist. Instead, large companies that exit are able to negotiate more favorable rates for power.

Currently only large utility customers can leave under the 2001 law. But Nevada voters in 2018 will be asked to weigh in on a measure that would clear the way for all utility customers large or small to seek out cheaper electricity prices through competition. Question 3 passed in November but must win approval a second time before the Legislature could enact a law opening the process to competition for everyone.

After Switch was denied, it reached an agreement with Nevada Power to stay with the utility and get all of its electricity from renewable energy at two Southern Nevada large-scale solar facilities called Switch 1 and Switch 2.

The stipulation filed with the PUC dated Thursday says Switch will continue to take power from both of these facilities.

Despite this agreement, Switch in July filed suit in U.S. District Court against the PUC and NV Energy over the denial of its exit application, arguing that others were allowed to leave. The lawsuit asserted that approvals of other exit applications constituted a violation of Switch’s 14th Amendment right to equal protection under the law.

The stipulation does not address this lawsuit.

Founded in 2000, Switch says its patented data centers are globally recognized for their revolutionary high-density design, superscale cloud campus, unparalleled telecommunications services and industry-leading sustainability.

Contact Sean Whaley at swhaley@reviewjournal.com or 775-461-3820. Follow @seanw801 on Twitter.

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