EDITORIAL: PUC should let Switch, others buy electricity on wholesale market

The Public Utilities Commission says it’s not in the public interest to allow data storage giant Switch to stop buying electricity from NV Energy and begin purchasing cheaper power from the wholesale market. The PUC couldn’t be more wrong.

Switch is an important player in the diversification of the state’s economy. Its south valley building is a recruiting tool, evidence that high-tech businesses can thrive in Nevada. Switch is a vitally important success story in the region’s recovery from the Great Recession.

Switch is also an enormous consumer of electricity. Allowing Switch to reduce its operating costs, continue growing and employ more and more Nevadans most certainly is in the public interest. If Switch can reduce its power bill, it has an obligation to its investors to try to do so. And if the company can’t obtain cheaper power, but it can operate at a much lower cost elsewhere, it has an obligation to move.

The PUC, which rejected Switch’s request to ditch NV Energy on Wednesday by a 2-1 vote, isn’t sympathetic. If Switch and other large electricity customers were allowed to stop buying power from NV Energy at retail prices, the regulators reason, NV Energy’s smaller commercial customers and residential base could be stuck with higher bills to make up for NV Energy’s lost revenue. Unlike Switch, the power monopoly is a guaranteed money maker.

Most of the Strip’s hotels want to fire NV Energy, too. MGM Resorts International, Caesars Entertainment, Wynn Resorts and Las Vegas Sands Corp. all want to buy their power from the wholesale market, and they have submitted letters to the PUC declaring their intentions. These four companies employ tens of thousands of people and sustain hundreds of thousands of jobs in other sectors. Allowing Strip operators to improve their bottom line is in the public interest.

A state law passed in 2001 allows Nevada’s large utility customers to acquire power from other providers. At that time, reducing demand for power was seen as a way to cut costs for consumers. But the power market has become so distorted by renewable energy mandates, stricter federal regulation and NV Energy’s shift away from coal-fueled generation that prices have increased, even though electricity supply is adequate to meet demand. Switch had sought to acquire wholesale electricity from Exelon Generation Co. — and it was willing to pay $18.5 million to NV Energy to do it. The PUC countered by demanding a $27 million exit fee before rejecting the idea altogether.

It’s incredible that paying such high separation costs might pencil out for Switch. The reality is all Nevadans overpay for power, and it’s eating at profits and household budgets. Rising utility costs are a hidden tax.

The PUC voted unanimously Wednesday to quickly develop and clarify a policy that allows companies to exit NV Energy. Commissioners want to be sure exit fees are adequate to prevent further harm to other consumers. Once that policy is clear, Switch can reapply to get its power elsewhere. But it likely will have to pay even bigger bucks to break away.

Cheaper power is out there — and Nevada’s biggest electricity consumers want it. Instead of sticking everyone with ever-higher costs, the PUC and state and federal lawmakers should be working to reduce power bills for all customers so that no one wants to exit. That’s in the public interest.