Our electricity monopoly was once again kept in check

Jon Wellinghoff
| Reno Gazette Journal

Re: “PUC rejects NV Energy bid to triple Northern Nevada service fee,” Sept. 19:

Profit-oriented monopoly companies are a rarity in our capitalist economy. Sometimes they happen by default, when one company dominates a sector and pushes out competitors – like Google or Amazon. In other cases, monopolies are expressly authorized by law to provide so-called essential services.

Such is the case with Sierra Pacific Power Company, which provides revenue-generating electricity services to northern Nevada. By law, electric services are considered monopoly services by the legislature, and Sierra Pacific is granted an exclusive monopoly right by the Nevada Public Utilities Commission (PUCN) to provide these services throughout the northern part of the state, including the Reno-Sparks-Carson City area. Sierra Pacific's sister company, Nevada Power, offers similar monopoly services in the Las Vegas area. Both companies belong to the umbrella company NV Energy. NV Energy, in turn, is owned by parent company Berkshire Hathaway Holdings. Although electrical service can be provided competitively and is the case in a number of other regions of the country, our electrical service remains a monopoly here in Nevada.

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

Fortunately for us, however, there is someone who is mandated by the legislature to keep this profit monopoly in check. It is the same company that grants Sierra Pacific its monopoly power in the first place, the PUCN. This commission consists of three individuals appointed by the governor who serve as alternates for the competition. They do this by regulating the rates and the amount of profit that the monopolies that supply Nevada with electricity are allowed to make. The commission also monitors other monopoly supply services such as methane gas services and water.

Not a consumer-friendly suggestion

The need for this immediate regulator became painfully clear recently as Sierra Pacific sought to exert its monopoly power. Sierra tried to convince the PUCN in its most recent rate case that it needs to increase the base rate for residential customers from the current $16.50 per month to a whopping $45.30, or a 175% increase! This basic fee only applies to connecting to the Sierra Pacific cable from your home. It doesn't pay for electricity, just the connection. It's like the membership fee you pay at Costco for the privilege of shopping in their store. But you can also go to Walmart, Target, or WinCo instead and pay nothing to shop at those stores. Sierra Pacific is a one-stop/only-stop shop for electrical services.

At the PUCN hearing, the Nevada Attorney General's Bureau of Consumer Protection (an office I once headed) testified that Sierra Pacific's utility fee proposal was of great importance to the bureau because it would “penalize energy savings, and potentially…” reward higher consumption, reduce participation in distributed energy resources and demand-side management programs, harm low-income customers who use FlexPlay, are unpopular with customers, and result in higher electricity rates over time. This was clearly not a consumer-friendly proposal.

In addition to the Bureau's concerns at the hearing, PUCN employees (I was also once a PUCN human resources consultant) testified that they were concerned that Sierra Pacific's proposed increase in service fees would “…benefit those residential customers who require more Energy than those who use more energy.” Employees also expressed surprise at Sierra's proposal since “…Sierra is trying to use this (service fee) increase to cover distribution costs, which employees “We've never seen anything like this before in a tariff case.” According to PUCN officials, Sierra Pacific sought to increase tariffs in a way that would primarily benefit the largest residential energy consumers on its grid and less disadvantage small-scale consumers To be so bold requires a person with a strong sense of entitlement. Such an attitude brings back memories of Ernestine the telephone operator from the 70s TV sitcom Laugh-In years.

PUCN did its job – this time

Fortunately, the PUCN did its job on Tuesday and rejected Sierra Pacific's proposal to exorbitantly increase the base fee for residential services. Instead, it gave Sierra Pacific only a $2, or 12%, increase instead of 175%. However, the PUCN stated that the extent of the proposed Sierra Pacific increase was “…not appropriate at this time” – which of course raises the question of whether it will be appropriate at a later date. The PUCN also mentioned the tariff concept of gradualism in its decision – basically meaning $2 today, maybe $2 at a later date, and after that, who knows? It reminds me of the story of the frog in the pot of water that is slowly brought 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 well below those of their counterparts at Sierra Pacific. This also applies to the PUCN employees and the lawyers and experts who work for the Bureau of Consumer Protection. But we must all remember that by giving Sierra Pacific the mantle of a for-profit, government-sanctioned monopoly, we are creating an entity that is allowed to spend our money, which it will get back in full at the rates it charges us, in order to Proposing changes that will primarily benefit their bottom line, regardless of the impact on consumers.

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

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

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Our electricity monopoly was once again kept in check

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