Gambling on the Mirage of Customer Choice

With summer diversions in the rearview mirror, it’s time to look ahead to the mid-term elections. Down the ballot from attention-grabbing federal and statewide races sit some key ballot initiatives. Nevada’s Question 3, if approved, would amend the state’s constitution to enshrine deregulation – also known as restructuring, competition, or customer choice – of the state’s electricity market. What’s behind this attempt to make lasting energy policy decisions at the ballot box?

Voters generally respond enthusiastically to the idea of CHOICE in any arena. But in Nevada, famed for casinos and deserts, many are starting to see that Question 3 is a big roll of the dice for consumers and that its benefits are a mirage. Since April, three important voices have emerged to oppose deregulation and Question 3.

In April, Nevada’s PUC issued a report projecting deregulation’s impact on consumer bills and renewable energy supplies. It saw costs rising over the first decade due to billions of dollars in stranded asset liabilities and significant new costs for re-assembling the state’s power supply system. The neutral regulatory body also believes that distributed and utility-scale renewable development will slow significantly under deregulation.

In July, the Guinn Center released a report and voter guide highlighting several potential pitfalls, based on examining the history of deregulation in several other states over the last two decades. It focused on the dangers of making sweeping changes in the state’s foundational document, affirming the common-sense notion that unwinding all or part of it would be cumbersome, costly and take up years. The Guinn Center also flagged the likelihood of a decrease in consumer protections.

Later in the summer, more voices joined the chorus opposing deregulation, including national environmental groups such as the Sierra Club and the Natural Resources Defense Council. The groups cited disruption to the state’s energy market and uncertainty as chief concerns. In their view, if Question 3 passes, and the state’s leading utility has to get out of the generation business, mature plans for large renewable and storage projects could disappear into the sands.

The fallacies of Question 3, as noted by these three distinct groups, track with what Energy Fairness has researched and advocated over the last decade. “Customer Choice” is often pushed by large commercial entities seeking to break away from the established electricity system designed to serve all citizens and strike bargains with energy providers. It’s an open question whether and how their assumed savings would trickle down to their customers, or offset the higher electricity bills that may result for all.

In most states with deregulation implemented, retail electricity rates are actually higher, and it’s hard to detect consistent benefits for end-use consumers. If you’d like more information, a first-rate report by Paul Zummo examines EIA cost data across deregulated states.

Some renewable developers jump on the deregulation bandwagon, envisioning higher profits ahead by moving incumbent utilities expert at building and operating large-scale renewable projects off the gameboard. And, deregulating literally often means a diminishment of regulatory oversight, and therefore of regulators’ consumer protection powers.

Energy Fairness hopes that Nevada voters who value consistency and a sustainable path toward a balanced energy portfolio will vote NO on Question 3. Voting NO will help consumers win the bet and dispel the customer choice mirage.