March, 2018

In 2016, a majority of Nevada voters approved the Energy Choice Initiative (ECI) via “Ballot Question 3”. Question 3 is a constitutional amendment which would fundamentally alter Nevada’s long-standing Investor-Owned Utility (“IOU”) regulated utility model. However, incorrectly implementing ECI could inadvertently impact members of the Nevada Rural Electric Association (NREA) whom are not akin to the IOU regulated model.  Specifically, ECI could usurp many of Nevada’s existing Nevada Revised Statutes affecting NREA members. In November 2018, Nevada voters will be asked to consider Question 3 once more to determine if the proposed amendment should take permanent effect. The language of this constitutional amendment, should it be approved, could have wide-ranging significant economic implications throughout the state, many of which remain today, vague and uncertain. The proponents of ECI have publically stated that ECI, if it passes again in November 2018, should be implemented in a manner that reflects the existing business models of the NREA members.

The follow is a list of discussion points attempting to inform and educate NREA website visitors with a foundation of knowledge about NREA Members’ (Rural Electrics) existing business models which are fundamentally different from the IOU regulated model.  These business models have proven to be successful and sustainable for nearly nine decades.   Our intent is to provide a factual base for the reader to develop appropriate understanding of the difference between Rural Electrics and the IOU regulated model, and why the business models of Rural Electrics should be left intact should ECI pass for a second time and amend the constitution of the state of Nevada.

A.  Each of Nevada’s Rural Electrics are governed by a separate and independent democratically elected Board of Directors and face little regulation and/or oversight from the PUCN because, unlike the IOU regulated model, they do not earn a profit on the sale of energy. There are several important existing NRS statutes that exempt Electric Cooperatives, Power Districts, and Municipal Power Systems from current PUCN regulations.

Rather, Nevada’s Rural Electrics procure energy as consumers for their own use. Each of the entities that the NREA represents was created to serve its own owner-member/consumers in a service area defined by the PUCN.

B.  Each NREA Member provides meaningful choice for their member-owner/consumers as to where their power comes from and determines the allocated costs for each member-owner on the system. At the crux of this notion is a “one member, one vote” democratic structure and not-for-profit business model. Through their elected representatives to their Board, member-owner/consumers choose their source of electricity; make decisions to build and maintain distribution system infrastructure; plan and implement conservation and energy efficiency programs to fit local conditions; aid fellow consumers in need; enable individual member renewable resource generation; employ local community resources; and, strengthen their communities by supporting schools and community-based service.

C. NREA owner-member/consumers own and operate their respective electric transmission and distribution systems. Each Association’s Board establishes standards for the expansion of the electric distribution system through a line extension policy, and ensures all members will benefit from the expansion of the system.  The Board also determines which owner-member consumer(s) pay the line extension costs.  NREA Members’ distribution systems are solely used to serve their own system capacity and reliability requirements inside of the PUCN defined service area. These systems directly benefit the owner-member/consumer because their electric distribution system is operated at cost.

D. Rural Electrics are voluntary associations that aggregate the electricity needs of consumers within their service areas and exercise their will as a bloc. NREA owner-member/consumers do not own or operate generation facilities other than to serve their own needs as determined by their independent governing boards.

E. Each cooperative, power district, and municipality takes its member-owners/consumer’s energy needs to an energy market and finds the best available resource at the best available price. Because these consumers have come together, they are able to pool resources to accomplish community goals and operate at the lowest cost. In accordance with each NREA members’ Board policies ensuring appropriate safety and high system reliability, individual members have the right and potential ability to seek and procure energy generation resources on their own, or, in addition to the Board approved resource mix.

F. Each Association’s Board of Directors set rates with no excess margin component.

Rate components = Energy + Demand + Cost of maintaining the distribution system and managing Association services for owner-member/consumers.

We hope the topics above help readers to distinguish the differences between the IOU regulated model and the Rural Electric models.  We urge all visitors to the NREA website to engage with any of NREA Member Electric Cooperative, Power District and/or Municipal Power Authority about questions you have regarding how ECI, if implemented in a manner that does not allow the continuation of the existing Rural Electric models, can impact electricity prices in rural Nevada.

Finally, NREA members have worked diligently to develop some key principles to guide our discussions toward influencing key stakeholders and energy policy makers throughout the State.  Please follow the following link to our collective set of Principles.

Please call or contact your local NREA member, or, reach out to me, NREA’s Executive Director for more information on this truly important and urgent issue.

 

Richard “Hank” James

Executive Director

Nevada Rural Electric Association

1894 E. William Street, Suite 4222

Carson City, Nevada 89701

(775)275-0439

hjames@nrea.coop