Buffett’s Bolshevik: Dissecting NV Energy’s Soviet-Style Sabotage Of Distributed Energy
On Wednesday, Nevada’s Public Utility Commission (PUC) radically revised the state’s net-energy metering (NEM) rules, which determine the price utilities pay for electricity supplied by customer-sited solar panels to utilities.
Under the revised NEM rules, utilities will pay significantly less for electricity purchased from customers with rooftop solar panels than they paid in the past.
The more I have learned about the circumstances surrounding the PUC’s decision, the more convinced I’ve become that Nevada’s biggest incumbent utility has baked the books on the economics of the state’s NEM policy to undercut potential competitors.
NV Energy, a utility subsidiary of Warren Buffett’s Berkshire Hathaway, was instrumental in persuading the PUC to revise the state’s NEM rules in the manner it ultimately did. How the utility orchestrated the actions of regulators to do the bidding of its investors is illustrative of the political dangers posed by relying on ludicrously antiquated and legally formalistic models of regulating electric utilities.
To quote Rupert Duwal, “if centralized planning worked, the Berlin Wall would still be standing.”
The Nevada PUC’s decision on NEM is indisputable evidence of the need for fundamental and unflinching reforms to utility regulation in the United States. If anything, NV Energy’s role in the PUC’s decision underscores the urgency of implementing those reforms.
The utility claimed that customers with rooftop solar panels were paying less than their fair share of the cost of providing electric service. To make up for the money not paid by customers with rooftop solar panels, NV Energy said it would need to charge customers without rooftop solar panels more for electric service. NV Energy stated that “the rationale for its proposal [was] to reverse the inequity between NEM and non-NEM ratepayers.”
The most obvious criticism of this rationale is that the inequity NV Energy proposes to correct does not yet exist – at least not according to just about anyone other than NV Energy.
Even the PUC’s staff, which strongly supported NV Energy’s proposals to revise the NEM rules, recognized “that NEM ratepayers do not impose any significant additional costs on NV Energy or other ratepayer classes at this time.”
An independent study of the economics of Nevada’s NEM policies commissioned by the state legislature in 2013 and completed in 2014 concluded that NEM ratepayers actually created a $36 million net benefit for non-NEM ratepayers. In other words, NEM ratepayers with rooftop solar were not free riders and NEM policies did not shift costs from NEM ratepayers to non-NEM ratepayers. The independent study was prepared by Energy and Environmental Economics, a company based in San Francisco with widely-recognized expertise on NEM rate design.