PUCN obligated to set utility rates that are fair for all Nevadans

In Nevada, public utilities are regulated by the Public Utilities Commission of Nevada (“PUCN”). The PUCN is charged with promoting safe and reliable utility services at fair and reasonable rates.

Recently, the PUCN has made news in regard to an area of significant interest to many Nevadans — solar energy and the net metering program associated with it. Net metering is a metering mechanism that credits residential, rooftop solar energy system owners for the electricity added to the grid.

Prior to 2015, Nevada law provided a cap on the amount of electricity that could be added to the grid from residential, rooftop solar systems in the state. The cap had been expanded over the years and the rooftop solar industry in 2015 lobbied the Nevada State Legislature for another increase to the cap as residential solar installations neared capacity. The Legislature, in noting that the net metering model required non-solar customers to subsidize solar customers, opted instead for a new approach.

The Legislature worked with the solar companies, NV Energy, and others in coming up with a new regulatory program. The new law, as adopted in Senate Bill 374 (“SB 374”), removed the net metering cap and authorized the PUCN to adopt new net metering rates to ensure non-solar customers were not unreasonably subsidizing net metering customers. SB 374 was widely supported by the solar companies, NV Energy, and many others.

In mid-2015, the PUCN opened proceedings to determine the new rates for roof-top solar customers under the framework of SB 374. These PUCN proceedings allowed all interested parties to provide extensive testimony and submit other evidence designed to assist the PUCN in determining fair rates for all.

The PUCN ultimately adopted rates, which were based, in part, on a finding that non-solar customers were subsidizing net metering customers to the tune of more than $16 million annually. The rates adopted by the PUCN following the 2015 public proceedings were designed to reduce the annual subsidies that everyday ratepayers were paying with each month’s utility bill.

Ultimately, the rooftop solar companies were not pleased with the new rates imposed by the PUCN. A political action committee funded by the rooftop solar companies was formed in an effort to remove the PUCN’s authority of net metering. The political action committee filed a petition to modify SB 374 to remove the oversight over net metering, which had been delegated to the PUCN by the Legislature. Notably, the proposed petition sought to leave those portions of SB 374 that removed the cap on net metering in place; the effect of which would be unfettered ability to grow rooftop solar energy generation without any cap while forcing the electric utility to provide a one to one credit for the energy produced. This would result in the continued subsidy of rooftop solar by non-solar customers.

The petition to modify SB 374 was ultimately rejected by the Nevada Supreme Court on August 4, 2016, upon a finding that the sponsors of the petition had not accurately informed potential signers and voters of the effects of the petition. Specifically, the Supreme Court, in its Order, noted that the petition failed to inform voters that approval of the petition would result in “an unlimited amount of net metering.”

It is unclear what steps, if any, the rooftop solar companies might take next. It is clear, however, that the PUCN retains the authority and obligation to set rates that are fair and reasonable for all Nevadans. This means ensuring that non-solar energy customers are not forced to unreasonably subsidize net metering customers while ensuring solar customers receive fair service charges and reimbursement rates for solar power generated.

It is clear that this debate will continue as the PUCN and our elected officials struggle with finding balance between encouraging increased solar generation and the appropriate allocation of the costs associated with rooftop solar power generation. As the law in this area continues to evolve, whether you are a small business owner, service provider, rooftop solar owner or simply a concerned citizen, it is helpful to consult with an experienced attorney who understands the various PUCN regulations to help answer your questions regarding Energy Law in Nevada.

Justin Townsend is an associate with Allison MacKenzie Law Firm with primary practice in Business Law, Real Estate Law, Transportation Law, Commercial Transactions and Energy Law. Justin was admitted to practice in Texas in 2010 and Nevada in 2011. He is also fluent in Spanish. Justin can be reached by phone at 775-687-0202 or by email at: JTownsend@AllisonMacKenzie.com.