CEO Message – July 2018

Headshot of Clay FitchIn her book, “Out of Africa” Isak Dinesen wrote, “… the Earth was made round so that we would not see too far down the road.” At the moment, I wish I could see so much further.

Question 3, also known as the Energy Choice Initiative, asks you to approve a constitutional amendment giving every citizen of Nevada the right to choose where you buy electric energy. While I can see how the amendment can guarantee that right, I can’t see how it can guarantee that ability.

What’s the difference? The constitutional amendment can’t force anyone to sell you electricity, so you might not be able to choose another provider. You might also lose the one choice that has been providing safe, reliable, renewable and affordable electricity for the last 60 years, Wells Rural Electric Company (WREC).

Before anyone accuses me of using scare tactics or just looking out for myself, please let me show you what I can see at the moment.

Question 3 will, “… provide by law for the establishment of an open, competitive retail electric market that prohibits the granting of monopolies and exclusive franchises for the generation of electricity.” (emphasis added) At face value, the amendment shouldn’t impact WREC’s daily operations because your electric cooperative doesn’t generate electricity, it delivers electricity.

WREC obtains some of the most affordable electricity in the nation from the Bonneville Power Administration (BPA) and delivers it to you at cost. Regardless of whether Question 3 passes or fails, the poles and wires you own as a member of your cooperative will probably deliver any electricity you might be able to purchase. If so, WREC will still need all of its existing employees, facilities, vehicles and equipment to deliver electricity.

So how could Question 3 jeopardize your access to low-cost electricity from BPA? Question 3 promises a, “meaningful choice.” That term isn’t defined, but in other States that have deregulated, incumbent utilities were forced sell their generation assets and cancel their power supply contracts because new providers couldn’t compete initially.

If you’re scratching you head at this point, you’re not alone. Backers of Question 3 claim that “competition” will result in lower rates, but if your current supplier has to be pushed out of the market so new competitors can get a foothold, doesn’t that indicate that new “competitors” are more expensive?

WREC was created as a not-for-profit cooperative because for-profit competitors weren’t interested in operating the poles and wires to deliver electricity to rural areas. Even though 60 years have passed, I can’t see that those economics have changed.

Nationwide, rural electric cooperatives average 7.4 members and collect $16,000 per mile of power line. That might seem like a great business opportunity until you compare it to other utilities. For-profit utilities average 34 customers and collect $75,500 per mile of power line. Municipal utilities average 48 customers and collect $113,000 per mile of power line.

Now, if you were a for-profit competitor, how much time would you spend looking for customers in Carlin where you would have about 15% as many potential customers or in South Fork with 14% as much potential revenue? I can see potential competitors looking for customers in Las Vegas. I can even see some slick marketing promising cheaper rates, but I can’t see potential competitors actually delivering a lower bill in West Wendover. If Question 3 passes, all I can see are higher bills no matter how far down the road I try to look.

Clay R. Fitch
Chief Executive Officer