CEO Message – September 2018

Headshot of Clay FitchAn advertisement for Question 3 suggests that you “break-up” with your power company if you don’t like the rates or the service. The ad makes it sound so simple. But Question 3 won’t lead to a break up, it will lead to a divorce—a long, nasty and expensive divorce. Question 3 raises three difficult questions similar to those that must be settled in a divorce: Who will have custody of the children? What about our house? How will we manage holidays and family events?

Let’s consider custody first. As members of Wells Rural Electric Company (WREC), you have always had access to safe, reliable, clean and affordable electricity. If Question 3 passes, WREC will probably be forced to terminate—or be prohibited from extending—our long-term wholesale power supply contracts. That will force you to find a new electricity provider. Question 3 advocates claim competition will drive rates down. In your case, you will be forced to leave your not-for-profit, tax-exempt, cost-based electric cooperative for profit-driven electricity providers subject to income taxes. I can’t see how that will reduce your costs. You might even begin to receive two bills: one for electricity and a separate bill for delivering it to your home or business.

Next, a judge will likely decide how we will split the house. In the case of Question 3, the “house” is the value of all of the generation plants and long-term contracts held by all of the utilities. It’s a really big house because some of those contracts were intended to provide stable rates for as long as 50 years. Consumers will be stuck either with the cost of fulfilling those contracts or paying the termination costs. That cost has been estimated somewhere between $4 and $7 billion. That’s not a misprint. It’s billions. The range is so varied because no one can accurately predict the sale price of the house since there are no comparable sales. The sale price will also be heavily influenced by an arbitrary deadline to close the deal.

When California deregulated, that cost was about $20 billion, which had to be financed like a mortgage. Sixteen years later, Californians are still paying an approximate 10% surcharge for the mortgage. You could think of that surcharge as alimony.

More often than not, the divorced couple still has to get along for the sake of their children. Question 3 will create a similar situation in that the wires from your existing utility will still be connected to your home or business. Those wires will be delivering electricity from another provider. Not only will you have a new relationship with a new spouse, your electric cooperative will have to have a relationship will all of those new spouses.

Question 3 attempts to address several issues important not only to Nevada, but to the nation. Those issues include incorporating more clean energy, consumer protections, rate fairness, self-generation, energy supply and pricing, and the role of legislative and regulatory bodies. These are not simple issues and there are no simple answers.

These questions, and many others Question 3 will raise, will require the kind of compromises that must be negotiated through the mediation only the legislative process can provide. If we, as a state, decide deregulation is the correct path for Nevada, that process should begin in the legislature, not with a constitutional amendment. Instead of reconciling any differences, passage of Question 3 will drag us all into divorce court. Please vote no on Question 3.

Clay R. Fitch
Chief Executive Officer