PUC chair: No regrets about solar decision

J. Emilio Flores / The New York Times

A SolarCity employee installs solar panels on a house June 27, 2014, in Camarillo, Calif. SolarCity, the nation’s largest provider of rooftop systems, is among a cluster of companies built with the aid of government subsidies and utility incentives now facing deep uncertainties and accelerating losses despite unflagging consumer interest and surging growth in renewable energy.

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Steve Hill of the Nevada Office of Economic Development, Tony Sanchez of Nevada Energy and Paul Thomsen of the Nevada Office of Energy answer questions from lawmakers during a special session at the Nevada Legislature on Wednesday, Sept. 10, 2014, in Carson City.

Over the past six months, the Public Utilities Commission of Nevada has found itself at the heart of a national debate about whether and how governments should encourage rooftop solar energy generation. Media outlets, from NPR to The New York Times to The Wall Street Journal, have covered the PUC’s decision to increase bills for NV Energy customers with rooftop solar.

The fallout from the decision has been dramatic. Rooftop-solar companies SolarCity and Sunrun stopped installations in the state. Applications for rooftop-solar installations fell from more than 1,000 in December to fewer than 100 in January. And a broad group of elected officials, including Gov. Brian Sandoval, criticized the regulatory decision for not grandfathering existing customers.

During the decision-making process, the three members of the commission were unable to explain their perspective because the commission serves as a judicial body and discussing an open case would be inappropriate. Now that the case is closed, however, commissioners have started to push back against solar advocates’ arguments that the PUC decision suffocated the solar industry here.

Commission Chairman Paul Thomsen, appointed in 2015 by Sandoval, spoke to VEGAS INC about the solar decision, the controversial decision not to grandfather existing customers and the tactics used by the solar industry.

On the drop-off in rooftop solar applications:

In December, 1,311 residents of Southern Nevada submitted applications with NV Energy to start the process of installing solar panels on their roofs. The number fell to 90 applications in January — a decrease of 93 percent.

“It does not astonish me whatsoever to see a decline in installations when we had a 400 percent increase in the six months leading up to the end of 2015, a 400 percent increase in the participation in the net-metering program,” Thomsen said, referring to the program which gives rooftop solar customers a credit for providing the grid with solar energy. “So when will we see the equilibrium? I’m not sure.

“But I think we’re going to see people more closely evaluate whether they should put rooftop solar on their homes, what their demand is, and the projects that are viable will continue to be developed. And as innovation in battery technology breaks through, I think we will see that number continue to climb. But frankly, we saw an absolute clamoring to this very lucrative incentive toward the end of 2015. And when we reduced that subsidy, we saw a decline in new customers.”

He added: “SolarCity and Sunrun didn’t do the industry any favors when they said, ‘We’re packing up and leaving.’ ”

On whether the commission has regrets about its decision:

The commission was tasked with deciding new rates for rooftop solar customers after the Legislature, under Senate Bill 374, directed the PUC to eliminate what it described as an unreasonable cost shift from solar customers to other ratepayers. Many argue that solar customers don’t pay their fair share for the grid. The commission’s decision sought to eliminate a cost shift by increasing bills for solar customers. In doing so, the commission tripled a fixed fee and slashed the value of credits customers could earn selling excess power to NV Energy. That new structure, to be phased in over 12 years, applied to all customers and was criticized by advocates for effectively killing the industry.

“I think the legislative intent was very crystal clear from SB 374,” Thomsen said. “And I think that the commission and the expertise of Nevada’s commissioners put together one of the best rate-design proposals I’ve seen nationwide. And I think that’s why frankly we’ve received so much scrutiny on this order, is that as this gets reviewed moving forward, I think people are going to say, ‘This makes sense.’ ”

On the commission’s decision not to grandfather existing customers:

One of the most controversial aspects of the commission’s decision was not to let thousands of existing solar customers stay under the old rules for a period of time, as NV Energy supported. Instead, the commission opted to institute the new rates for all solar customers gradually over 12 years.

“We recognized how important the grandfathering issue was and had an additional hearing to discuss that very specific issue,” Thomsen said.

“And then after the Legislature passed this bill that said, ‘We want to reduce the subsidy. We want to reduce the burden to nonsolar customers,’ we saw 24,000 customers sign up. ... If we had just carte blanche grandfathered everybody in, we would have seen a massive increase in the subsidy (after) the passage of SB 374, and we would have been doing nothing to reduce nonsolar ratepayers from subsidizing solar ratepayers moving forward.”

On accusations the commission was unduly influenced by NV Energy:

Throughout the process, solar advocates and public commenters at commission meetings accused the PUC of acting as the pawn of NV Energy, which it regulates.

“Absolutely not,” Thomsen said. “We’ve been subject to many data requests. ... They will all show the same thing, which is there is no nefarious plan for this industry.”

On the conduct of members of the solar industry at commission meetings:

Solar advocates, organized by coalitions and installation companies, rallied in front of several commission meetings and offered lengthy public comment. At one meeting, comments stretched for hours. Commissioners reported receiving threats.

“I would bluntly tell you: I think the only people who ever tried to intimidate or influence the outcome of the Public Utilities Commission was the solar industry itself, who had huge protests in front of the Public Utilities Commission building, who gave out our home addresses, who filed public data requests before every agenda hearing,” Thomsen said.

On the push to deregulate Nevada’s energy market:

In addition to transmission and distribution, NV Energy is responsible for acquiring and selling electricity in Nevada. Some want that to change. Data company Switch, electric-car company Tesla and undisclosed gaming interests are backing a ballot initiative to open electricity markets, allowing third-party companies to sell electricity in Nevada.

“I think deregulation is a very complicated issue,” Thomsen said. “You need to look very closely at those costs. We are next to California, which pays a lot more for energy. And in an open, competitive market, how confident are those advocates that they will be able to keep the energy portion of their bill down? When you have deregulation, you only shop for a subset of your bill. The transmission and distribution is still controlled by the utility in most cases, so you’ve got to take that into consideration. And, finally, you tend to give up state control for federal control when you look at statewide deregulation.”

On MGM Resort International’s decision to move forward with its exit application:

In January, the commission ruled that MGM Resorts, Wynn Las Vegas and Las Vegas Sands Corp. must pay more than $125 million to purchase third-party electricity. Only MGM has proceeded with the exit process.

“It seems like MGM is proceeding with its exit application,” Thomsen said. “And it will be interesting to watch. If it proceeds with exiting ... it might be in an interesting quandary, because if we were to deregulate a couple of years later, I would find it awfully frustrating to pay a fee for an exit application only to see that not be necessary if we went into a deregulated market. ... We’re just kind of watching to see how that plays out, between either the proponents or the opponents of the deregulation measure, because it’s going to get messy moving forward.”

On criticism from other states:

As other states consider expanding solar generation, the Nevada decision has been cited in media as a case study for the potential dangers of changing rules for customers.

“I see a lot of articles that use the same terminology and use the same talking points out of press releases from the solar companies,” Thomsen said. “I see very few articles that have read the order, looked at the rate-design discussion — giving great analysis to the legal discussions that have occurred in this case — and, frankly, have looked at the robust legislative minutes on what our Legislature wanted to have done. There have been a couple that have looked at the rate design and said, ‘There are some interesting things here.’ ”