PUCN outlines plan to investigate alternative rate-making mechanisms for electric utilities

The Public Utilities Commission of Nevada recently outlined a proposal for an alternative to traditional rate making for electric utilities.

According to a PUCN press release, the docket was opened in response to Nevada Senate Bill 300 that requires the commission to adopt regulations for an electric utility to apply for an alternative rate-making plan.

Peter Kostes, a PUCN spokesman, said that the bill sponsor indicated that alternative rate making would position Nevada to create “a flexible and nimble“ regulatory environment necessary to develop a modern, reliable and efficient electrical grid.

Electric vehicle charging, distributed generation like solar and rooftop solar, energy storage and integration of large amounts of renewable energy are the future for Nevada, and that future must be embraced by adoption of the bill, according to Senate Bill 300’s sponsor.

“SB 300 states the types of alternative ratemaking mechanisms electric utilities may be permitted to request as part of an application for alternative rate making. Those mechanisms include, but are not limited to performance-based rates, decoupling, earnings sharing, formula rates and subscription pricing,” Kostes said in an email.

Alternative rate-making mechanisms represent a departure from from the usual cost-of-service rate making that the PUCN and most other state utility commissions typically apply.

Any new regulations approved in Docket No. 19-06008 would apply only to electric utilities jurisdictional to the PUCN for rate-making purposes and the customers they serve, which are Nevada Power Company and Sierra Pacific Power Company, both doing business as NV Energy, Kostes said.

The electric utility industry is changing rapidly and, as a result, regulators across the country are evaluating whether changes in rate making are required to align regulatory mechanisms with industry changes, according to the press release.

Not all rural areas of Nevada are served by NV Energy. For example, the southern part of Nye County that includes Pahrump and Beatty are served by Valley Electric, while the north-central and northwestern part of the county are serviced by NV Energy.

Senate Bill 300 includes a menu of possible alternative rate-making mechanisms including performance-based rates, subscription-based pricing and formula rates, decoupling and earnings-sharing mechanisms and multilayer rate plans.

Since opening the docket, the PUCN has solicited three rounds of stakeholder comments and led four workshops between June 6, 2019 and Feb. 18. Moving forward, the docket will continue in two phases.

The PUCN competitively selected Rocky Mountain Institute and the Regulatory Assistance Project to assist the PUCN in the next phases of this rule-making docket.