Nevada Newsmakers

News - August 7, 2023 - by Ray Hagar

NV Energy CEO and President Doug Cannon predicted on Nevada Newsmakers recently that energy costs could drop as much as 35 to 40 percent by early 2025.

Cannon acknowledged energy costs have been "really challenging" for customers in the past year but told host Sam Shad energy rates will be "about 30 percent lower than what they are today, in one year."

Cannon added; "When we go out to probably the end of 2024 and early 2025, those rates are going to be between 35 and 40 percent lower than they are today."

Cannon's prediction is based on a stabilized natural-gas market and improved natural-gas infrastructure, especially in the western United States.

Natural gas supplies 32 percent of all primary energy in the United States and its share of electricity generation has nearly doubled from 2008 to 2021, according to published studies.

Rising natural gas availability and prices across the world have been in flux for more than a year, and the trickle-down effect in Nevada has caused steep price increases for NV Energy customers.

"It has been a really challenging last 12 months for our customers," Cannon said. "Absolutely a challenge. Prices have gone up considerably.

"And what has caused that? It has all been caused by increased prices in the natural gas market," Cannon said.

"We were paying $2.50 or $3 for a unit of natural gas 18 or 20 months ago," Cannon said. "We started to see that price increase and it really peaked last December and January. We saw prices at more than $25, $30 a unit for a short period of time, I mean that's a 10x increase in price for that resource."

Instead of hitting customers all at once with a steep price hike, a "mechanism" of The Public Utilities Commission of Nevada allowed prices to go up incrementally.

"Yes the price of natural gas went up, but our customers didn't feel that right away," Cannon explained. "Under this (PUC) mechanism, it (cost increase) gets spread out over a period of time and that caused rates to consistently go up -- quarter after quarter -- for the last year. And that is what our customers are feeling today, those high natural-gas prices."

Those natural-gas inspired price increases were halted in July, Cannon said.

"It (cost of energy) was going to go up again on July 1st," he said. "We did not want that to happen. So we pro-actively made a filing with the Utilities Commission and actually asked them not to implement the next rate increase, and instead, just spread those cost over a longer period of time so that our customers didn't see rates go up any higher."

The July filing was expected to reduce costs in Nevada between approximately 5 percent and 16 percent through September, depending on a customer's location and electric service they receive, according to news reports.

The War in Ukraine and the decrease in fracking for natural gas in the United States were just two of many reasons for the destabilization of natural gas prices, Cannon said.

"It is really a complex picture. We can't point to any one cause on what caused gas prices, in particular in the western United States, to go up," Cannon said.

"There were a number of causes," Cannon said. "There has been environmental regulation, political regulation that has caused production  in the United States to vary, and especially in the last 18 months, to go down.

Russia's halt a natural gas sales to Germany in late 2022 helped caused supply and price issues.

Other factors, however, were closer to home.

"One of the biggest effects for us was there was actually a pipeline outage in the western United States last year," Cannon said. "There was some damage to a pipe that had to be replaced. That ultimately affected what could be moved in real time and well as what was in storage because they hadn't been able to build up storage in the western United States.

"That pipe is now back in service and so we have seen prices drop back down to where they had been."

The ruptured pipeline's impact on the Western gas markets points to the necessity of upgraded infrastructure in the U.S., Cannon said.

Late last year, with natural gas prices at their highest levels, President Biden signed a $1 trillion bipartisan infrastructure bill to help with upgrades for roads, bridges, pipelines, internet connections and other issues.

"If I had to point to one cause (of price increases), it would probably have been that pipeline outage," Cannon said. "It just highlights how critical infrastructure is in our country and how critical it is that we have a positive and really good infrastructure."

Cannon pushed back on any notion that NV Energy profited on larger customer billings due to the higher cost of natural gas in the past year.

"It is not true," he said. "We are not making any additional profits off of these rate increases. It is truly just recovering the actual cost for that gas."

"For every dollar we spend on natural gas, we recover a dollar back from customers," Cannon said. "We don't get to up-price that. That is not how we make money," he said.

MORE ELECTRIC CHARGING STATIONS : NV Energy partnered with the Nevada's Office of Energy to create the "Electric Highway,' by installing electric-vehicle charging stations on U.S. 95 between Reno and Las Vegas.

Now, motorists complain some of the charging stations don't work. Others are concerned about taking electric vehicles on long road trips in Nevada.

"I share your concern about the charging infrastructure that is out there," Cannon told Shad.

NV Energy plans to get more involved in charging, Cannon said, noting demand for charging stations has grown exponentially in Nevada.

Some studies show electric car registration grew by 133 percent in Nevada from 2019 to 2021.

Another study ranked Las Vegas as the top metro area for growth in electric car ownership and Nevada was ranked second in state EV growth.

"We are actually working on an NV Energy owned-and-installed charging infrastructure right now," Cannon said. "We have been working with the Public Utilities Commission on that. So that is something we are going to see a lot more of.

"It's certainly something that is going to be developing, over the next few years, because the infrastructure need is absolutely there," Cannon said.

"My guess is consumers will adopt electrification faster than we even suspect right now," he said.