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Big Data Center Company Sues Nevada Regulators, Utility Over Solar Deal

by Katie Fehrenbacher (July 14, 2016) FORTUNE.COM

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It’s the latest dispute in Nevada over solar.

The owner of some of the world’s largest data centers has sued Nevada regulators and that state’s utility over a solar energy deal that it says led to it being overcharged.

Las Vegas-based data center operator Switch filed a lawsuit this week that alleges that its agreement to buy solar power, partly brokered by the Nevada Public Utilities Commission and utility NV Energy, was unfair, overpriced, and that employees of the state regulator acted inappropriately. The suit, which asks for $30 million in damages, claims fraud, negligence, and conspiracy.

The lawsuit is the latest dispute that has emerged involving solar energy in Nevada, a state with ample sunshine that was an early clean energy supporter.

As companies and residents in Nevada increasingly install solar panels, and sometimes unplug from the power grid, the state regulator and NV Energy are trying to figure out how to manage. The utility and the regulator have repeatedly clashed with both companies selling solar panels and customers buying solar panels.

NV Energy is owned by Warren Buffett’s Berkshire Hathaway.

Switch, along with some of the world’s largest Internet companies like Google GOOG -0.15% and Apple AAPL -0.01% , have increasingly sought to buy solar and wind power to operate data centers as a way to manage energy costs and be more environmentally friendly.

Switch, which has two massive data centers in Nevada, says it started trying to buy solar power from NV Energy in 2011. Its data centers, which sell services to eBay, Zappos and Cisco, are power-hungry facilities that are filled with computers.

Switch says NV Energy ignored its requests to buy solar power, prompting it to file an application in 2014 to disconnect from the grid so that it could seek solar power from other sources like First Solar FLSR 0.00% .

In the summer of 2015, Switch says the Nevada Public Utilities Commission denied its application to leave the grid. The regulator found that because Switch was such a large power customer, leaving the grid would financially hurt NV Energy and force it to raise rates and thus harm other power customers.

Instead, regulators said that Switch could buy solar power for a higher price through a deal with First Solar, but with NV Energy as the middleman. Switch says it agreed to the deal because it felt like it had no other options, and because an important federal solar subsidy was set to expire by the end of the year that would have driven up solar prices even more (the federal subsidy ended up getting extended).

First Solar is now installing 180 megawatts of solar panels as part of a deal to sell the power to Switch. That’s enough energy to run close to 30,000 average American homes.

Following Switch’s solar deal, the regulator later allowed several large Las Vegas casinos to disconnect from the power grid, with the agreement that the casinos would have to pay hefty fees to NV Energy to leave.

Switch says the solar deal it agreed to was an unlawful attempt to “retain Switch as a customer of the monopoly NV Energy.” Switch also says that the NPUC’s attorney, Carolyn Tanner, acted inappropriately by discussing the case on social media using a pseudonym.

The NPUC said it has yet to receive service of the complaint and therefore has no comment at this time.

NV Energy said in a statement:

“Switch is a very important customer to NV Energy, and given how far we thought we had come over the past two and a half years of working with their team on a variety of issues and opportunities, we are surprised and disappointed with this turn of events. If we are eventually served with the complaint, we will vigorously defend our company and our employees from baseless claims.”

This isn’t the first time a company has accused the NPUC and NV Energy of colluding.

Late last year, regulators approved a plan to increase the fees and lower the rates that solar customers earn for generating electricity. The new rate structure makes roof-installed solar panels uneconomical in the state, according to solar companies, some of which stopped doing business in Nevada.

Following the solar roof rate change, solar companies like SolarCity SCTY 1.58% and SunRun RUN -1.17% accused the NPUC of being in the pocket of NV Energy. NPUC Chairman Paul Thomsen denied the accusation in an interview with Fortune.

Solar companies and solar customers are turning to other venues to fight the regulator’s decisions.

A ballot measure, dubbed the Energy Choice Initiative, if approved would enable companies to buy power on the open market rather than only through the utility. That measure will be voted on in November.

Another ballot measure would ask voters if they want to restore the more favorable solar rates. That measure is being contested in the state Supreme Court, but also made it onto the ballot in November.

Lawsuits have been pointed at all parties over the solar roof rate change. In March a solar group filed a lawsuit against the NPUC seeking to overturn the new solar rates. Earlier this year solar customers filed a class action lawsuit against NV Energy, alleging the utility provided false information to the state’s regulator. And another solar customer sued SolarCity accusing it of failing to disclose information about the potential rate change.

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Category: Editorial

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