(BRK.A), (BRK.B)
Berkshire Hathaway’s 2014 $5.6 billion all-cash acquisition of Nevada electric utility NV Energy looked like a home run at the time. After all, who needs loads of electricity more than the neon-bright Las Vegas Casinos?
Well, the casinos need electricity but they are now pushing to get it elsewhere.
Wynn Las Vegas, MGM Resorts International and Las Vegas Sands Corp. are now planning to purchase their power from another “qualified energy provider,” using the exit provision passed by the Nevada Legislature in 2001.
Letters of intent to file applications to leave Nevada Power and its parent company, NV Energy, were submitted to Nevada state regulators in March.
Also looking to leave is Nevada-based Switch Communications, a developer and operator of data center facilities.
As they push for the change, Las Vegas Sands Corp., Wynn Resorts Ltd., Switch, and rooftop solar-energy providers Sunrun and SolarCity have collectively formed the Nevada Coalition to Protect Ratepayers.
Leaving Nevada Power can come with a hefty exit fee. The Public Utility Commission is proposing a $27.7 million exit fee for Switch to leave Nevada Power, and Switch is pushing for an exit fee more in the range of $18.5 million.
At the time of the NV Energy acquisition, MidAmerican (now Berkshire Hathaway Energy) looked at Nevada as a growth market, however, the defections could take a major bite out of NV Energy’s consumer demand.
The Battle Over Net Metering
NV Energy has also been in a battle with rooftop solar providers over Net Metering legislation, which currently caps the cumulative capacity of all net metering systems operating in Nevada at 3 percent of the total peak capacity of all electric utilities in the state. There are already over 3,300 residential systems that feed power in the electric grid, and solar providers are worried that the current cap would severely limit the market for rooftop solar panels.
Under legislation which just passed the Nevada State Senate, S.B. 374 “revises the amount of cumulative capacity for which utilities are required to offer net metering in accordance with existing law.”
The bill allows 235 megawatts of residential systems to qualify under net metering through the end of 2015. It also empowers the state’s public utilities commission to set a new rate structure for solar.
Nevada leads the nation in solar power, the big question is will it be coming from NV Energy.
Transmission Lines a Valuable Asset
No matter who produces the power that flows into the grid, NV Energy will continue to make money from its ownership of the transmission lines, and ownership of transmission lines has been a key area of acquisition for Berkshire Hathaway Energy. In 2014, BHE acquired AltaLink, L.P., a transmission lines company serving Alberta, Canada.
© 2015 David Mazor
Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.