Power struggle

Billionaire Brawl: Warren Buffett vs. Sheldon Adelson in Nevada

A Nevada ballot measure over a utility monopoly has drawn more spending than the state's Senate race.

By DARIUS DIXON and ERIC WOLFF

Warren Buffett's Nevada energy utility is clobbering Republican megadonor Sheldon Adelson in a power struggle over the fate of the state's electricity supply.

The Omaha investor and the Las Vegas gambling magnate are on opposite sides of a Nevada ballot measure that could rattle the electric power industry: Buffett's Berkshire Hathaway owns NV Energy, a government-regulated monopoly that ranks as the state's largest utility. And Adelson is bankrolling a campaign to break up the company and take control of where his power-hungry casinos buy electricity.

The fight has drawn more political money than Nevada's fiercely contested Senate race, while scrambling political partnerships in the state: Allies of former Senate Democratic leader Harry Reid are working with Adelson, while local environmentalists have joined forces with Buffett's utility.

Adelson and his company Las Vegas Sands have funneled more than $20 million into supporting the Energy Choice Initiative, a constitutional amendment which would allow Nevada customers to choose their own power providers. In addition to Adelson's eight-figure contribution, making him its largest patron, the data storage company Switch has also contributed $12 million to the cause, according to state campaign finance records. But NV Energy has thrown roughly twice as much money into its efforts to kill the amendment, which will appear on the November ballot as Question 3.

Both sides are offering a similar pitch — promising lower energy prices and more opportunities for renewable power — but the "No" campaign seems to be doing a better job drawing voters to its side.

"It's clear that Buffett has decided to loosen the purse strings," said Nevada political expert Jon Ralston. "They’ve way outspent [proponents] and they’re going to win."

The $62 million NV Energy has put toward defeating Question 3 has gone into branding the initiative as a “new, unknown system” and a “risky experiment” that echoes the Western energy crisis in the early 2000s.

"On top of higher rates, electricity deregulation in other states has led to less reliable power and even rolling blackouts," a firefighter says in one anti-amendment ad, as newspaper clips about California power outages in 2001 zip by the screen.

Marc Spitzer, a former regulator in Arizona and at FERC, said reminders of the California crisis remain potent in the region. “The West is different in that regard and they have longer memories for the California implosion,” he said.

Jon Wellinghoff, a former FERC chairman close to Reid, has been working on the pro-amendment campaign for several months. He blasted NV Energy’s attacks as “scare tactics” and “total garbage,” but acknowledged they were having some success.

“The bear is fighting for its life, basically," Wellinghoff said. He says their investment to date is "probably the tip of the iceberg."

Question 3 supporters have responded with commercials featuring Jonathan Scott, co-star of home renovation show “Property Brothers,” and a series of “telephone townhalls” that have included former Republican FERC Chairman Pat Wood to help answer questions about how the electricity market in Texas has worked.

But that campaign appears to have started too late to prevent voters from abandoning the measure. Only 32 percent of likely voters supported it compared with 51 percent opposed, according to a September poll from the Reno Gazette-Journal and Suffolk University. The measure won 72 percent of the vote when it first appeared on the ballot in 2016; Nevada law requires initiatives to pass twice to amend the state's constitution.

Adelson's forces "certainly should not have let the other side have the field for so long and outspend them the way they did," Ralston said.

With more than $95 million raised by both sides, the ballot fight outstrips the spending in the race that could unseat Sen. Dean Heller, one of the most endangered Republicans this fall. Heller and his Democratic opponent Jacky Rosen have raised less than $30 million combined as of the end of September, according to FEC records, and outside groups have spent another $38 million, the Nevada Independent reports.

More than a dozen states have broken up their electric monopolies over the past quarter century in favor of competitive markets, but Nevada would be the first to do so by ballot initiative. Squashing the amendment in Nevada could help stave off similar challenges to utilities in other states where regulated monopolies have dominated — and made steady cash — for a century.

Buffett's holding company, Berkshire Hathaway Energy, controls several large regulated utilities in the West, including PacifiCorp, which provides power to nearly 2 million customers in six states without having to compete against other power companies.

“One of the reasons Berkshire Hathaway is coming out with such force here in Nevada is because it’s not just about Nevada. They know these discussions are happening in other states too,” said Karen Wayland, the executive director of the Clean Energy Project in Nevada and former energy aide to Reid. The former senator is backing the amendment, but Wayland isn’t affiliated with either campaign.

Most of NV Energy's money has gone to one company, Winner & Mandabach Campaigns, a California-based consulting firm that specializes in ballot initiatives, according to state records. The same company has been hired to challenge a carbon fee ballot initiative in Washington state.

NV Energy built a broad coalition of business groups, electric cooperatives and environmental groups like the Natural Resources Defense Council and the Sierra Club that worry that breaking up the monopoly may threaten planned renewable energy projects. The utility recently opened a request for 330 megawatts of new renewable energy and storage, and in May it announced contracts for 1,000 megawatts of new solar and 300 megawatts of new storage.

"For one, we’d see years of uncertainty as the years of retail competition and NV energy are worked out, and years of uncertainty means not building anything renewable and missing out on the investment tax credit," said Dylan Sullivan, the NRDC's policy lead in Nevada. The ITC provides a 30 percent subsidy to builders of solar plants, but the benefit declines to 10 percent for commercial builders who start projects after 2021.

Environmentalists also are backing a separate ballot measure to increase the state’s renewable energy mandates to require that 50 percent of the state's electricity comes from green power by 2030. The initiative would amend the constitution, and although it is likely to pass, it will face another vote in 2020. NV Energy is not taking a position on that question.

The anti-monopoly amendment would require the Nevada Legislature to create an open electricity market where customers could pick from different power providers. In a report, state regulators said the amendment would likely cost $100 million to set up markets, and $45 million annually. NV Energy would also be required to get out of the business of owning power plants, a common feature in power markets in places like California, Texas and the Northeast, and instead chiefly maintain and operate the electrical lines in the state.

The earliest the changes could take effect would be 2023.

NV Energy is hemorrhaging big customers: In 2016, MGM Resorts, one of several large consumers to leave NV Energy, exited the utility after forking over an $87 million fee calculated by Nevada state regulators. MGM represented almost 5 percent of the utility's power sales. The resort chain says leaving NV Energy has allowed it to add significantly more renewable power, and it has argued that it can recover its exit costs through lower rates and increased efficiency within seven years.

In addition to Wynn Casinos, Caesars Entertainment Corp. and other big-name firms that have left, Station Casinos and Georgia-Pacific Gypsum, a Koch Industries subsidiary that does wallboard and plastic manufacturing, recently asked to stop buying power from NV Energy.

Adelson’s Las Vegas Sands balked at the $24 million exit fee it was billed and has so far opted to stay in, though he has spent nearly as much pushing the ballot measure. A Sands spokesman did not immediately respond to a request for comment.

Even if Adelson and his allies fail in November, pro-market groups say the monopoly utilities won’t last.

“This is bigger than Nevada,” said Jim Presswood, the executive director of the Earth Stewardship Alliance, a conservative environmental group that believes energy markets will drive down pollution better than mandates.

“We’re not kidding ourselves. The electric utility industry is quite influential, and they don’t want to see change. There’ll be resistance, and there’ll be challenges,” he said. “But they have to recognize that the world is changing on them.”