Nelson had a 3.45 FIP last season with some impressive strikeout totals and a declined walk rate, but even if he can't repeat that, and instead posts a FIP around 4 in 50 innings you're looking at NLRS around 4. That's 0.4 WAR, or worth 2.4 million, for a player in his first year of arbitration eligibility you would expect that player to get paid around 950k. If Nelson is simply a tad bit better, 0.5 WAR, arbitration salary would be ~1.13 million, so the Rays are paying him basically what he deserves and a touch more.
This is advertised as a one year deal, but the Rays will have him under control for an additional two seasons, assuming he's not non-tendered for ineffectiveness by then.