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Best of Howard Stutz

Gaming Guru

Howard Stutz
 

Three Strip casino operators get OK to leave Nevada Power

3 December 2015

State regulators on Wednesday gave their approval to three major Strip gaming companies to leave as customers of Nevada Power Co. to secure their own electricity supplies on the open market.

But the three members of the Nevada Public Utilities Commission also required MGM Resorts International, Wynn Resorts Ltd., and Las Vegas Sands Corp., to collectively pay $126.6 million in exit fees for the privilege of doing so, a move that didn't sit well with the gaming companies.

The three casino operators, which between them control more than a dozen Strip resorts, are all expected to leave NV Energy by Feb. 1.

The exit fees approved by the commission total $86.9 million for MGM, $15.7 million for Wynn and $23.9 million for the Sands, plus recurring fees and charges to recover certain ongoing costs that cannot currently be quantified.

The PUC said in a statement issued last week that the fees are necessary because NV Energy's remaining ratepayers would otherwise be forced to pay increased rates to allow for the recovery of costs already incurred to provide reliable electric service to the casinos.

Casino operators balked at the undetermined nature of the recurring fees and a separate ruling could deny the companies access from acquiring energy from the wholesale market. NV Energy often sells excess energy to wholesalers and the gaming company were prohibited by the PUC from acquiring excess power from NV Energy.

"We are disappointed that the PUC has failed to implement (the law) as intended by the legislature and we are reviewing our options," Wynn Resorts spokesman Michael Weaver said in a statement.

Las Vegas Sands spokesman Ron Reese said the casino company would also be reviewing "the variety of options" that it has available.

"We are disappointed in the PUC's order and their apparent desire to put out-of-state big money interests ahead of Nevada ratepayers and their families," Reese said.

MGM Resorts spokesman Clark Dumont said the company "will continue to evaluate the Public Utilities Commission decision against the objectives of sustainability in our energy supply and costs."

The departure of the companies are the first in many years. The hotel-casinos relied on a 2001 law approved by the Nevada Legislature allowing companies to leave as utility customers to lessen pressures on electricity rates during an energy crisis.

The circumstances behind its passage no longer exist. Instead, energy prices are increasingly competitive, including natural gas. Large companies that exit are expected to be able to negotiate their own favorable rates for power.

MGM, with its multiple properties, is the largest at 4.86% of Nevada Power's annual energy sales. MGM has said it fully intends to leave the utility, a part of NV Energy, with approval of its exit application.

The gaming companies have been critical of NV Energy for raising rates and focusing on profits instead of lowering electricity rates to customers.

Matt Maddox, president of Wynn Resorts, earlier this year criticized NV Energy for reaping huge profits from Nevada customers and taking the profits back to parent company Berkshire Hathaway's home office in Omaha, Neb. The utility company had a 27.7% increase in operating profit from 2013 to 2014 and yet there have been no breaks on electricity rates to customers, he said.

Warren Buffet's Berkshire Hathaway unit, MidAmerican Energy Holdings Co., closed its acquisition of Nevada's main electric utility in 2013.

The first application to leave in recent years, filed by the data storage company Switch, was rejected by the commission. Switch later struck a deal with Nevada Power to remain for at least the next three years. Its exit fee was estimated at $27 million.

In a statement, NV Energy said, "NV Energy continues to work closely with all of our large customers to find solutions that meet their energy and business needs. We support them in making the decisions they feel are in the best interest of their business."
Three Strip casino operators get OK to leave Nevada Power is republished from Online.CasinoCity.com.