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Best of Sean Whaley

Gaming Guru

Sean Whaley
 

Strip gaming companies opt to delay utilities exit applications

24 June 2015

Just days after the Nevada Public Utilities Commission denied an application by the data storage company Switch to leave Nevada Power Co. and seek its own energy supply on the wholesale market, three major Strip gaming companies opted Tuesday to delay their exit applications by two months.

Exit applications from Wynn Las Vegas, MGM Resorts International and the Las Vegas Sands Corp. were to be reviewed in separate one-hour prehearing conferences with state regulators and other interested parties.

But the complexities raised with the denial of the Switch application prompted regulators and the gaming companies to agree instead to restart the application process beginning early next month. This will extend by two months the amount of time the commission will have to decide each exit application to a full 150 days.

It will give the PUC time to consider new rules on approving exit applications that would protect remaining utility customers. The first hearing in this separate review is scheduled for Monday.

The prehearings for the three gaming companies will be rescheduled to July 15. They will be overseen by PUC Chairwoman Alaina Burtenshaw, who voted with a colleague on June 10 to deny Switch’s application to leave as a Nevada Power customer, finding that the company’s departure was not in the public interest.

The three major gaming companies have filed similar applications, but the future of their requests has become unsettled following the Switch vote.

The three gaming companies, along with Caesars, which is also expected to file an exit petition, consume about 370 megawatts of electricity at the time of year that Nevada’s Power electricity demand is at its highest level, known as “coincident peak.” This peak level is important for the utility because it has to plan for the amount of electricity needed at peak demand.

There is a concern among some officials that the departure of the large gaming companies could end up costing the average utility customer in the form of higher rates. Nevada Power, part of NV Energy, has developed its own electricity generation resources over the past several years based on the consumption that includes the companies now seeking to exit.

Nevada Power could end up with surplus power that it would have to dispose of on the wholesale market if the companies follow through with their plans.

Seeking to address the exit concerns, the Monday workshop will provide an opportunity to discuss ways to ensure that companies that want to leave can do so without harming remaining customers. New guidelines to ensure that a company’s exit costs are fully captured over an ongoing period of time could allow Switch ultimately to leave Nevada Power.

PUC staff had recommended that Switch pay $27 million to exit Nevada Power, while the company had proposed paying no more than $18.5 million. This was based on current practice of analyzing the exit fee on a three-year lump sum basis.

PUC Commissioner David Noble, who voted with Burtenshaw to reject the Switch application, said he did not have enough information to know if the $27 million staff recommended fee was appropriate.

In comments submitted for the upcoming workshop, the Bureau of Consumer Protection said any calculation of an exit fee for a business to leave should be determined based on the number of years that will be required for the portion of growth attributed to the exiting company to be offset by the exiting capacity.

In its comments, MGM officials said the commission should consider an alternative method that will track actual costs and benefits for a reasonable period after a customer has left Nevada Power.

Both MGM and the Sands Corp. say in their exit applications they plan to enter into an agreement with Tenaska Power Services Co. of Arlington, Texas, to acquire the necessary energy, capacity and ancillary services required to ensure the delivery of energy to their properties. Wynn said in its filing that it plans to use the Excelon Generating Co., doing business as Constellation, as its electricity provider.
Strip gaming companies opt to delay utilities exit applications is republished from Online.CasinoCity.com.