Sands to Stay, But MGM and Wynn Still Plan to Leave NV Energy

by | May 25, 2016

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The Las Vegas Sands, one of three casinos that filed with the Public Utilities Commission of Nevada (PUCN) last November to withdraw from NV Energy’s bundled electric services program – and instead purchase their energy from retail suppliers – has dropped its efforts, according to report by Vegas Inc. on May 19.  However, pending approval, MGM Resorts International anticipates exiting in October.

Sands effectively voided its exit application, according to the local news outlet, when it missed a deadline to make a compliance filing with the PUCN. Wynn Las Vegas also plans to exit, but has, in the past, challenged the “impact fees” that the regulators want to charge to protect other customers from paying higher rates in the absence of the gaming companies. Regulators said the companies must pay a combined $125 million to exit.

The companies currently consume about 7 percent of NV Energy’s services. To shield remaining NV Energy customers from paying higher rates in the wake of the casino departures, orders in the three cases before the commission mandate that the casinos should pay a cumulative $126.571 million plus recurring fees and charges to recover certain ongoing costs “that cannot currently be quantified.”

Specifically, MGM Resorts would pay $86.927 million (Docket No. 15-05017); Wynn Las Vegas would pay $15.738 million (Docket No. 15-05006); and the Las Vegas Sands would have paid $23.906 million (Docket No. 15-05002);

In filings, Vegas Inc. reported, the Sands had repeatedly disputed the fees that the commission assessed. A lawyer for the company called the fees “exorbitant and unjustified” in one document filed with the commission. Its decision to forgo its exit does not mean the company is walking away. Ron Reese, a Sands spokesman, declined to get into specifics, but said Sands would “remain active on the issue overall.”

Hearings in each case were conducted in October and November. At those hearings, the casinos made the case that they were significantly overpaying NV Energy – which provides electricity to 2.4 million electric customers in the Silver State.

Last October 15, on behalf of MGM, Mark Garrett, president of an eponymously named Oklahoma group specializing in public utility regulation, litigation, and consulting services, made the casinos’ cases: “Nevada Power [NV Energy] should be given an opportunity to earn a reasonable rate of return. However, ratepayers should also expect that they have an efficiently run utility that strives to reduce its costs whenever possible to ensure that its customers’ rates are no higher than necessary.

“Nevada Power’s current rates are clearly higher in 2015 than necessary from them to earn a reasonable rate of return,” Garrett asserted, “and with generate rates not scheduled to be changed until January 2018, it appears that overearnings will continue for at least two more years.

“Thus” he said, “[the utility] should not be surprised that its largest customers now prefer to seek more competitive market alternatives for their energy rates ….”

Now, MGM said it still expects to transition to a third-party supplier. “After careful thought and analysis over many months, we have concluded our objectives are best met by purchasing the energy required to operate our resorts, and serve our customers and guests, from a source other than NV Energy,” the company’s general counsel wrote in a letter to the PUC.

“We will continue to work with MGM to meet their needs as a transmission and distribution customer of NV Energy,” said Jennifer Schuricht, a spokeswoman at NV Energy.

In addition to protecting other ratepayers, the impact fees would prevent the casinos from avoiding payment of their proportionate share of costs associated with Nevada’s legislatively mandated energy policies – among them, the Renewable Energy Program Rate, the Temporary Renewable Energy Development charge, the Energy Efficiency Program Rate, the Energy Efficiency Implementation Rate, long-term renewable energy power purchase contracts required by the state’s Renewable Portfolio Standard; and Senate Bill 123 costs, which include coal plant decommissioning and site remediation costs.

The gaming companies have long been critical of NV Energy, a part of Berkshire Hathaway, for collecting huge profits rather than lowering power rates for Nevada Power customers.

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