Casinos go their own ways on NV Energy exit after appeal deadline passes

The world’s largest convention center rooftop solar array, built through a partnership between NRG Energy and MGM Resorts, overlooks the pool area at Mandalay Bay on Thursday, Oct. 23, 2014.

When a deadline passed last week for three gaming giants to appeal a ruling requiring them to pay more than $125 million to purchase energy on the open market, only one had filed suit.

But that hardly means the push is over to contest the fees. The competing casinos just see different ways of doing it.

Wynn Las Vegas LLC was the only one of the three to legally contest the fees, which utility regulators approved as a requirement for the companies to break away from NV Energy and capitalize on lower electricity prices.

While Wynn fights in court, MGM Resorts International is working through the regulatory system. On Friday, the company filed a compliance document with the Public Utilities Commission, NV Energy’s regulator, that would keep open the option of exiting. Clark Dumont, a spokesman for the company, said the filing was not an indication that the company would or would not exit. MGM is simply moving ahead in the process, crossing one of the many hurdles it must pass.

“We have not made any determination,” Dumont said.

Another option would be for MGM Resorts to negotiate a settlement directly with NV Energy. Dumont declined to comment on that option, but the resort company has conferred with the utility.

Las Vegas Sands Corp., the third gaming company that petitioned to leave NV Energy last May, could also pursue a settlement. A spokesman said Sands has had conversations with NV Energy.

But where MGM has worked through the system during the consideration of its exit application, Sands has at times adopted a more spirited, often blunt, tone in its filings with utility regulators.

In one document, a lawyer for the company called the fees “exorbitant and unjustified.” Although the company did not file suit, Ron Reese, a Sands spokesman, said it was continuing to evaluate options. Those could include other legal paths.

Another effort underway could affect the casino exits.

Through a proposed ballot measure, a political action committee with undisclosed backers is seeking to create a competitive electricity market, which would, over time, make the exit fees moot and effectively end NV Energy’s regulated monopoly. The PAC filed the ballot measure this year with the Nevada Secretary of State's Office.

Matt Griffin, a lobbyist for the initiative, declined to comment on its backers. The supporters have not been disclosed, but several sources believe the effort it is backed by gaming and technology companies. Wynn and MGM both have denied involvement. Reese said he would neither confirm nor deny that Sands was involved.

Other casinos, though, indicated a desire to leave NV Energy years ago and now could benefit from the measure.

In the early 2000s, several properties that now are operated by MGM Resorts, Caesars Entertainment Corp. and Station Casinos Inc. sought to source their electricity from NV Energy's competitors. Other large customers that looked to leave at the time included the Stratosphere and the Fashion Show Mall. Most customers did not exit for a number of reasons, including an uncertain energy market, said Tim Hay, a former utility regulator who served then as the state’s consumer advocate.

But tensions between several gaming companies and the utility lingered, he said.

Hay said management at some gaming companies felt the utility overinvested in infrastructure, costs that were passed along in higher rates. Now, he said, the companies have seen a new opening to exit and obtain better energy rates than those they would pay to NV Energy.

The commission justified the exit fees — $86.9 million for MGM, $15.7 million for Wynn and $23.9 million for Sands — as necessary for covering NV Energy's investments in building infrastructure to serve the casinos, which consume about 7 percent of its service. Without the casino exit fees, the commission argued, the utility would make up for the lost revenue by charging higher rates, meaning the utility's remaining customers would shoulder the burden of making up for NV Energy's losses.

The ballot initiative would nullify the concept of exit fees altogether, allowing large customers to source electricity from other companies. But if the initiative is successful, it could be years before casinos see an effect. The measure does not require the Legislature to open energy markets until 2023.

So in the coming months, the gaming companies have a more pressing deadline to consider. They must indicate whether they plan to proceed with exiting by early summer.

Ashley Brown, a former utility regulator in Ohio and the executive director of the Harvard Electricity Policy Group, said large customers in other states often have filed exit applications as leverage to negotiate better rates with their utilities. He said it had been especially common in states with energy-intensive industries.

“This kind of stuff is not unusual,” he said.

Such settlements have precedent in Nevada. After the commission denied data company Switch’s exit application last year, the firm, a 24/7 consumer of electricity, made a compromise with the utility to rely on renewables. It also obtained a lower rate because of its energy requirements.

Last year, NV Energy CEO Paul Caudill said he was open to working with casinos. “We don’t fight with our customers,” he said. “We look at it as an opportunity to work even closer with them.”

On Monday, a spokesperson from NV Energy echoed the statement, saying in an email that the utility was continuing "to work with our large customers to find solutions to meet their energy needs."

Any negotiated settlement would have to be approved by the utilities commission. Some worry that a rate discount for the gaming companies could result in a cost shift that would be picked up by other ratepayers unless NV Energy agreed to take the discount out of its profit.

The companies declined to comment on possible negotiations.


Sun staff librarian Rebecca Clifford-Cruz contributed to this story.