Major casinos, Switch want to leave NV Energy

In letters sent to the Nevada Public Utilities Commission and obtained by political blogger Jon Ralston, Wynn Las Vegas, MGM Resorts International and Las Vegas Sands Corp. have announced their intentions to purchase power from a “qualified energy provider” for their energy needs.

The letters of intent to file applications to leave Nevada Power and its parent company, NV Energy, were submitted to state regulators in March.

There is no formal docket yet filed by any of the gaming entities to pursue the separation from Nevada Power.

The letters come several months after Las Vegas-based computing giant Switch Communications made a similar filing with the PUC.

In its filing in November, Switch said it intends to acquire electricity from Exelon Generation Co., doing business as Constellation, which is active in the Western Electricity Coordinating Council wholesale power market. Much of the process before state regulators is confidential.

The Switch case is in progress, but concerns have been expressed in testimony from Dan Jacobsen, technical staff manager with the state attorney general’s Bureau of Consumer Protection, who said “exit fee” calculations proposed by Switch are inappropriate because they would “cause remaining customers’ bills to increase or would increase the cost burden on the utility.”

Exit costs could be set at a high rate by the PUC to reduce the impact on remaining utility customers.

The Legislature in 2001 approved these types of exits after being told they would benefit remaining customers by helping reduce the overall cost of electricity, Jacobsen said in his testimony.

Jacobsen said state law includes a requirement that the PUC focus on the extent to which any remaining customers of the electric utility will pay increased costs for electric service because of a proposed transaction.

“Accordingly, an exit fee should be large enough to assure that a proposed exit transaction would not result in increases to customer bills,” he said.

The original intent of the 2001 legislation was to help utility customers because there was so much demand for energy that costs were very high. If large users left and acquired their own electricity, it would benefit ratepayers. Some mining companies did just that.

But in 2015, electricity can be acquired more cheaply on the wholesale market by large customers, and so there are efforts by companies such as Switch to make the change using a 14-year-old law that was enacted for other reasons.

Ralston also posted a proposed amendment from Switch that the company is trying to attach to a bill in the state Legislature that would make it easier for the company to leave. The deadline for such an effort is today, and it is not clear if there is a piece of legislation available as a vehicle for such an amendment.

If the gaming companies end up leaving NV Energy, they also may benefit by not having to pay for the closure of the Reid Gardner coal-fired power plant at Moapa. The plant is being shut down, but the full cost of that effort has not yet made its way into the NV Energy rate structure.

Representatives of the three casino companies either didn’t return phone calls seeking comment or declined comment.

Review-Journal writer Ben Botkin contributed to this report. Contact Sean Whaley at swhaley@reviewjournal.com or 775-687-3900. Find him on Twitter: @seanw801.