LAS VEGAS (CN) - Owners of Las Vegas Sands, Wynn Resorts and MGM Resorts International asked Nevada regulators to reconsider ordering them to pay $126.6 million in exit fees to switch from the state's largest utility to alternative power sources.
The Nevada Public Utilities Commission on Dec. 2 ruled that the three major casino-resorts must pay a combined $126.6 million in exit fees if they want to stop buying power from Nevada Power dba NV Energy.
"These fees are necessary because NV Energy's remaining ratepayers would otherwise be forced to pay increased rates to allow recovery of costs already incurred to provide reliable electrical service to the casinos," the commission said in a statement.
"The impact fees reflect the casinos' share of long-term costs that are currently embedded in NV Energy's rates. NV Energy has incurred significant costs constructing facilities and acquiring energy resources to meet the casinos' current and future electricity demands."
The casino owners say the utility is interested only in boosting rates and profits and filed separate petitions on Dec. 17 for reconsideration of the ruling.
MGM owns the MGM Grand, Bellagio, Mandalay Bay, Mirage, Luxor, Monte Carlo, New York New York, Aria, Vdara, Excalibur and Circus Circus hotel and casinos on the Las Vegas Strip, making it the largest casino operator in Nevada.
MGM is Nevada Power's single largest customer , accounting for an estimated 4.86 percent of the utility's annual energy sales over a 6-year period, according to the Nevada Public Utilities Commission.
The three casino owners account for more than 6 percent of Nevada Power's business.
For MGM to stop buying power from Nevada Power dba NV Energy, the PUC says, it must pay $86.9 million to offset infrastructure and other costs the utility otherwise would have to pass on to its mostly residential customers.
The commission also said Las Vegas Sands would have to pay $23.9 million and Wynn Resorts $15.7 million in exit fees to stop buying power from Nevada Power.
The casino owners say they are weighing their options while awaiting a decision on their petitions for reconsideration.
"We are disappointed that the Public Utilities Commission has failed to implement (state law) as intended by the Legislature and we are reviewing our options," Wynn Resorts spokesman Michael Weaver said in a statement.
MGM officials said they are evaluating the commission's decision "against the objectives of sustainability in our energy, supply and costs."
The casino owners say Nevada Power is interested only in boosting profits for parent corporation Berkshire Hathaway, and they want to pursue more affordable and sustainable energy on the open market, such as natural gas and solar energy.
"Nevada Power is significantly over-earning and has been for several years. Further, the utility seems tone-deaf to the current and ongoing economic recession," MGM said in its petition to the PUC .
"Instead of filing applications at the commission to reduce its rates, to eliminate its over-earnings and to bring its prices in line with market-based prices in the region, Nevada Power has continued to seek further increases, even when those increases are clearly not in the public interest and detrimental to the Nevada economy," MGM told the commission.
MGM cited Nevada Power's recent failed attempt to add the Moapa solar project to its rate base at twice the market rate for solar energy, which would have cost Nevada Power customers $50 million.
"Fortunately, the commission rejected the company's Moapa plan, but that fact does not excuse the company's conduct of aggressively pursuing a profit-motivated project at above-market rates that are not in the public interest," MGM said in its petition.
MGM also cited Nevada Power's proposal to stop buying power from Griffith Energy and replace it with energy produced by a company-owned generation plant in 2020, which would cost ratepayers $70 million more per year at a time when MGM says Nevada Power should be looking for ways to reduce its rates and not increase them.
Wynn Resorts President Matt Maddox claims Nevada Power increased its profits by 27.7 percent from 2013 to 2014, but transferred them to Berkshire Hathaway via MidAmerican Energy Holdings instead of reducing rates for its customers.
Although the casino owners say Nevada Power is charging too much for its energy, the utility said in a statement that it "continues to work closely with all of our large customers to find solutions that meet their energy and business needs," and that it "supports them in making the decisions they feel are in the best interest of their business."
The Public Utilities Commission has 40 days to respond to the casinos' petitions for reconsideration of its Dec. 2 ruling on exit fees.
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