NV Energy Repels Casinos

Warren Buffett’s Berkshire Hathaway paid $5.6 billion to buy Nevada Power, which does business as NV Energy, three years ago. Since then its profits and utility rates have gone up, and MGM Resorts International says it will pay nearly $87 million to stop buying power from NV Energy. Meanwhile, Las Vegas Sands is hoping a November ballot initiative will deregulate the state’s energy market, freeing it from NV Energy.

A decade ago,virtually every property in Nevada, casinos included, obtained their electricity from Nevada Power and its subsidiary, NV Energy.

The vast majority of that power came from coal-fired plants and out-of-state producers, and that meant Nevada casinos were vulnerable to potential decreases in available energy, at the same time the Greater Las Vegas area was experiencing a population boom that would swell to a current level of about 2.2 million.

The resulting increase in energy use and demand, plus a concentrated effort to move away from coal-based energy and reliance of out-of-state power providers necessitated costly improvements to NV Energy’s infrastructure in order to provide more power.

To help pay for infrastructure improvements, Nevada lawmakers in 2001 required casinos to pay a fee if they want to stop buying power from NV Energy.

Since then, many developments, including new solar plants and wind farms, now offer electrical power in Nevada for rates much lower than NV Energy is charging.

Warren Buffet’s Berkshire Hathaway paid $5.6 billion to buy the utility three years ago, and its moves since are encouraging many of the state’s largest utility customers—casinos—to find alternative energy sources.

In filings with the Nevada Public Utility Commission, the casinos say NV Energy is reaping large profits, up to 27 percent, while operating a state-protected monopoly and not reducing costs for is residential and business consumers.

The utility recently upset many Nevada homeowners when it announced it would stop buying energy back from homeowners who switch to solar energy. The utility partly backed off, though, amid a consumer uproar.

Like Nevada homeowners who switched to solar energy, MGM, Las Vegas Sands, and Wynn Resorts would like to find more affordable alternatives.

MGM Resorts International recently announced it would pay a nearly $87 million fee to NV Energy in order to stop buying power from the utility and instead buy it from the open market.

The Nevada Public Utility Commission is levying the fee to offset investment costs made by the utility to make improvements and ensure it has the available energy necessary to fully power casinos, residences, and other properties.

The $87 million MGM will pay to the utility otherwise would be added to the bills of NV Energy’s mostly residential users in order to offset investment costs.

Wynn Resorts and Las Vegas Sands, likewise, have filed applications to exit their buying agreements with NV Energy, but neither has acted on their ability to exit the utility.

The Public Utility Commission said Wynn must pay $15.7 million to exit its deal with NV Energy, while Las Vegas Sands would have to pay almost $24 million.

Caesars Entertainment did not file an application to stop doing business with NV Energy.

There is a chance both, and possibly MGM, could wind up paying nothing to buy their energy from someone other than NV Energy.

Las Vegas Sands Chairman Sheldon Adelson is backing a November ballot proposal that would deregulate the state’s energy market by amending the Nevada Constitution.

If the measure succeeds, all of NV Energy’s current customers would have the ability to buy their electricity from solar power plants and wind farms, among others.

If the measure does not succeed, Wynn and Las Vegas Sands could follow MGM’s lead, pay their respective fees, and buy their energy elsewhere.