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May 31, 2016

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Wynn Las Vegas files lawsuit over fee to leave NV Energy

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Mikayla Whitmore

The Wynn Hotel and Casino on Las Vegas Blvd. on September 30, 2015.

Updated Tuesday, Jan. 26, 2016 | 2:53 p.m.

Wynn Las Vegas is suing the Public Utilities Commission over the fee it would have to pay to leave NV Energy and buy power from a different company.

The lawsuit, filed in District Court on Friday, says state regulators used a “legally untenable scheme” to calculate the $15.7 million exit fee.

Alleging the commission exceeded its authority and disregarded legislative directives, Wynn wants the court to invalidate the exit fee. The lawsuit also objects to how the PUC calculated future fees Wynn must pay.

The lawsuit comes after Wynn exhausted an internal appeals process with the PUC, which this month denied its request to recalculate the fee.

It is the latest development in an effort by three gaming companies to leave NV Energy. Wynn, Las Vegas Sands Corp. and MGM Resorts International filed applications with the PUC in May seeking permission to leave the utility.

A 2001 law, written at a time NV Energy was generating less than half its own power and there was an energy crisis, allows large companies to petition to leave NV Energy and purchase electricity from alternative sources. They must also pay an exit fee.

One of the lawsuit’s claims is that the PUC has sought to reinterpret the law, taking into consideration factors such as changed marketplace conditions and different financial circumstances for Nevada Power Co., NV Energy’s Southern Nevada division.

“Simply put, although the Legislature has not deviated from its policy directives since 2001, the PUC has decreed that those policy choices are no longer valid and thus it has decided to revise them without any legislative authorization,” the lawsuit says.

In December, the commission approved exit fees totalling more than $126 million for all three companies. The amount was split proportionally between the companies — $86.9 million for MGM, $15.7 million for Wynn and $23.9 million for Sands.

The gaming companies, which make up about 7 percent of NV Energy’s customer base, would also be required to pay future fees.

The exit fees are intended to protect other NV Energy ratepayers from assuming the costs of large customers abandoning the power grid.

Much of the lawsuit focuses on how the exit fees were calculated. The commission took an “aggregate approach” when it made its assessment, the lawsuit says. It assumed in its calculations the impact of all three casino companies exiting, instead of considering their individual impacts.

“Because of the aggregation, if, for example, MGM were to decide not to proceed with its proposed exit, then the entire basis for the PUC’s calculation self-implodes,” the lawsuit says.

“Nothing in (the law) empowers the PUC to condition Wynn’s rights on the wants of one of its business competitors simply because these competitors have filed applications within some unspecified ‘close proximity’ to Wynn’s application,” the lawsuit says. “The PUC has simply made up rules as it goes along so as to discourage any applicants from exiting bundled retail service.”

The commission has defended its approach and says it doesn’t negatively impact Wynn. The PUC believes it has the discretion to choose how it calculates the fees.

In a statement today, the commission said NV Energy has paid to create facilities and acquire resources to meet Wynn’s current and future energy needs.

“The impact fees ensure that Wynn remains obligated to pay for the portion of NV Energy’s costs that it has caused,” the commission said, arguing that utility ratepayers will otherwise be responsible for the cost of their exit.

The commission said it plans to defend its order in court.

Representatives from Sands and MGM Resorts did not immediately respond to requests for comment about whether they plan to file lawsuits.

Other courses could include paying the fees, deciding to stay with NV Energy or negotiating a compromise with the utility, as data company Switch and the city of Las Vegas did last year.

The other gaming companies would have less than a month to file a lawsuit against the commission.

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