Special to the Sun
Friday, Sept. 30, 2016 | 2 a.m.
Nobody will flip a switch. Lights are not expected to flutter on the casino floors. Yet 15 Strip properties owned by MGM Resorts International and Wynn Resorts will seamlessly start parting ways with NV Energy’s service at midnight, the culmination of a yearlong effort to purchase power from an alternative provider.
Arguing that the move will slash bills and boost renewables, the two companies will begin purchasing electricity from private providers who can obtain energy on the open market. NV Energy will still provide reliability through backup services and transmit power through the grid, but the utility will cease to sell energy to the casinos.
“From a reliability standpoint and a physics functionality standpoint, nothing changes. What changes is the transaction itself,” said Erik Hansen, who oversaw Wynn’s exit as director of energy procurement.
The departures of the two large companies mark a significant decrease in electricity sales for NV Energy. MGM and Wynn represent about 6 percent of NV Energy’s customer base. For this reason, utility regulators required the companies to pay a collective $100 million in impact fees — about $87 million for MGM and $15 million for Wynn — to ensure that ratepayers do not shoulder the costs of their exits. The Public Utilities Commission also will assess recurring charges to the companies for six years as an additional protection to ratepayers.
Sands Las Vegas Corp. received permission to leave NV Energy but backed out. Sands instead supported and helped fund the Energy Choice Initiative, a ballot measure to restructure Nevada’s electricity market. It would create an open market and end NV Energy’s monopoly on power supply by the early 2020s.
Despite high upfront costs, MGM and Wynn say the move will be good for business. It allows the casino companies to purchase power at prices that better reflect the market value for electricity. Due largely to cheap natural gas, the wholesale price remains low.
“You will always save money going wholesale,” Hansen said.
MGM sees an opportunity to source a greater portion of its electricity from renewables. The company already receives some of its energy from an expansive rooftop solar array at Mandalay Bay. Cindy Ortega, senior vice president and chief sustainability officer, said MGM will explore contracts with large-scale solar plants and look at future applications for energy-storage batteries.
“It’s part of being able to control what your supply looks like and be able to take advantage of opportunities without have a third-party as an intermediary,” Ortega said of MGM’s reason for exiting. “Innovation and technological advancement is faster than regulations and monopolies can usually move.”
MGM, Ortega said, plans to continue investing in renewables across the state. Wynn might also look at procuring renewables. Both companies are required to meet the state’s renewable portfolio standard.
Since the utilities commission gave the casinos permission to leave NV Energy in January, dozens of employees at the companies and utility have been coordinating the exit. Wynn, for instance, installed meters allowing the company to see more data about its energy usage. So complex is the switch to a private provider that MGM said it could be several days before it stops using NV Energy power entirely.
In the early 2000s, a number of large energy producers, including Station Casinos, MGM Mirage and Fashion Show mall, sought permission to leave NV Energy but ultimately didn't.
Energy is often a top overhead cost for businesses. Hansen said that companies are increasingly looking for ways to cut their bills, and many are making energy a key part of their business strategy. “If (businesses are) not looking at it today, I think they certainly will in the coming years,” Hansen said.