Grand Sierra Resort withdraws application to leave NV Energy, citing transmission shortage
Grand Sierra Resort has withdrawn its application to leave NV Energy as an electric customer, the first high-profile withdrawal from the slew of companies that filed to leave the utility over the last two years.
In a letter sent to members of the Public Utilities Commission on Monday, attorneys for the Reno-based casino company wrote that they would be withdrawing their application to depart NV Energy’s electric service and purchase electric power from a new provider, ending a nearly five-month process and ensuring the company stays a customer of NV Energy.
In an email, Grand Sierra Resort representative Andrew Diss said the company was withdrawing the application because of “transmission capacity concerns” in Northern Nevada — an unexpected shortfall brought up as an issue in January by NV Energy.
The news is a welcome sign for the utility, which has made several moves this year to address the looming issue of more than a dozen businesses that have filed to leave its electric service over the past two years, allowed under a 2001 state law that requires departing businesses pay an “exit fee” to offset any unexpected costs that would otherwise be paid by other utility customers.
A total of 13 businesses have filed the so-called 704B applications with the PUC over the last two years, including the Las Vegas Convention and Visitors Authority and The Cosmopolitan so far in 2019. The utility has also offered a carrot to businesses flirting with leaving its service, announcing it would offer a revamped special reduced-cost rate on renewable energy for its largest customers. Already, the city of Las Vegas said it would likely take advantage of the program after an outside power wholesaler withdrew its pitch to take over electric service for the city.
Grand Sierra Resort filed its initial application in December along with the SLS Las Vegas, which are both owned by businessman Alex Mereulo, citing a desire to “capitalize on our state’s abundant natural resources.” Diss said SLS Las Vegas is continuing with its application to leave the utility.
The staff of the PUC estimated in March that the company’s electric load made up about 0.5 percent of the utility’s annual energy sales in Northern Nevada, and recommended a $2.2 million “impact fee” for the right to leave the utility’s service.
But that wasn’t the only obstacle to leaving NV Energy.
Similar to the process undertaken by NV Energy in applications of other businesses filing to leave the utility, the company filed an “alternative analysis” calling on the PUC to assess impact fees over a much longer period of time and to reject the application unless it specifically showed a public benefit. It projected that the suggested impact fee would not be enough to cover the costs to other customers, estimating that a departure would result in a $1 million shortfall despite the $2.2 million exit fee.
Shawn Elicegui, a consultant for the utility, wrote in accompanying testimony that approving the application would likely lead to higher rates for residential customers and more a reason for large customers to leave utility service, perpetuating the cycle.
“By placing upward pressure on rates in classes where customers are eligible to submit a 704B application, more of these customers may conclude it is in their economic interests to seek out an alternative energy provider and thus perpetuate additional upward pressure on rates,” he wrote.
The utility also identified shortfalls in Northern Nevada transmission capacity, saying it would likely need to commission a multi-year transmission study and build out additional capacity — likely costing hundreds of millions of dollars — if additional so-called 704B applications are approved.