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MGM seeks $16 million credit as part of amended exit agreement from NV Energy

Riley Snyder
Riley Snyder
The MGM Grand hotel and casino sign

More than a year after agreeing to pay a nearly $87 million exit fee for the right to leave NV Energy’s jurisdiction and purchase electricity on the open market, MGM Resorts officials met with state regulators on Wednesday over a proposal that would grant the casino giant a $16 million credit to future electric costs owed to the state.

According to a stipulation agreement publicly reviewed on Wednesday and filed in May, the casino giant, Public Utilities Commission staff and the state’s Bureau of Consumer Protection concurred on amending MGM’s agreement to leave as a utility customer in order to “resolve numerous uncertainties” and “perceived inequities” in the assessed exit fee.

Though none of the $87 million paid by MGM to NV Energy so far would be directly refunded under the agreement, the $16 million credit toward future liabilities would be used to pay down costs for decommissioned or closing Reid-Gardner and Navajo coal plants. Though the gaming giant is no longer buying electricity from NV Energy, under the terms of its initial exit agreement it will continue to pay millions in various electric fees over the following years to avoid leaving other ratepayers high and dry to pay down the cost of those plants and other fixed costs.

Fred Schmidt, an attorney with Holland & Hart representing MGM, said the credit was based on a handful of factors, including the company spending an eight-month period paying full “bundled” electric rates after it was scheduled to leave the grid in February 2016 before it fully left the utility in October.

He also said a course correction was necessary because the initial exit agreement was made under a different year’s energy load forecast — a multi-year assessment of energy supply and demand — and didn’t take new factors into consideration. He said the credit — proposed by MGM — was a compromise that wouldn’t substantially affect other ratepayers, would fairly credit the casino giant without skimping out on its existing obligations.

“We’re going to pay a lot more than $87 million once this stipulation is adopted,” he said.

State legislators in 2001 created a process for large energy-consumers to leave as customers of the utility and to purchase power on the open market contingent upon paying an exit fee to ensure that other power customers aren’t left paying for planned energy generation. Barrick Gold applied to leave the utility in 2002, and other major Nevada companies including Caesars Entertainment, Wynn Resorts and Switch have all applied to leave NV Energy as customers over the last two years.

In a letter sent Tuesday, NV Energy testified that it is neutral on the proposed stipulation.

MGM, which made up close to 5 percent of NV Energy’s energy sales and is the state's’ largest private employer, currently purchases power through a third party — Tenaska — and has started shortlisting bids for a 100 megawatt renewable energy facility, likely a large photovoltaic solar plant in Clark County.

Next steps include PUC Chairman Joe Reynolds, who presided over the hearing, issuing a draft order recommending what action to take that would then be considered by the full commission at its next meeting.

Disclosure: MGM has donated $250,000 to the Nevada Independent. You can see a full list of donors here.

Caption: The MGM Grand hotel/casino and New York/ New York is seen on Monday, March 20, 2017. Photo by Jeff Scheid.


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