The Drew withdraws exit application from NV Energy, latest business to back off departing utility
Developers of The Drew Las Vegas have withdrawn their application with utility regulators to purchase power independently of NV Energy, marking a resolution after a nearly two-year process that saw many big businesses file to leave the electric utility.
In a short, one-page letter submitted to the Public Utilities Commission on Thursday, Two Blackbirds Hospitality Management LLC (parent company of The Drew) announced that it was withdrawing its application to depart NV Energy and purchase electric power from another provider. The $3.1 billion project, which took over from the failed Fontainebleau Las Vegas resort casino, isn’t scheduled to open until 2022.
The company’s withdrawal of its application marks the end of an unusual period in Nevada’s energy landscape that saw dozens of the state’s largest and best-known companies file to leave NV Energy, causing major concerns for the utility and ultimately resulting in a state law adding several significant barriers to the ability of businesses to leave NV Energy’s service.
“The Drew is signaling its trust in NV Energy by withdrawing its application and we look forward to continuing to work with them," NV Energy spokeswoman Andrea Smith wrote in an email. "We are confident that we will deliver an energy service package that provides The Drew value and meets their operational needs. We are also excited to see The Drew move forward and open its doors to further Southern Nevada’s vibrant tourism industry.”
First approved in 2001, Nevada’s “704B” law (named for the provision in state law) allows large businesses and government agencies with a large electric load to file applications with the utilities commission for the right to leave NV Energy and get power from another provider, in return for paying an “impact fee” calculated to ensure other utility customers don’t face unexpected additional costs.
While large businesses that filed 704B applications have paid impact fees into the tens of millions of dollars range, the PUC has largely avoided charging the fees to under-construction entities, under the assumption that NV Energy wouldn’t be “losing” any customer demand from them going with another power provider. Attorneys for The Drew had requested a $0 impact fee; NV Energy attorneys and staff of the PUC had assessed a potential impact fee of anywhere from $2 to $15 million.
The 704B law was revived in 2014 by data company Switch, and a pair of casinos (MGM Resorts and Wynn Resorts) quickly followed suit and successfully left the utility. But since mid-2018, 14 additional businesses and government agencies (including The Drew) filed 704B applications with the commission, raising concerns from the utility that the mass exodus would cripple its future electric demand and raise prices for its other customers.
Those concerns helped lead to SB547 — a bill approved nearly unanimously by Nevada lawmakers in 2019 that sets additional and stricter requirements on businesses seeking to leave NV Energy through the 704B process, but exempting those that had already filed to leave under the existing law.
The Drew’s withdrawal from the 704B process (filed in April 2019) is the last of those 14 businesses to have resolved their application; seven ultimately backed away from the process, and another seven received permission to depart NV Energy. Of the seven that have departed, at least one (The Raiders’ future Las Vegas Stadium) has received permission to delay taking electric service from an outside provider to assess alternative options from NV Energy.
NV Energy has taken increasingly more aggressive steps to curb the tide of businesses attempting to leave their service, primarily through filing opposition motions in commission proceedings or requesting that impact fees be substantially raised. But the utility has also focused on providing carrots to possible departing businesses; primarily through a special Optional Pricing Program Rate (OPPR) based on low-cost renewable projects that would offer a stable and lower rate to businesses eligible to leave through the 704B process. That rate program has yet to receive PUC approval.
The utility has also entered into agreements with at least four governmental agencies (the city of Henderson, the Las Vegas Convention and Visitors Authority, the Clark County School District and Clark County) that will see the utility make annual payments in return for a promise not to file a 704B application.
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