Flipping the switch

The three mega-casinos in Las Vegas aren’t the only large Nevada businesses that have chosen to leave NV Energy for their power needs.

Two Northern Nevada businesses — Switch and the Peppermill Resort Hotel — also filed regulatory paperwork to leave the state’s public power provider. They join MGM Resorts, Wynn Resorts and Sands Corporation, although Sands effectively ended its bid to leave NV Energy in May when it missed a filing deadline with the state Public Utilities Commission.

MGM and Wynn Resorts, however, continue to move forward and are expected to pay fees of $86.9 million and $15.7 million, respectively, to leave NV Energy. The hefty fees are to protect other NV Energy consumers from assuming any costs associated with their departure. Together, the casinos are among the state’s largest power users.

So why are these companies choosing to leave NV Energy? It’s all about business, says Matt Griffin, legal counsel for the Energy Choice Initiative, a ballot measure written to remove the state’s power generation monopoly and empower individual companies with the right to choose their own power providers from an open market.

Griffin says big businesses such as Switch, which has an aggressive green energy policy and is a very large energy consumer, will have much more control over its business model if it can enter into long-term procurement contracts with energy providers on an open market than if it’s forced to rely solely on NV Energy for its power needs.

If Switch wants to derive all its power from renewable sources, Griffin says, it currently has to rely on NV Energy to procure that energy from whatever third-party sources it can, and Switch would have no control over the costs it must pay for that renewable energy.

“Switch is beholden to the ability of others to get the amount of green energy it wants, and Switch would be paying whatever price NV Energy can secure,” he says. “There is obvious benefit for Switch to procure energy itself on an open market — Switch would have the ability to set its energy portfolio however it wants to, and it can enter into a long-term contract with the seller. That allows Switch to adjust and reduce operating costs, because in many instances it can purchase power for cheaper (than NV Energy). Or it can purchase however much renewable energy it wants.”

In a statement provided by its communications department, NV Energy says it’s committed to delivering energy solutions that meet the unique needs of its customers and to deliver reliable electric service at reasonable and stable prices. Many commercial customers pay as much as 30 percent less for electricity today than they did in 2008, the company says, and its rates are among the lowest in the Western U.S.

Cost is but one factor in the decision, counters Griffin of the Energy Choice Initiative. Large power users such as Switch and the Peppermill, as well as smaller commercial customers and even residential power users, all should have the right to choose where they get their power, he says. Power, he adds, should be derived on an open market, much like telecommunications, rail service, trucking, or even cable television.

“Right now there are over 3,000 electric utilities in our country and growing,” Griffin says. “As more states and regions provide consumers with choice among providers, that spawns innovation and technologies to reduce inefficiencies — that is the motivation behind these large user exits. They want generators to compete for quality and price for their business.”

And some large companies may even go into the power generation business themselves. Barrick Gold North America, for instance, is one of the largest users of power in the entire state — the company’s many gold mines in northeastern Nevada require tremendous amounts of power. Barrick has its own power plant at Tracy east of Sparks.

Newmont Mining also got into the power generation business in the late 2000s when it brought a 242-megawatt coal-fired plant online to service its extensive mining operations north of Carlin.

Griffin says it’s reasonable for large users such as Switch to explore production of on-site energy.

“When deciding to buy energy on a competitive market, most companies would also consider energy from their own generation,” he says.

Peppermill is no stranger to power generation — the resort casino invested nearly $10 million to harness geothermal energy to heat water for the property’s two hotel towers and swimming pools, as well as mechanical heat for the property. The geothermal wells save the Peppermill approximately $2.2 million annually.

The company filed a letter of intent on June 7 to leave NV Energy as a customer and pursue other energy sources.

“The Peppermill has a long track record of investing in the most sustainable and environmentally-friendly energy sources for our customers — including a recent $9.7 million investment in on-site geothermal heat generation for the hotel casino,” it said in a statement. “We are committed to continuing that investment in responsible and renewable energy sources.”

NV Energy says it respects customers’ ability to explore utilizing alternative energy providers and will work with qualifying customers through the exit process. But the decision of a customer to use an alternative energy provider cannot impact other customers or shift costs or contractual obligations of the vast majority of customers that continue to receive their electric service from NV Energy, the company’s statement says.