Big casinos looking forward to paying lower power bills

David Strow

Saturday, Oct. 7, 2000 | 3:05 a.m.

In those states where deregulation is under way, its biggest backers have been the biggest users of electricity.

Nevada is certainly no exception.

Nevada's gaming industry helped introduce and pass Nevada's first electric deregulation law in 1997.

Casinos had hoped to begin shopping for power in November before Gov. Kenny Guinn delayed its introduction. That's really not a surprise, since a casino's power bill averages $250,000 to $500,000 per month, depending on size.

But those that represent the gaming industry in the deregulation debate insist it isn't an effort to benefit casinos at the expense of Nevada's residents.

"If you look at what has happened in a variety of industries, the reality is that all consumers ultimately benefit from free market processes, not just big customers," said attorney Martha Ashcraft, who has represented Las Vegas' largest casino companies in the deregulation debate. "It really does not behoove the hotel-casinos to do something that will hurt the residential customer. They employ thousands and thousands of people, all of whom are residential customers."

Historically, however, casinos have had to pay more for their electric bills in the name of universal electric service. Nevada, like many states, structured electric rates so that large customers paid considerably more for their electricity than it cost the utility to supply it. This extra margin helped subsidize residential customers, who were offered rates that sometimes did not reflect the cost of their electric service. The idea was to make electric service available to everyone, even those customers that weren't economical to serve.

This system was gradually being phased out in Nevada in the past several years, even before deregulation talk began.

A casino is an attractive customer for more reasons than just the amount of power it consumers. The power consumed by a casino also varies little by time of day and season, making it far easier for a power producer to supply it with the right amount of electricity. A homeowner, by comparison, could use huge amounts of electricity in the evening and very little during the day.

In Nevada, mining companies are just as attractive for electric suppliers, since mining operations use vast amounts of electricity, and that electric consumption varies little by time or season. In Clark County, the largest electric customer isn't a casino operator, but the Southern Nevada Water Authority, which needs power to pump water to the Las Vegas Valley. Water authority officials estimate as much as one-third of water bills are related to electricity costs.

The decision to delay electric competition for 10 months probably won't hurt casinos and other big users much, primarily because of record high electricity prices across the West. Few believe casinos would save money by leaving Nevada Power now -- in fact, their rates could instantly accelerate, as Nevada Power is providing big chunks of its power to customers at below-market rates.

"In today's environment, the advantages of going to an open market are removed," said Harvey Whittemore, a Reno lawyer/lobbyist representing several major Las Vegas casino operators.

But instability in the electricity market has hardly dampened the gaming industry's push for deregulation in the long-term.

"As one of the top five power consumers in the state, power cost is obviously very important to us," said Alan Feldman, spokesman for MGM MIRAGE. "We support the governor's actions (to delay deregulation), and will work with the governor to make sure the right decisions are made for all of us who are residents of Southern Nevada."