Large power users staying for now

Thursday, Dec. 19, 2002 | 11:06 a.m.

Five large power users that declared their intent to leave the Nevada Power Co. grid next year have withdrawn their applications, but expect to refile new ones by February.

The Public Utilities Commission of Nevada received notification Wednesday from Steve Boss of Nevada Energy Buyers Network that five companies he represents have determined that conditions in the energy market have changed -- making the plan to leave Nevada Power less attractive at this time.

Boss said, however, that he expects conditions to return to previous levels early next year and that the five companies would reapply by the end of February.

The five companies that withdrew their applications are Park Place Entertainment Corp., owner of Caesars Palace, Bally's, Paris-Las Vegas, Las Vegas Hilton and the Flamingo; Station Casinos Inc., which owns several locals casinos including Palace, Boulder, Texas, Sunset, Santa Fe and Green Valley Ranch Station and two Fiesta hotel-casino properties; Coast Hotel and Casinos Inc., which owns the Gold Coast, Barbary Coast, Suncoast and Orleans properties; Gordon Gaming Corp., which operates the Sahara hotel-casino; and Rouse Fashion Show Management LLC, which owns the Fashion Show mall.

MGM MIRAGE, which owns the MGM Grand, the Mirage, Treasure Island, New York-New York, Golden Nugget, Boardwalk and a half interest in the Monte Carlo, also asked to exit the Nevada Power system and missed a filing deadline Wednesday. A spokesman for MGM MIRAGE could not be reached for comment today on the status of the company's application.

Provisions to exit the Nevada Power grid would give large electricity users options to purchase power at cheaper rates and would relieve the utility of having to produce more power during periods of peak use. The five companies represented by Boss were required to pay a combined $4.2 million to compensate Nevada Power and existing customers for leaving the system. That was determined to be their share of fixed costs incurred on their behalf.

Boss said two conditions have changed dramatically since the five companies formally applied to exit the Nevada Power system last summer, a move that was approved by the PUC in separate sessions in July and August. Boss said the companies' alternate energy supplier, Reliant Resources Inc., Houston, had its credit rating downgraded while the price of natural gas has risen significantly.

"We had to designate one supplier early in the process," Boss said. "All analyses showed that they would be best to supply our clients' needs."

Boss said the application process to exit the grid system -- the first ones ever undertaken after a new state law allowed the process -- took longer than anticipated and by the time issues were resolved and deals were consummated among the parties, Reliant became the subject to credit scrutiny by regulatory agencies.

Meanwhile, the price of natural gas climbed higher than normal with the arrival of winter.

Boss said gas prices already have begun to return to earlier levels, leading him to believe the spike was an aberration. Also, he said Reliant has begun a refinancing program and will be re-evaluated by credit rating companies early next year.

He expects the application to be smoother next time because much of the information he needs has been gathered and he knows what has to be delivered. In the next application, he said he expects to simultaneously submit up to three potential electricity suppliers, including Reliant, in the new application.

In addition to the five companies he represents, there are two other casino companies in the process of exiting from the grid system -- the Riviera and Imperial Palace hotel-casinos. He also said two other companies are close to filing applications, the Stratosphere Corp., which owns the Stratosphere hotel-casino and two Arizona Charlie's locals properties, and Potlatch Corp., which operates a paper manufacturing plant in North Las Vegas.

In another matter, the presiding officer in Nevada Power's $81 million rate decrease case before the Public Utilities Commission has asked participants for legal briefs explaining what effect earlier power contract cancellations would have on the public.

In a pre-hearing conference Wednesday, Commissioner Adriana Escobar Chanos asked attorneys in the case to file legal briefs by Jan. 10 and for Nevada Power to respond by Jan. 16 on the effects contract cancellations would have on the rate case.

Escobar Chanos hopes to sort out what legal issues must be considered on the rate decrease case, which would cut rates by 5.3 percent and lower the average residential customer's monthly bill by $6.39 next summer.

Several wholesale energy suppliers canceled their contracts with Nevada Power last year when the company's credit rating fell below investment grade. Escobar Chanos may also consider Nevada Power's petition to the Federal Energy Regulatory Commission arguing that fuel suppliers illegally manipulated the Western energy market and court appeals involving the utility's $922 million rate increase that was partially denied last spring.

Experts say those variables could have a wide-ranging effect on whether power rates rise or fall next year.