PUC finds flaws in Nevada Power exit plans

Kevin Rademacher

Tuesday, Aug. 5, 2003 | 11:06 a.m.

The state Public Utilities Commission on Monday outlined a series of shortcomings in the filings of four large power users seeking permission to buy their own electricity.

MGM MIRAGE, Fashion Show Mall, Station Casinos and the Monte Carlo hotel-casino have each sought approval to leave the Nevada Power system to buy power on their own, but the report said that their filings with the PUC may not comply with rules governing the departures.

"Staff believes that each of the four applicants in these dockets may be in material breach of the compliance order," the report said. "However, staff also acknowledges that external circumstances, arguably beyond their control, have significantly interfered with the applicants' ability to comply."

On July 9, the four large customers became the first to announce contracts with independent suppliers under a 2001 state law designed to ease the demand on Nevada Power. Eight other large customers had received approval to seek new power contracts but allowed their window of opportunity to close without making a move.

The report said the exiting customers' new power contracts do not specifically grant access to suppliers' books for the purpose of ensuring properly paid local taxes. The report also said a regulatory mandate giving Nevada Power Co. the right to buy 10 percent of the electricity supplied under the new contracts has not been met.

Another sticking point is the apparent inability of the exiting users to secure 10 percent of their peak demand supply from inside the Las Vegas Valley generation system.

The commission and Nevada Power have said that provision is necessary to ensure that all customers will have seamless access to power during peak-demand summer months when the local transmission system is at capacity. During that time, Nevada Power has argued, new power cannot be imported over the heavily used lines.

However, only two local power plants are currently selling power on the wholesale market -- Mirant Apex Generating Facility and Las Vegas Cogeneration, which is marketed by Allegheny Energy Supply. PUC staff, in the report, conceded that the lack of local suppliers makes the provision difficult. It got worse last month when Mirant filed for bankruptcy protection. The report said Allegheny also is considering bankruptcy.

"The applicants assert that the financial condition of both of the currently operating internal sources worsened significantly and suddenly over the summer making it very difficult to finalize a viable contract," the report said.

More local generation is expected to go online by next summer when Reliant and Pinnacle West Energy open their two new local power plants.

The report said applicants responded by delaying their departure. Fashion Show and Station Casinos are planning an October exit. MGM MIRAGE and Monte Carlo are expected to leave in November. That time frame would allow them to secure deals with the new plants by next summer.

Steve Boss, president of the Nevada Energy Buyers Network and representative for Station Casinos and Fashion Show in the exit cases, said the problems should not stall the companies' exit plans.

"The practical results of the marketplace have kind of dictated that certain things cannot be as neatly categorized as in the reading of the commission's order," he said. "Still, there isn't anything in such direct conflict as to prevent these guys from leaving."

The exiting users have until Monday to file a response with the PUC. A hearing before the commission to review the exit cases has been scheduled for Aug. 15.