Tuesday, Aug. 12, 2003 | 11:11 a.m.
The four large power customers preparing to leave Nevada Power Co. to buy their own electricity responded on Monday to concerns outlined in a report issued last week by the state Public Utilities Commission staff.
MGM MIRAGE, the Rouse Co.'s Fashion Show mall, Station Casinos Inc. and the Monte Carlo hotel-casino have each sought approval to leave the Nevada Power system to buy power on their own. But the PUC report said that their filings 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."
In a response filed by MGM MIRAGE and the Monte Carlo, the companies requested a second compliance order from the PUC that would allow some flexibility in meeting some of the provisions of the initial commission order. The Monte Carlo is jointly owned by MGM MIRAGE and Mandalay Resort Group.
"At this juncture, the dilemma for applicants is the endeavor to satisfy the commission's conditions ... while not seriously jeopardizing their respective companies by committing to a $90 million contract that may not be approved," the MGM/Monte Carlo response said.
The PUC 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.
All applicants assured the commission in their response that those details would be spelled out in final contracts, but those contracts cannot be finalized without the requested flexibility.
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.
The response by Station Casinos and Fashion Show challenges that assertion.
"It must be remembered that (these) transactions do not add any new load to the system," the filing said.
Finding power within the local system has been a challenge since 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 PUC report also said Allegheny is considering bankruptcy.
More local generation is expected to go online late this year when Reliant opens a new power plant and even more will be available when Pinnacle West Energy opens a new plant by next summer.
Those suppliers, however, will come online too late to meet the conditions of the current PUC order. The applicants have asked for an extension of that provision in order to seek deals with the new power plants.
"If the commission should conclude that issuing a second compliance order, conditionally approving applicants' departure from the NPC system upon the submission of certain items, is an acceptable alternative to denial of the applications, the applicants can have the confidence necessary to responsibly commit to firm agreements," the MGM response said.
The PUC will discuss the issue at a hearing Friday morning.
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