Thursday, July 10, 2003 | 11:32 a.m.
After two years of false starts, MGM MIRAGE, Station Casinos Inc., the Monte Carlo hotel-casino and Fashion Show Mall notified state regulators on Wednesday that they will enter into contracts with new electricity suppliers.
The state Public Utilities Commission must now decide if the contracts comply with its exit ruling handed down in March. The departing companies must then give final notification to Nevada Power Co. that they intend to exit.
The departing customers will still buy transmission services from Nevada Power, said Walter Higgins, CEO of Nevada Power's parent company Sierra Pacific Resources.
Station Casinos and the Fashion Show Mall both signed power contracts with Houston-based Coral Power, a subsidiary of Shell Oil. The companies are scheduled to begin receiving power from Coral Oct. 1. Station has a 3 1/2-year deal and Fashion Show has a three-year contract.
MGM and Monte Carlo both signed three-year deals beginning Nov. 1.
Financial terms of the contracts were not disclosed.
The deadline for five other large customers considering leaving -- including Park Place Entertainment -- expired Wednesday.
The deadline expired on two other customers -- the Riviera Hotel and Imperial Palace -- last month. Those two companies had filed for an extension of their deadline, but it was never heard by the PUC.
The exit notification of the four customers comes a week after Nevada Power released a resource plan outlining the company's efforts to fill a 2,000-megawatt supply gap heading into 2004. The exiting users represent a total peak demand load of 167 megawatts.
Higgins said the departure would not represent a huge power savings compared to the looming shortfall, but it would be a start.
"It has one effect of reducing the amount of wholesale power we have to buy," he said. "It's not a big amount, but in the summer, it's that last 30 megawatts that are the most expensive."
Under the 2001 state law that allowed for the exits, Nevada Power also has the right to buy up to 10 percent of the total electricity supplied under the new contracts.
Higgins said the utility would examine the cost of that power to determine its value for Nevada Power customers.
Station, MGM and Fashion Show had each received approval to leave the system a year ago but let their window of opportunity close. A major difference from 2002 was the lack of exit fees assessed by the PUC in this year's round of exit cases. Of the four exiting users, only Fashion Show was ordered to pay an exit fee, totaling about $44,000.
In 2002, MGM was assessed a $2 million exit fee, Station a $1.3 million fee and Fashion Show a $439,000 fee. Those fees covered the exiting customers' share of the costs Nevada Power incurred building its existing generation and transmission system. The PUC said exit fees were not necessary this year because higher power prices meant the cost to customers would be offset by savings for the utility since it would be buying less high-priced, peak-demand electricity.
The state Bureau of Consumer Protection argued that the projections used to wash away the exit fees place undue risk on the remaining customers should the savings fall short of covering lost revenue.
Higgins and PUC officials both emphasized that the exiting customers will be responsible for their portion of past deferred energy cases, which repay the utility for past costs for fuel and purchased power through rate adjustments over the next three years.
The exiting customers also will be subject to an updated cost/benefit analysis prior to their departure.
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