Las Vegas casino set to exit Nevada utility's service with $87M fee

Dive Brief:

NV Energy's subsidiary Nevada Power is losing a major customer in MGM Grand, with the casino's parent company announcing it will pay an exit fee to leave the utility's service in an effort to find cleaner, cheaper power on the open market, the Las Vegas Review-Journal reports.
MGM Resorts International last week informed the Nevada Public Utilities Commission it would pay $86.9 million to exit the utility's service. "Our imperative is heightened by increasing customer demand for environmentally sustainable destinations," the casino said.
Las Vegas Sands and Wynn Resorts have also been considering leaving, but their respective $24 million and $16 million exit fees may remain a hurdle.

Dive Insight:

MGM is rolling the dice on cleaner power, it told regulators, agreeing to a hefty penalty for leaving Nevada Power's service but saying its customer responsibility demanded it.

MGM will leave the utility's service by Oct. 1, the casino told regulators last week, in a letter reported by the Las Vegas Review-Journal. According to the newspaper, the MGM casino accounts for 4.86% of Nevada Power's sales.

“It is our objective to reduce MGM’s environmental impact by decreasing the use of energy and aggressively pursuing renewable energy sources,” wrote MGM Executive Vice President John McManus. “Our imperative is heightened by increasing customer demand for environmentally sustainable destinations. After careful thought and analysis over many months, we have concluded our objectives are best met by purchasing the energy required to operate our resorts, and serve our customers and guests, from a source other than NV Energy."

Other companies have been considering leaving the NV Energy utility's service, but so far the price tag has quelled defections. Sands told regulators earlier this year that the exit fees "effectively denied" its plan, along with other conditions.

The Wynn, in filed testimony, told regulators the casino "firmly believes that its exit from bundled service and choice of provider … will not result in increased costs to either remaining customers or the utility, nor will it impair or otherwise adversely impact the reliability of electrical service to remaining customers."

A data company, Switch, was the first to consider leaving Nevada Power's service but wound up striking a deal to remain for several years after the $27 million exit fee proved too hefty.