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Power to Choose: MGM and Caesars Shop Wholesale Electric Market

Last week, the State of Nevada Public Utilities Commission (PUCN) approved an application by Caesars Entertainment Corp. (Caesars) that will allow its Northern and Southern Nevada properties to leave NV Energy as a retail customer and purchase its own power supplies on the wholesale market. Caesars is the third large gaming company, joining Wynn Resorts Ltd. and Holland & Hart client MGM Resorts International (MGM), to obtain permission to leave NV Energy as retail customers in pursuit of cheaper electricity.

Holland & Hart assisted MGM to successfully exit NV Energy’s retail system last fall after 18 months of administrative applications, hearings, and negotiations with the PUCN. This was an unprecedented achievement because “exit” applications by several other entities over the past decade have been unsuccessful.

In the summer of 2016, Caesars started exploring the prospects and costs of departing NV Energy. Despite the prospect of paying significant “stranded cost” impact fees, Caesars decided to proceed. Caesars’ electric load usage is complex because it involves two utilities, NV Energy for Caesars’ nine Las Vegas properties, and Sierra Pacific (NV Energy’s Northern Nevada utility) for three northern properties at Lake Tahoe and Reno. Exit fees are assessed by the PUC to protect remaining utility customers by covering infrastructure investments and to ensure a reliable supply of energy continues to existing customers.

Caesars filed two applications under 704B last November. On Feb. 16, a settlement agreement (Stipulation) was signed with the PUCN  Regulatory Operations Staff and the Attorney General’s Bureau of Consumer Protection (consumer advocate), with NV Energy remaining neutral, that favorably resolves potential stranded costs for remaining customers and provides Caesars with a reasonable impact fee obligation payment plan.

On March 8, the PUCN issued an Order approving the Stipulation, determining it is in the public interest to approve Caesars’ application to purchase energy, capacity, and ancillary services from a new provider.  Over the next four months, Caesars must demonstrate compliance of several obligations to PUCN, including submitting a signed contract with a new electricity provider, as well as a Network Integration Transmission Service Agreement, Network Operating Agreement, Transmission Reduction Plan, and Distribution Only Services Agreement to facilitate the exit process.

Holland & Hart’s Energy, Telecom, and Utilities representative and negotiation team includes Carson City-based attorneys Fred Schmidt and Brandon Sendall.


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