The Weekend Wonk: The Utility Death Spiral has Begun

May 30, 2016

Caution – Earthquake in Progress.

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Nevada Power is likely doing a lot of soul searching.

Last week, two of the biggest Las Vegas casino companies — MGM Resorts and Wynn – filed to leave Nevada Power and set off to buy wholesale electricity on their own. MGM has particularly strong renewable energy goals, and this move signals that the company thinks it can procure clean electrons cheaper than the utility.

As more large corporations make similar moves, will it lead to a financial disaster for utilities? This week, we’ll discuss the implications with Cory Honeyman, the associate director of GTM’s US solar research practice, who has been following the commercial customer class closely.

A big deal, as the discussion points out – this is a big deal because MGM alone accounts for 5 percent of Nevada Power demand – and MGM was willing to pay an 87 million dollar penalty to get off reliance on the utility.

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4 Responses to “The Weekend Wonk: The Utility Death Spiral has Begun”


  1. This is really a result of the abrupt end of net metering in Nevada. With NM in place, customers with solar (including C&I customers) were getting a sweet deal. The swift decapitaiton of NM brought sudden price increases for those customers, and a search for a better way. MGM thinks they’ve found it, but that remains to be seen. Electricity isn’t just a product, it’s also a service, and the “service” part means keeping the lights on 24/7, not just when the solar array is pumping out the power.

    I suspect that MGM is going to discover that the reality of going it alone will be a lot trickier than the fantasy. It’s not all that hard to buy (or build) solar power to run a Nevada casino’s air conditioning during the day. But then there’s that secondary demand peak that happens right after sunset, when the lights go on and the air is still warm.

    So what I’m really wondering is, where the power for Mandalay Bay will come from after sunset. who will provide it, over what distribution network, and what MGM will be paying for that.

    Meanwhile, as Lake Mead drops ever lower, I’m also wondering how much longer Hoover Dam will be able to produce power at anything like its capacity factor.

  2. miffedmax Says:

    Keith, the casinos have the right to buy energy wholesale from the supplier of their choice. Their goal is to be able to use solar and other renewables without paying Nevada Energy’s penalties for so doing. Any deficit can be made up by buying from other suppliers who produce power either from renewables or by conventional means.

    Nevada Energy pushed this regulation through, and now it’s coming back to bite them in the butt.

  3. bbenfulton Says:

    According to the Las Vegas Review-Journal, MGM has to have its exit application approved by the Public Utilities Commission. When Switch attempted to exit their application was rejected. I think we still have to wait to see how the politics fall out.


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