Unexpected departure of David Farahi from Atlantis owner Monarch surprises investors

The completion of an expansion project to Monarch Casino & Resort’s Colorado property is allowing Chief Operating Officer David Farahi to leave the Reno-based company and explore business opportunities away from the gaming industry.

The late Tuesday announcement raised a few eyebrows given the structure of Monarch, which is publicly traded on the Nasdaq but is overseen by the founding Farahi family. John Farahi and his brother Bob Farahi serve as the company’s co-chairmen with John also holding the CEO position. David Farahi, who is John Farahi's son, said he will leave the company on Sept. 3.

Truist Securities gaming analyst Barry Jonas, in a research note published Wednesday morning, said David Farahi, 40, has been the public face that investors in Monarch have come to know. The company operates Atlantis Casino Resort in Reno and Monarch Black Hawk, roughly 40 miles west of Denver.

“We’ve seen Mr. Farahi as a key part in setting and executing Monarch’s existing and growth strategies, and a potential successor for the CEO role at some point,” Jonas wrote. He said the management change was a “personal decision not grounded in any disagreement or concern over the company's prospects.”

In an interview with The Nevada Independent, David Farahi said the Black Hawk casino has “ramped up faster and better than predicted.” Analysts expect the Colorado casino will be the primary driver of gaming revenues for the company.

John Farahi, in the same interview with the Independent, said he supported his son’s decision.

“He’s a blessing for a father,” he said. “I was careful not to tie him down and this allows him to explore other opportunities. He will be successful in whatever he does.”

John Farahi said he is now focused on expanding Monarch’s presence in Reno where it controls an additional 40 acres near Atlantis. He said the company is exploring potential mixed-use development ideas to coincide with a rapidly expanding Reno.

“We want to see what the prospects are for this city,” he said.

In addition, he said Monarch would seek a new chief financial officer, filling a position that has been vacant since 2016. John Farahi said the new CFO would lead any mergers and acquisitions discussions, allowing the company to expand from just two casino resorts.

“We believe the announcement adds complexity to the debate around identifying and acquiring the next asset for growth and the long-term growth trajectory,” Jefferies gaming analyst David Katz said of Monarch pursuing a CFO. “This element, given the apparent success with Black Hawk thus far, is key to the longer-term growth trajectory for the company.”

Wearing many hats

David Farahi became Monarch’s chief operating officer in 2012 and filled several other positions, including oversight of gaming operations and investor relations. He held more than a dozen roles at Atlantis starting in 1998.

But he also spent two years outside the gaming industry in investments and private banking.

“I’m proud of what the team has accomplished,” David Farahi said of Black Hawk casino, adding that he plans to remain in Denver. “I’m not rushed right now, but I’m exploring the potential of what is out there.”

For the past two years, he was tasked with overseeing the increased staffing for a $400 million expansion to the Black Hawk resort, which was completed this year. The size of the casino was increased to 60,000 square feet and a poker room was added along with a sportsbook. The property also opened new restaurants, convention space, and grew to 513 hotel rooms.

David Farahi was credited with helping push along passage of Amendment 77 last November that was overwhelmingly approved by Colorado voters. The measure removed the state’s $100 single-bet wagering limit and allowed casinos to begin offering previously forbidden games, such as baccarat, keno and the big six wheel.

The gaming law changes took effect on May 1, which coincided with the completion of Monarch Black Hawk’s expansion.

Monarch said in July its net revenues in the 2021 second quarter were $97.7 million, an increase of 55.7 percent over the 2019 second quarter. For the first six months of 2021, Monarch’s total revenues were $172.7 million, a 42.1 percent increase over 2019. (The investment community compares 2021 with 2019 because of the influence COVID-19 restrictions and guidelines had on 2020).

The company doesn’t break out individual results for the Reno and Black Hawk resorts.

Wall Street still bullish on Monarch

Shares of Monarch closed at a price that was down 1.21 percent Wednesday as investors sought answers to David Farahi’s sudden departure.

“The stock is trading off today, likely reflecting concerns around key management risk with Mr. Farahi's departure,” Stifel Financial gaming analyst Jeffrey Stantial said in a note to investors. “However, we expect a smooth transition given most of the heavy lifting is over for Black Hawk, with the ramp already off to a strong start.”

Macquarie Securities gaming analyst Chad Beynon said he remains “confident in the leadership of the company” and the direction of the Reno and Black Hawk casinos.

In May, David Farahi sold 62,000 shares of Monarch stock, leaving with him 16,000 shares out of the company’s 19.5 million shares outstanding. Combined, the Farahi family controls more than 30 percent of the company.

“We believe he (David) has significant holdings as a beneficiary of a family trust,” Jonas said.

Beynon said there have been few gaming companies that are considered “family businesses” the way that Monarch has been. As a result, he said “investors have appreciated the vision and rewarded” the company with a higher valuation.

“In addition, the company has operated with arguably the healthiest balance sheet, only borrowing capital when needed,” Beynon said. “Monarch remains focused on further building an executive bench and expanding the portfolio even further.”

New Colorado leader

As part of the announcement, Michelle Shriver, a longtime gaming executive who has been a consultant to Monarch since April, was named corporate vice president of operations and will have primary responsibility for the Black Hawk resort. She will be based in Colorado.

She previously was part of the Ameristar Casinos executive management team with responsibility for the company’s eight regional casinos. She also oversaw the expansion of Ameristar Casino Black Hawk and has familiarity with the Denver market.

“Michelle has a track record of approximately 20 years in the gaming and hospitality industry,” John Farahi said in a statement. “She has extensive experience developing a corporate strategy aimed at maximizing revenues and achieving market leadership.”

Updated at 10:17 a.m. on 8/27/2021, to reflect David Farahi's role with the Black Hawk resort expansion.

A Christmas tree for fallen soldiers helps Gold Star families honor their loved ones during difficult holiday season

Gold Star parents around Christmas tree

This holiday season, a special gift for the local families of fallen soldiers sits inside the busy Atlantis Casino Resort. Away from the noise and lights of the slot machines and blackjack tables, a Christmas tree is adorned with lights, ornaments and photos of their sons and daughters whose lives were lost while serving in the U.S. military. 

While the holidays can be a painful reminder of the loved ones they’ve lost, this Christmas tree gives the families of fallen soldiers, known as “Gold Star” families, a tangible way to remember and honor their sons and daughters. 

“We haven’t had a Christmas tree since my son was killed,” Gold Star Mother Sharon Zaehringer said through tears. “Last year was the first year we had a tree and it was here at the Atlantis. So I will come down here and sit and look at the pictures and honor our children that are on the tree.” 

Zaehringer is a Gold Star Mother who attended the Christmas tree lighting and whose son’s photo is placed among the others on the tree. Marine Sgt. Frank Zaehringer died in October of 2010, at age 23, while serving in Afghanistan. 

Frank Zaehringer graduated from Wooster High School in 2005 and joined the Marine Corps in 2007. 

Sharon Zaehringer next to Christmas tree
Sharon Zaehringer stands next to the photo of her son, Frank Zaehringer, on a Christmas tree at the Atlantis Casino in Reno on Dec. 4, 2019. Photo by Jazmin Orozco-Rodriguez/The Nevada Independent.

The parents of fallen soldiers are known as “Gold Star parents,” a term that goes back to World War I families who placed blue stars in their windows for every immediate family member serving in the armed forces. If their family members died while serving, the family would replace their blue star with a gold star. 

Honor Flight Nevada, a non-profit organization that flies local veterans out to see their memorials, started this memorial last year in December of 2018. 

CEO and founder of Honor Flight Nevada Jon Yuspa wrote in an email to The Nevada Independent that he had the idea to help fallen soldiers’ families create new positive memories for the holidays.

“We have seen and heard so many stories with a lot of healing around the tree,” Yuspa wrote. “The families have been spending time around the trees as if its their [own] living room.” 

Prayer at Christmas tree lighting
The room went silent for a prayer said for all the families and veterans present at a Christmas tree lighting at the Atlantis Casino in Reno on Dec. 4, 2019. Photo by Jazmin Orozco-Rodriguez/The Nevada Independent.

Steven Ward is also a Gold Star parent whose son, Marine Lance Corporal Eric Ward, died in February of 2010 while also serving in Afghanistan. He was 19 and grew up in Redmond, Washington. 

“He loved Christmas,” said Ward. “Every year we keep a seat empty for him.”

Eric Ward was a fifth-generation Marine, preceded by his father and mother, grandparents, and generations before him. 

Ward admits this time of year can be emotional and difficult. 

“But you have to learn to process and go forward,” he said. “You honor them. I know the loss will never be painless, but I go forward and in exchange I honor him by doing extra events like Honor Flight and the Christmas trees and barbecues for other Gold Star parents.” 

Man looks at Christmas tree
A man views a Christmas tree put up by Honor Flight Nevada at the Atlantis Casino in Reno on Dec. 4, 2019. Photo by Jazmin Orozco-Rodriguez/The Nevada Independent.

There are three Christmas trees on display at the Atlantis. One is for remembering fallen soldiers such as Frank and Eric, one is for living veterans and the last one is for active duty personnel. 

Since the trees were put up in late November and early December, a few holiday cards have been left at the foot of the trees by strangers, thanking the people the trees represent for their service and sacrifice. 

The three trees were put up by Dawn Forbus, who sits on the board of Honor Flight Nevada. Forbus said she volunteered to help put the trees up because she feels connected to the Gold Star families and wanted to honor them and the sacrifices made by their loved ones.

She said the event brings mixed emotions and the Christmas tree has become much more than just a tree for the families remembering their sons and daughters.

“It's just helped to give those Gold Star family members the realization that they're not alone, that their loved one is not forgotten,” Forbus said.

NV Energy to pay $1.1 million annually to keep Clark County in the fold

Clark County Government Center

Clark County Commissioners have adopted a five-year agreement with NV Energy that will see the state’s primary utility pay the county $1.1 million a year for promising not to leave its electric service.

Commission members voted unanimously on Tuesday to adopt the proposed contract, which makes the county at least the fourth government agency to receive direct cash payments from NV Energy in return for a promise not to consider leaving NV Energy for another electric provider.

Already, the utility has entered into similar contracts with the city of Henderson, the Las Vegas Convention and Visitors Authority and the Clark County School District exchanging cash payments for both a commitment not to leave the utility and a promise to enroll in a special Optional Pricing Program Rate (OPPR) for large utility customers by 2022.

In a statement, NV Energy spokeswoman Jennifer Schuricht said that approval of the contract would help the utility “actually protect other customers from potential cost increases.”

“NV Energy is pleased that the Clark County Commission is considering a multi-year agreement to remain a customer, which will provide them with long-term value without increasing rates for other customers,” she said in an email on Monday. “Our large business and government entity customers are seeking tailored solutions that meet their unique needs and we are responding to this demand.”

Since May, NV Energy has announced similar long-term arrangements or deals with several other customers, including Station Casinos, the Cosmopolitan, Las Vegas Sands, the Atlantis, Golden Gaming and South Point. NV Energy has declined to say whether those deals, which are not required to be publicly disclosed to the Public Utilities Commission, included similar payments as part of their arrangements to stick with the utility.

The additional $1.1 million that will flow annually to Clark County every year would bring total payments from the utility to government agencies up to $3 million a year, including $1.5 million to CCSD, $250,000 to Henderson and $650,000 to the LVCVA. If similar financial payments are part of the deals struck with private businesses, the utility could be paying tens of millions of dollars annually to keep the business of its largest customers.

The contract itself largely follows the same outline as the contracts with other Southern Nevada agencies — guaranteeing $1.1 million in payments for 2019, 2020 and 2021, and requiring the county enroll in the OPPR program by 2022. The proposed OPPR pricing program, which would offer a flat rate based on new large-scale solar projects, has been touted by the utility as an alternative for large businesses that have flirted with leaving the utility, but has faced criticism as too generous to participants (the utility temporarily withdrew its OPPR application in June).

The exact savings under the OPPR program are still unclear, though in at least one example, the utility estimated that the Nevada System of Higher Education would save $381,000 on its power bills every year under the initially proposed program.

The growing number of large customers who have sought to leave the utility for another power provider under the 704B process — the state law allowing large power users to use an alternative power provider in return for an exit fee designed to keep other ratepayers whole — has prompted worries from NV Energy, which has warned in rate filings and public statements that the departure of its largest customers would cripple future electric demand and likely shift millions of dollars in costs to its other customers.

Since mid-2018, at least 14 large Nevada businesses and government agencies filed 704B applications with the PUC; six have withdrawn their applications, seven were granted the right to leave and one (the under-construction resort The Drew) is still pending.

The contract with Clark County — which never filed a 704B application — also contains language noting the utility plans to file for a $120 million rate reduction in 2021 and includes a requirement to reduce incentive payments based on estimated savings if the PUC approves a higher rate reduction. It also contains a promise to continue cash payments into 2022 and 2023 if the savings from the OPPR rate don’t reach at least $1.1 million annually, and a requirement that Clark County refund all “incentive” payments if the five-year agreement is terminated early for any reason.

And as with the other contracts, the proposal with Clark County contains a confidentiality notice prohibiting either party from issuing “press releases or similar public announcements” without prior written consent of the other party.

Updated at 10:59 a.m. to reflect that the county commission approved the contract.

SLS Las Vegas cleared to leave NV Energy, amid many applicants withdrawing from attempts to leave utility

The sign at NV Energy corporate headquarters

It took less than ten minutes for the three members of Nevada’s Public Utilities Commission to swat down a last-chance effort by NV Energy to raise the price of SLS Las Vegas’s ticket to depart the utility and purchase electric power from another provider.

The PUC’s quick discussion and 2-1 vote on Wednesday to deny NV Energy’s request to reconsider an earlier PUC order granting the casino’s request to depart the utility is perhaps the last nail in an effort by NV Energy to coax, delay or dispute efforts by nearly a dozen large companies to leave utility service.

Since mid-2018, 14 of Nevada’s largest businesses and government agencies have filed applications with the PUC under the so-called 704B process, which allows certain large businesses and government entities to leave utility electric service and purchase power on the open market, in return for a usually substantial “impact fee” calculated and charged by the commission to ensure other utility customers don’t face unexpected costs.

Although Nevada lawmakers approved a wide-ranging bill in the 2019 Legislature that added more restrictions and limits on the 704B process, the legislation exempted all businesses with pending applications before the Commission from the new restrictions and requirements, meaning that they’re able to leave under the old, less restrictive set of rules.

That possibility has concerned NV Energy, which has moved to dispute or seek higher exit fees for companies applying to leave their service, including filing several motions for the commission to reconsider its orders granting the applications over fears that granting all pending applications would cripple future load growth and cost its other customers millions of dollars. 

But their arguments have yet to sway a majority of the Commission, which wrote in the order denying NV Energy’s reconsideration petition for the SLS that their arguments were not valid.  

“Considering the fact that [NV Energy’s] petition merely repeats the same arguments that it put forth in its testimony, the Commission finds that [NV Energy] has presented no basis for altering the determinations contained in the order, which are clearly delineated therein and which are clearly supported by the evidence presented in this docket,” members of the commission wrote in the order.

But the utility company has moved in other ways to reel its largest customers back into the fold, including entering into contracts with the LVCVA, City of Henderson and the Clark County School District that included direct incentive payments to the government agencies in return for a promise to not leave utility service. 

We believe we are the best energy partner for SLS Las Vegas, and we are committed to providing them with customized solutions that address their unique business needs and provide added value,” NV Energy spokeswoman Jennifer Schuricht said in an email. “This approach to meeting customer needs has been successful in helping us retain our customers, and we will continue to work hard to retain the opportunity to be the energy provider for SLS Las Vegas.”

Of the 14 entities that filed to leave utility service since June of 2018, six have withdrawn their applications, seven have been granted the right to leave by the PUC, and one (the under-construction The Drew resort) is still pending. Here’s how the exit application status of each business or entity that has filed to leave the utility is currently faring:

The Drew (exit application filed in April 2019)

The unfinished $3 billion, 67-story The Drew Las Vegas (formerly Fontainebleau) is still under construction and isn’t expected to open until the second fiscal quarter of 2022. Still, the hotel’s management company Two Blackbirds Hospitality Management LLC filed an application to preliminarily leave the utility in April 2019. 

The application is still pending, and a procedural order issued by the Commission set a hearing date for August 29.

Cosmopolitan (exit application filed in February 2019)

The Cosmopolitan withdrew its application to leave NV Energy’s service in late May, just three months after filing to leave the utility. No order was filed in the case, but an “impact analysis” by staff of the PUC estimated that the casino company would need to pay a $4.739 million impact fee over six years, or a $3.96 million fee up front.

LVCVA (exit application filed in February 2019)

The Las Vegas Convention and Visitors Authority — which operates Cashman Field and the Las Vegas Convention Center — withdrew its application to leave the utility in May amid announcing a five-year energy services agreement with NV Energy. That contract includes yearly payments of $650,000 and a requirement the authority enroll in the utility’s special Optional Pricing Program Rate program if and when it is approved by the Commission.

No order was drafted or approved by the commission, but according to PUC staff’s final impact analysis, the agency would have needed to pay either $6.36 million over six years or $5.098 million up front to officially leave the utility (slightly less if the LVCVA did not go forward with its planned expansion).

Air Liquide (exit application filed in February 2019) 

This company, which plans to build a liquid hydrogen facility in Clark County that will transform methane into liquid hydrogen, was granted approval for its exit application earlier this month with no impact fee included. 

Air Liquide, which plans to ship the liquid hydrogen to a California fuel cell facility for use in fuel cell vehicles powered by hydrogen, will still be required to pay legislatively-mandated “rate riders” such as the Economic Development Electric Rate Rider, an electric bill rebate program granted to Tesla and other large businesses that relocate to Nevada.

Commercial operation of the plant is scheduled to begin by the third or fourth fiscal quarter of 2021.

SLS Las Vegas (exit application filed in December 2018) 

Wednesday’s decision by the PUC means the runways are cleared for SLS Las Vegas to leave NV Energy’s electric service, after filing to do so last year and having an initial order approved in May.

The casino, which shares an owner (Meruelo Group) with the Grand Sierra Resort, will need to pay a $1.279 million up-front impact fee in order to depart NV Energy.

Grand Sierra Resort (exit application filed in December 2018)

The Grand Sierra Resort withdrew its application to leave NV Energy in April, citing concerns raised by NV Energy in previous filings about a lack of transmission capacity in Northern Nevada. 

Although no order was issued in the case, the casino would have had to pay $2.122 million up front or $2.2234 million over six years according to a PUC staff analysis.

South Point Casino (exit application filed in December 2018) 

After filing to leave the utility last year, the South Point Hotel and Casino withdrew its exit application and announced a partnership with NV Energy in May. 

The application was withdrawn before an order approving or not allowing the exit to proceed forward could be drafted, but a PUC staff final impact analysis estimated the casino resort would need to pay an impact fee of $3.229 million over six years or $2.605 million up front.

Boyd Gaming (exit application filed in November 2018) 

Of the 14 companies that have filed to leave NV Energy over the last 12 months, Boyd Gaming remains the largest current electric customer that still plans to leave the utility.

Boyd’s exit application was granted in June, and the casino company — which operates 12 Nevada properties including Aliante, Fremont Hotel and Casino and the Orleans — will be required to pay a $10.681 million up-front impact fee or $13.099 million fee paid over six years.

MSG Las Vegas (exit application filed in October 2018) 

The planned 18,000-seat MSG Sphere at the Venetian is one of several major under-construction projects that applied and received an order granting an exit application from NV Energy without having to pay an exit fee. 

The application by MSG Sphere, a joint venture between the Madison Square Garden Company and the Las Vegas Sands expected to be completed between 2020 and 2021, was approved by the Commission with no impact fee in April. A separate reconsideration petition by NV Energy was filed but rejected by the PUC in late April.

Georgia-Pacific Gypsum (exit application filed in September 2018) 

This gypsum wallboard and plastic manufacturing plant was granted permission to leave NV Energy as an electric customer in February. The company is required to pay an impact fee of either $1.567 million over six years, or 1.289 million as an upfront payment.

Raiders’ Stadium (exit application filed in September 2018) 

The future football home of the NFL’s Raiders was granted approval to leave NV Energy’s service sans exit fee in early February, after filing to leave the previous year.

But the team filed an unusual request to the PUC in May, essentially asking to temporarily hold off on compliance with entering into electric service agreement with a third-party provider amid a pending alternative offer by NV Energy to enroll in a similar pricing program provided by the utility. That motion was granted by the PUC, giving the team and NV Energy until September to come to an agreement.

Atlantis (exit application filed in August 2018)

Although their application to withdraw NV Energy was granted in February, the Reno-based Atlantis Casino Resort Spa reversed and withdrew their exit application in late April as part of an agreement with NV Energy. The original order would have required the casino to pay a $1.756 million up front impact fee, or $1.959 million fee spread out over six years.

Fulcrum Sierra BioFuels (exit application filed in June 2018) 

Fulcrum, which plans to open a waste-to-fuel biofuels plant in northern Nevada in early 2020, received permission from the PUC in November to leave NV Energy’s service without having to pay any impact fee, despite a request from the utility to tack on a $6.3 million impact fee.

Station Casinos (exit application filed in June 2018)

After being assessed a $15 million exit fee (or $18.091 million up front fee), Station Casinos withdrew its exit application and announced a long-term deal to stick with NV Energy.

The company, which owns multiple properties in the Las Vegas area including Red Rock Casino Resort and Spa and Green Valley Ranch, was granted its exit application in September 2018, but requested and received a delay in May to consider alternative options from NV Energy.

Proposed contract would see NV Energy pay Clark County School District $1.5 million annually to remain a customer

Front view of the building front of the Clark County School District administrative building

NV Energy will pay $1.5 million a year to the Clark County School District over the next five years in return for the district promising not to depart utility electric service under a proposed contract up for a vote later this week.

Members of the Clark County School District’s Board of Trustees have scheduled an agenda item and possible vote during their upcoming Thursday meeting on a contract that would lock the district into an agreement to remain an NV Energy customer for the next five years, in return for annual $1.5 million in either direct cash payments or through a special rate program for large customers.

The proposed arrangement is at least the third such deal with large municipalities that includes direct cash payments in return for remaining utility customers; the city of Henderson and the Las Vegas Convention and Visitors Authority entered into similar arrangements with NV Energy in past weeks.

"NV Energy is pleased to have the school board considering a multi-year agreement with us to be their energy provider," utility spokeswoman Jennifer
Schuricht said in an email. "We believe the agreement meets the unique energy needs of the school district at a low price to ensure more money can go into the classroom."

Since May, NV Energy has announced similar long-term arrangements or deals with several other customers, including Station Casinos, the Cosmopolitan, Las Vegas Sands, the Atlantis, Golden Gaming and South Point. An NV Energy spokeswoman declined to say in an earlier email whether arrangements with those businesses — which are not required to be publicly reported to the Public Utilities Commission — included similar payments as part of their deals to stick with the utility.

If the contract is approved by trustees, the utility will be on the hook for at least $1.9 million in annual payments to Henderson ($250,000), the LVCVA ($650,000) and CCSD ($1.5 million) for the next five years. If similar arrangements were made with private businesses that have announced similar deals with the utility, NV Energy could be directly paying up to tens of millions of dollars every year to some of its largest customers.

The proposed contract with the school district contains many similar provisions to contracts entered into by Henderson and the LVCVA, including running for five years and requiring the district enroll in the proposed Optional Pricing Program Rate (OPPR) by 2022. The pricing program, which was proposed by the utility last year but withdrawn temporarily last week, is aimed at offering large NV Energy customers a special, renewable power-backed flat rate but has been criticized by Public Utilities Commission staff and the Bureau of Consumer Protection as overly beneficial to larger customers.

In past months, NV Energy has taken increasingly aggressive steps to stem the tide of large businesses filing so-called 704B applications to leave the utility and purchase power from other providers (in return for a typically substantial exit fee to ensure other utility customers don’t face suddenly higher costs). 

The contract requires the school district to enroll in the OPPR program by 2022 if it is available and approved by the commission, and it would promise to continue paying the incentive if the program is not available or if the savings under the program are less than $1.5 million. It also contains provisions nullifying incentive payments in 2022 and 2023 if the district does not take service under the OPPR system.

It also contains language noting the utility’s plan to file a $120 million revenue reduction during its 2021 general rate case, and requirements to reduce the incentive payment based on the amount of estimated savings if the PUC approves a rate reduction greater than $120 million.

And as with Henderson and the LVCVA, the only requirement for the school district is to remain a full service customer of the utility for five years and not seek a so-called 704B exit application to depart utility service.

Another similar contractual provision concerns confidentiality; the proposed contract requires neither party to disclose information about the contract, make public announcements or disclose information exchanged regarding the contract without prior written consent, unless otherwise required by law. Unlike the agreements with Henderson and the LVCVA, the proposed contract with the school district does not contain any provisions related to helping the school district meet its renewable energy goals.

Last year, CCSD heard a presentation from a group of outside companies to have the district leave the utility and possibly entering into a long-term power purchase agreement. Trustees took no action at the time to move away from the utility.

NV Energy paying nearly $1 million a year to keep Henderson, LVCVA as customers

A picture of Henderson City Hall Sign

NV Energy will make annual cash payments totaling nearly $1 million to the city of Henderson and the Las Vegas Convention and Visitors Authority over the next five years as part of unique and unprecedented deals to retain the government entities as utility customers.

Contracts approved by the Henderson City Council and LVCVA in recent weeks will allow both entities to annually bring in hundreds of thousands of dollars from NV Energy, in return for a promise to not file any application to leave the utility’s service and purchase electricity from another power provider.

The two contracts offer a unique view into just how far NV Energy — which is owned by the Warren Buffet-run Berkshire Hathaway conglomerate — is willing to go to entice large Nevada power users to remain utility customers, as many of the largest businesses in the state have openly weighed or taken proactive steps to buy power from other electric providers.

Since May, NV Energy has announced similar long-term arrangements or deals with several other customers, including Station Casinos, the Cosmopolitan, Las Vegas Sands, the Atlantis, Golden Gaming and South Point. An NV Energy spokeswoman declined to say whether arrangements with those businesses — which are not required to be publicly reported to the Public Utilities Commission — included similar financial payments as part of a deal to stick with the utility.

“NV Energy has always treated customer information as private and will continue to do so in the case of customer agreements,” utility spokeswoman Jennifer Schuricht said in an email. “These customer agreements with governmental entities are subject to public record laws, and we and the customer abide by the laws applicable to the customer.”

If the contracts with Henderson ($250,000 a year) and the LVCVA ($650,000 a year) scale up to the other businesses with similar arrangements but larger electric loads, the amount of payments made annually by NV Energy to its largest customers could easily run into the millions or tens of millions of dollars. Schuricht, who noted the utility is seeking a $120 million rate cut for Southern Nevada customers in its upcoming general rate case, said the cost of complying with the contracts are not currently recovered through electric rates and that the PUC would need to approve any possible future recovery for cash payments made to those customers.

“NV Energy believes that we present the best energy value for our customers, and that retaining our commercial and industrial customers benefits all other customers,” she wrote in an email. “Any costs associated with the customer agreements are not included in electric rates. If NV Energy ever decided to seek recovery in the future, it will be done through an open and transparent public process with the Public Utilities Commission of Nevada, who will decide what is in the public’s best interest.”

Since 2014, NV Energy has dealt with a steady trickle of its largest customers filing applications to leave its electric service under the 704B law, which allows large customers to file applications to leave utility service and purchase electricity from other entities, provided they pay a usually substantial impact fee determined by the PUC to ensure other utility customers aren’t left with higher costs.

The exits began in earnest in 2014 with the departures of MGM Resorts, Switch and Caesars Entertainment, but more than a dozen large businesses filed to leave in late 2018 and early 2019, leading to increasingly vocal concerns from NV Energy as to the effect the departures would have on the utility’s financial health and future load growth, likely creating upward pressure on rates for its other customers.

The direct payments are one of several tools the utility has unleashed during a campaign to keep its largest customers from jumping ship, including development of a special, renewable power-backed Optional Pricing Program Rate, proposed across-the-board rate cuts and support for a law passed by the 2019 Legislature adding new barriers for large power users wishing to depart utility electric service.

But unlike the other tools, the deals made with the city of Henderson, LVCVA, and potentially other businesses aren’t required to be publicly reported or approved by the PUC, and instead have only been revealed through public records requests or as supporting material for public meetings.

The LVCVA — the government-backed tourism agency that operates Cashman Field and the Las Vegas Convention Center — had filed a 704B exit application in February but withdrew it in May, at the same time publicly announcing a five-year energy services agreement with NV Energy.

As part of the contract approved on May 22, the agency will receive $650,000 annually for the next three years and $525,000 for two subsequent years in the form of either cash payments or lowered energy bills under the proposed Optional Pricing Program Rate (OPPR) offered to large utility customers.

The contract contains language requiring the LVCVA to consider taking electric service under the OPPR program starting in 2022, with any shortfall in electric savings under $525,000 a year made up in the form of cash payments from the utility to the agency. NV Energy withdrew its application for the OPPR program earlier in June amid concerns from PUC staff and the Bureau of Consumer Protection, but says it plans to refile the application soon.

Language in the contract requires that the “incentives” be paid out of the utility’s retained earnings and requires the provisions and payments to be voided if the agency decides to opt out of the OPPR program in 2022. It also requires the incentive payment amount to be lowered if the PUC approves any revenue reduction greater than $120 million during NV Energy’s next general rate case, with any cost savings from lower electric prices taken out of the amount the agency would get from NV Energy as an incentive payment.

The contract also includes language requiring the utility to help the agency satisfy “renewable energy objectives,” including the possible purchase of renewable energy credits, as well as energy efficiency rebate programs. It also contains language automatically lowering the amount of financial payments made to the LVCVA if the agency installs any on-site generation, such as solar panels.

In return for those benefits, the LVCVA’s only contractual requirement is to not file a 704B exit application with the PUC or any other application to purchase electric service from another provider.

It also includes a “confidentiality” section, noting that while the agreement must be publicly noticed and approved by the LVCVA’s board in a public meeting, the “customer otherwise will attempt to maintain confidentiality of this Agreement.” It also limits press releases or announcements about the contract without prior written consent of the other party.

The contract and dollar amount of the incentives were not included in supporting material posted for the agency’s May 22 meeting, and the contract was only obtained through a public records request submitted by The Nevada Independent on Friday.

The contract with Henderson, which was approved during a City Council meeting on Tuesday, is substantially similar — the city will receive roughly $250,000 a year for the next five years in the form of either cash payments or lowered energy bills under the proposed OPPR program.

Under the terms of the contract, the utility agrees to give $250,000 in “incentive payments” to Henderson through 2022, after which the city will either be granted the special OPPR rate or continue to pay the quarter million dollars if the rate structure is not approved. If savings from the new rate structure are less than $250,000 a year, the contract requires NV Energy to make up the difference in direct cash payments.

As with the LVCVA, those provisions are void if Henderson opts not to take up the OPPR rate, with the contract also requiring a reduction in the incentive rate in 2022 and 2023 equal to whatever savings the city would see under a planned $120 million revenue reduction the utility plans to file in its next general rate case.

The contract also includes language requiring the utility to “continue pursuing solutions” toward electric infrastructure demands toward development in west Henderson, including building out substations and installing other facilities. Typically, approval of specific transmission or other infrastructure projects by the utility must be approved by the Public Utilities Commission as part of the public Integrated Resource Plan (the contract language indicates both specific projects as well as a reference to working before the PUC for approval of the construction projects).

And like the LVCVA contract, it also includes general language requiring the utility to help the city satisfy “renewable energy objectives,” including the possible purchase of renewable energy credits.

“NV Energy’s willingness to help the City of Henderson find savings through energy efficiency, to work with us on meeting our renewable energy objectives, and their pledge to continue to advance economic development in West Henderson by expanding existing or building new electric infrastructure, demonstrated an unwavering commitment to do what is best for our citizens,” Henderson Mayor Debra March said in a statement announcing the contract on Thursday. “This is a mutually beneficial public-private partnership that extends benefits to our community as a whole.”

It’s unclear whether other businesses or entities that have announced similar agreements with NV Energy have also received such direct financial benefits.

The Nevada System of Higher Education Board of Regents voted earlier in June to open negotiations with the utility and forego filing a 704B application, with the utility promising that its special OPPR rate could save the system up to $381,000 in power bills every year. Michael Flores, chief of staff to NSHE Chancellor Thom Reilly, said negotiations on the scope of any new arrangement or contract with the utility has not begun, but said that “everything is on the table at this point.”

Henderson NVE Contract by Riley Snyder on Scribd

Lvcva Nve Agreement by Riley Snyder on Scribd

NV Energy withdraws, plans to re-file program offering special lower rates for large customers

NV Energy has withdrawn and plans to rework its application to create a new, renewably powered special rate designed to keep large power customers in the company’s fold.

In a filing last week, NV Energy attorneys withdrew the utility’s pending application for its Optional Pricing Program Rate (OPPR), stopping regulatory approval on an alternative pricing mechanism proposed by the utility last year as a way to keep multiple large businesses from filing or continuing with applications to leave the utility.

In a statement, NV Energy spokeswoman Andrea Smith said the company was still working on the pricing program and planned to eventually refile a similar application with the Public Utilities Commission.

“We understand we still have some work to do with various stakeholders to reach a balanced outcome on this program and have withdrawn our original filing in order to take the time to work toward that balanced outcome,” she said in an email. “We fully intend to resubmit the program in the very near future so we can offer this important product to our customers.”

Although the company had already opened up an application window for the program (fulfilled in 20 seconds of opening in Southern Nevada), the program was never approved by the Public Utilities Commission, and commission staff and the Bureau of Consumer Protection had raised concerns that the program would end up costing normal residential ratepayers and benefited an arbitrarily-picked group of customers.

NV Energy filed a motion to delay processing of the OPPR application in late May, before withdrawing the application entirely on June 14.

As proposed, the OPPR rate would have been available only to utility customers eligible to leave its service through the 704B process, used by a handful of major casinos and other large-scale energy users to depart the utility and buy power from other third party providers in return for a usually substantial “exit fee” to ensure new costs aren’t fostered onto other utility customers.

The rate would have been composed of certain non-bypassable charges (such as gas transmission) but would have replaced the standard electric rate with a flat charge based on the utility’s six new major solar power plants adding 1,001 megawatts of solar electricity to the company’s fuel mix.

Although the projected price savings from the program were largely kept private, the Nevada System of Higher Education (which is eligible for the program) estimated that it could save roughly $381,000 a year from enrolling in the program statewide.

But the pricing program has been criticized by commission staff and the Bureau of Consumer Protection, which called it “inconsistent with the very premise of planning and operating the utility as a system for all ratepayers.” The agency estimated that the initial version of the program would have seen roughly 48 percent of the benefits from the new renewable energy contracts — or roughly $65 million — go to OPPR customers, who only represent roughly 5 percent of total electric sales from the utility.

Since initially proposing the OPPR program last year, NV Energy has announced arrangements with some of its largest customers who had flirted with leaving utility service but ultimately decided to stay, including Station Casinos, the Cosmopolitan, Las Vegas Sands, the Las Vegas Convention and Visitors Authority, Grand Sierra Resort, the Atlantis, Golden Gaming and South Point.

NV Energy also supported a bill in the 2019 Legislature that added multiple barriers and new requirements for businesses seeking to leave NV Energy, but allowed the roughly dozen or so businesses that have pending applications before the commission to continue under the old system. That measure was approved nearly unanimously and signed into law by Gov. Steve Sisolak.

Station Casinos to drop exit application, stick with NV Energy for electric service

Yet another major Nevada business has backed away from efforts to leave NV Energy’s electric service and has announced it will stick with the state’s incumbent electric utility.

In a joint statement sent Tuesday, NV Energy and Station Casinos announced they had reached an agreement on fully bundled electric service and that the casino company — which owns multiple properties in the Las Vegas area including Red Rock Casino Resort and Spa, Palace Station and Green Valley Ranch — would withdraw its application before the state’s Public Utilities Commission to depart from utility electric service and purchase power from another provider.

The withdrawal comes amid numerous other large power users announcing decisions to stick with the utility after flirting with a departure from NV Energy; in recent weeks, the Cosmopolitan, Las Vegas Sands, the Las Vegas Convention and Visitors Authority, Grand Sierra Resort, the Atlantis, Golden Gaming and South Point have all announced plans to stay with NV Energy.

“The existing long-term relationship between our companies, together with our shared commitment to the Southern Nevada community, were important factors in making our decision,” Station Casinos executive Stephen Cootey said in a statement. “That, combined with NV Energy’s commitment to meet our evolving energy requirements in a price-effective way, created a partnership that is truly valuable and one that we want to continue in the future.”

The casino company initially filed its application to leave the utility in June 2018, and received a draft order in September with a roughly $15.2 million immediate impact fee if it wished to depart the utility. Such fees are required under Nevada’s 704B law, which allows large power customers to file applications to leave the utility in return for paying an “impact fee” designed to ensure higher costs are not fostered on other utility customers.

The company filed and was granted a request to delay compliance reporting with taking electric service from another provider in May of this year, citing a desire to consider NV Energy’s Optional Pricing Program Rate as an alternative option. The program, which still needs to be approved by the PUC, would offer a stable subsidized rate to a subset of utility customers eligible to depart the utility.

“We value their business and appreciate the opportunity they gave us to reach an agreement that retains Stations Casinos as an important fully-bundled electric service customer,” NV Energy CEO Doug Cannon said in a statement.

Raiders reconsidering leaving NV Energy for future Las Vegas stadium's electric service

Photo rendering of Las Vegas Stadium

Months after receiving approval from state regulators to pre-emptively leave NV Energy’s electric service, the Raiders and their future stadium are re-considering leaving the utility.

According to filings made with the Public Utilities Commission over the last month, attorneys for the Raiders have requested and received permission to suspend compliance with the terms of the under-construction stadium’s departure from its planned exit from NV Energy in order to assess an alternative offer by NV Energy.

In a letter sent to the commission last week, the Raiders stated that after the Commission approved their requested “exit” from NV Energy and be granted the right to purchase electric service from another provider in January, the organization was approached by NV Energy to enroll in a special tariff program “similar to how service is provided under” the current process for companies that have left the utility, but with NV Energy still providing the electricity.

The request made by the Raiders was to suspend the current compliance requirements — which it argues are unnecessary as the stadium is still under construction — to give the organization time to consider the new proposal, details of which are likely to become public sometime in June.

“Instead, if the Commission considers the new tariff to be in the public interest, there may be a benefit to NV Energy and its remaining customers from the Raiders staying in the NV Energy system under such tariff,” attorney Curt Ledford wrote in a motion to the Commission.

In a draft order published Thursday, the commission agreed to the arguments made by the Raiders and will allow for the extension of compliance reporting out to September 2019. The commission granted the Raiders the ability to contract with an outside electric utility without having to pay any exit fee in late January, deciding against an NV Energy request that the team pay $7.3 million to avoid other costs rising for other customers.

"We continue to work closely with the Raiders on a solution that retains them as a fully bundled customer of NV Energy and appreciate their openness to evaluating the proposed new tariff," NV Energy spokeswoman Andrea Smith said in an email.

Although the pricing program offered to the Raiders has yet to be introduced to the commission, NV Energy has already opened enrollment to companies eligible to leave the utility under a new Optional Pricing Program Rate. It’s also reached agreements to continue service in past weeks with large customers including the Las Vegas Sands, the Atlantis Casino Resort Spa, the Las Vegas Convention and Visitors Authority, Golden Entertainment and the South Point.

South Point agrees to stick with NV Energy, withdraw exit application

South Point Hotel Casino and Spa announced today that it will withdraw its application to leave NV Energy and instead will continue receiving electric service from the utility.

The two companies have agreed to a fully bundled energy service, leading South Point to withdraw its application with the Public Utilities Commission of Nevada that would have allowed the casino company to buy electric power from another provider.

“I’ve been in Las Vegas a long time and it is important to me that we continue to work with companies who are similarly invested in our community,” South Point Owner Michael Gaughan said in a statement.

This announcement comes a week after the Las Vegas Convention and Visitors Authority announced that it would stay with NV Energy under a five year deal. Other companies that have reached similar deals with the utility in recent weeks include the Venetian, Atlantis Casino Resort, Grand Sierra Resort and Golden Entertainment.

“All of us at NV Energy take these 704B applications personally. Simply put, we do not want to lose any of our customers and we remain committed to finding solutions that satisfy our largest customers’ evolving business needs,” said Doug Cannon, NV Energy’s president and chief executive officer. “NV Energy is delighted to have reached an agreement with South Point and looks forward to continuing our partnership for many years to come.”

This deal is one of many in the wake of multiple companies threatening to or have already moved away from the energy giant, including Boyd Gaming, the Raiders Stadium, Station Casinos and the SLS.