The Impact Of Energy Efficiency On Las Vegas’s Technology Sector – Caesars Entertainment CEO Tom Reeg knew that during a recent earnings conference call he might field a question or two about how the more expensive utility expenses in Nevada were cutting into the company’s cash flow.
Several analysts said it was driven by high energy prices in the Strip during background meetings with investors while in Las Vegas for the Global Gaming Expo in October. Caesars’ cash flow from its Las Vegas casinos in the third quarter was $480 million, down 4 percent from a year ago.
- 1 The Impact Of Energy Efficiency On Las Vegas’s Technology Sector
- 2 Net Zero Nevada: From Pledge To Action
The Impact Of Energy Efficiency On Las Vegas’s Technology Sector
“If you normalize for utilities, which was mostly rates in August alone, that’s pretty much the entire gap between the third quarter of 2022 and the third quarter of 2021,” Reeg said.
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Caesars wasn’t the only operator to see energy rates skyrocket in July, August and September, traditionally the hottest months of the year in Las Vegas.
Andrew Diss, director of government affairs for the Meruelo Gaming Group, said energy costs were very different for the privately-owned company’s two casinos. Sahara, which buys its power off NV Energy as part of the state’s 704B law, locked in its costs a year ago. The Grand Sierra Resort in Reno, an NV Energy customer, saw a jump in rates during the quarter.
“I’m glad we’re not paying the rates that everyone else is paying through NV Energy right now (in the Sahara), but we definitely feel it at GSR,” Diss said in an interview.
Act 704B was created in 2001 to allow utilities with a large electric load to leave NV Energy’s electric service and purchase power from another supplier, as long as they pay an “impact fee” determined by state utility regulators. More than a decade after the law was passed, a handful of casino operators have engaged in the 704B process as a way to reduce electricity costs. Others, such as the privately owned Resorts World Las Vegas, have entered into a market-based electricity supply agreement with NV Energy with the goal of powering the property with renewable resources.
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On conference calls, several Las Vegas gaming companies were reluctant to elaborate beyond simply acknowledging higher energy costs during the third quarter.
However, Truist Securities gaming analyst Barry Jonas was able to get more details from the company’s leadership during post-earnings discussions with executives. He published the observations in several research notes.
Boyd Gaming said its maintenance and utilities expenses rose 14 percent in the quarter. Management said the cost “was more tied to higher rates than usage and was focused in Las Vegas, where the third quarter is the peak electricity period.”
Golden Entertainment saw its cash flow fall 23 percent in the third quarter because of labor and higher utility expenses. The company owns STRAT Resort, one of the company’s eight Las Vegas-based casinos in Las Vegas, Laughlin and Pahrump. Golden also owns 65 operated taverns throughout the Las Vegas Valley.
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“If you look at our quarterly declines, half of them had to do with labor costs plus utilities and other types of fixed maintenance costs,” Protell said on the third-quarter conference call. “You would expect to see some of the utilities come down in the price of energy as you go into the winter compared to where they are in the peak summer season when you’re trying to cool the big buildings in Las Vegas.”
In an emailed statement, NV Energy spokeswoman Jennifer Schuricht said natural gas prices have increased nationwide by more than 65 percent since 2021. Natural gas is the primary fuel used to generate electricity in Nevada. She said the company plans to transition to additional renewable energy resources.
“NV Energy has put in place a mechanism that spreads any increase in the cost of natural gas over time to reduce the impact on customers,” Schuricht said. “In this case, the cost increase associated with natural gas for customers was limited to 25 to 30 percent.”
She said natural gas costs are expected to decline in 2023, “which would be reflected in customer rates.”
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Aside from the diss and a bit of commentary on the quarterly earnings call, most casino company executives declined to expand energy costs further.
For two major casino companies – MGM Resorts International and Wynn Resorts – high energy prices have not been a problem. Both companies left NV Energy in the 2010s under 704B.
When asked on the company’s conference call if MGM was having the same problem as its competitors with high energy costs, Chief Financial Officer Jonathan Halkyard said the casino operator had locked in its energy rates from other sources until 2023.
“We haven’t experienced any significant increase there,” Halkyard said. “In fact, our energy efficiency programs have had a slight decline in usage.”
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In 2015, MGM Resorts created one of the largest rooftop solar arrays in the country when it installed 26,000 panels over the Mandalay Bay Convention Center, which can generate 8.2 megawatts of power.
Last year, MGM Resorts added to its solar initiative, partnering with renewable energy developer Invenergy to create the MGM Resorts Mega Solar Array on a 640-acre site about 30 miles north of Las Vegas that houses 323,000 solar panels.
, an MGM spokesman said the solar array produces up to 90 percent of the company’s daytime power needs in Las Vegas, covering 13 Strip properties spanning more than 36,000 hotel rooms.
In 2018, Wynn secured a 160-acre site near Fallon for a 20-megawatt solar array that offsets 75 percent of peak power needs with renewable energy for Wynn and Encore Las Vegas. The company added a solar array on the roof of the Wynn Convention Center in Las Vegas that adds another 2 megawatts of solar power.
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Wynn Chief Sustainability Officer Erik Hansen said the company’s use of solar energy exceeds the requirements outlined in Nevada’s Renewable Portfolio Standard, which applies to both utilities like NV Energy and private entities that have left the public utility service through Act 704B.
“One of the main factors that contributed to the success of the 704B for big customers like MGM and Wynn and others is that we were able to integrate into our own renewables,” Hansen said in an interview. “We have utility scale with off-site solar. Basically, it’s a hedge against the broad gas market.”
President Joe Biden tours the Techren Solar Project near Boulder City on Nov. 20, 2019, while campaigning in Nevada. (Daniel Clark/The Nevada Independent)
Even businesses in the 704B program are experiencing increased costs. Caesars, for example, is in the 704B program and does not purchase power from NV Energy.
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Diss said Sahara buys power from Tenaska, a US-based private energy company. He said Tenaska’s rates are poised to increase next year, possibly as much as 30 percent above Grand Sierra’s current locked-in rates.
Game leaders said NV Energy’s rates include numerous items approved by the state legislature that have an effect on their bills and their employees’ bills. One example Diss cited was a supplement to a protection plan covering natural disasters.
“The best way for the Legislature to handle things like this is to go to the Public Service Commission,” Diss said. “They are the experts. The 63 legislators are not energy experts like the PUC commissioners.”
Schuricht said the fees are the result of state policy mandates established by the Legislature, including energy efficiency requirements, renewable and clean energy programs and programs that support low-income customers.
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“NV Energy is required to bill the costs of these state-imposed programs to customers,” he said. “Any rate charged by NV Energy is approved by the Public Utilities Commission.” Las Vegas: Bright Lights, Sustainable City Las Vegas works toward 30 more years of sustainability management with guidance from alumnus Marco Velotta
Tall solar panels stand guard in front of Las Vegas City Hall against a sinister enemy. The effects of a warming climate and severe drought are most evident in a city built in the middle of the Mohave Desert, and the solar panels represent a quick and focused shift Las Vegas made 15 years ago to prepare the city for the future. The efforts paid off. In 2016, Las Vegas was certified as a LEED (Leadership in Energy and Environmental Design) Gold City by the United States Green Building Council for the implementation of widespread sustainable building and operational practices. The city has decreased annual water use by 40 billion gallons over the past 15 years, even as the population has grown rapidly, and in 2020 the city released its new 30-year Master Plan with a clear focus on sustainably managing the future of Las Vegas . Las Vegas city planner and Department of Geography alumnus Marco Velotta (BS Geography ’06, MS Land Use Planning ’08) has been at the forefront of the city’s sustainability movement since 2008. He grew up in Las Vegas and witnessed the exponential growth of the city. , its durability during the Great Recession and its subsequent and unforeseen transformation into a model city of sustainability. He knows full well that the road ahead is not a straight line, which is good because it’s Velotta’s job to build the map.
Alumnus Marco Velotta walks under solar panels in front of Las Vegas City Hall, where he serves
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