Vegas Lights Undimmed

The newspaper stories about California’s electricity woes can be read easily at night on the Strip, bathed in the brilliance of miles of neon and a gazillion lightbulbs.

And Nevada utility officials expect it to stay that way through the summer--when air conditioners work day and night to make the desert heat tolerable--avoiding the power problems that have brought California to its knees.

But that confidence is coming at a price: increased electricity rates, to the consternation of the Strip’s monster hotel-casinos. Between September and April, rates will have increased by about 46%, driven by forces that are pushing up energy costs nationwide.

The typical Strip hotel-casino uses about the same amount of electricity as 10,000 homes, according to utility estimates. Like anxious homeowners, hotel-casino operators are scouring their properties, looking for ways to conserve electricity and--more important perhaps to Wall Street--save money.

At the MGM Grand, maintenance crews are working their way through the 5,005 rooms, changing lightbulbs to dimmer ones, reducing each room’s consumption to 500 watts from 750.

At the MGM and other hotels, incandescent bulbs are being changed for more efficient fluorescent lights in many cases. Thermostats are being installed to reduce air conditioning in unused convention rooms, and motion sensors are being installed to keep the lights off in empty offices.

Even slot machines are part of the trend: The newest models consume about 160 watts of electricity, 25% less than older models, said a spokesman for the world’s largest slots maker, International Game Technology.

But one thing won’t change: blazing signs and extensive use of exterior lighting to illuminate the resorts.

“Las Vegas has an image and a certain cachet it has to live up to, and that includes the exterior lighting and the neon and the marquees,” said John Marz, a vice president of Mandalay Resort Group, which owns four big Strip casino-hotels and operates a fifth.

“It’s what people come here to see,” he said. “And reducing those would be the last thing we do.”

Even as casinos look for places to cut corners, they’re also fighting a bigger battle in the state capital of Carson City to reverse the state Public Utilities Commission’s approval of a single, whopping 25% rate hike for casinos, which took effect March 1. At the same time, residential rates increased by nearly 15%.

The rate increases were sought by Nevada Power Co., which serves Las Vegas and surrounding areas, and its sister utility in northern Nevada, Sierra Pacific Power Co., to pay for electricity they already have contracted to buy this summer. That one-time increase is in addition to rate hikes approved earlier that are raising rates more than 1% a month, starting last September and continuing until September 2003.

By the end of that three-year period, residential electricity rates will have increased about 75%, and the rates charged casinos will have increased by about 65%, said utility spokesman Karl Walquist.

The issue is simple, Nevada Power says: Customers must pay more for electricity so the utility can remain solvent and buy power on the open market. Otherwise, Walquist said, the state’s two utilities will face the same dire consequences that are playing out in California.

Through its own four power plants, Nevada Power generates about 2,000 megawatts. It buys another 300 megawatts from small, private generators in Nevada, and another 230 from the federal hydroelectric plant at Hoover Dam.

Though the dam was built to create the Lake Mead reservoir, it was also equipped to generate 2,000 megawatts of hydroelectric power, for sale to agencies in California, Arizona and Nevada. However, it operates at only about 30% capacity, based on the amount of water released through the turbines for purchase by various California and Arizona agencies downstream.

Come summer, southern Nevada will need about 4,600 megawatts, nearly double its winter demand. To meet the 2,100-megawatt shortfall, Nevada Power has contracted for electricity generated in Utah, Arizona and Colorado.

The most jarring rate increase, yielding $311 million statewide in higher revenue to pay for those advance purchases, was approved by the state’s PUC in February without public hearings.

That decision triggered an angry response from the state attorney general’s consumer advocate, as well as from the gambling and mining industries.

They complained that the utilities had failed to publicly prove the need for more money, and that the rate increase violated agreements between the utilities and the PUC--with the casino industry’s blessing--calling for the small, measured rate increases every month.

A PUC hearing officer on March 23 heard testimony from the utilities and a consumer group on the need for rate increases, and a PUC decision is pending.

Nevada legislators and Gov. Kenny Guinn are immersed in the electricity issue. The state began moving toward deregulation four years ago, but reversed itself after watching California’s problems unfold. Deregulation is no longer on the state’s radar screen.

Legislators also are attempting to block plans by the state’s utilities to sell their power plants so they can focus on transmission and distribution. The lawmakers fear that if the utilities lose control of power generators, Nevada will be even more at the mercy of private power companies.

In the meantime, the Strip’s lights continue to shine brightly, and utility officials say skeptics should not look too critically at them as power hogs.

“They’re very efficient, especially in terms of cooling as many people as they do,” said Mike Smart, vice president of resource management for both Nevada Power and Sierra Pacific.