Managing Energy Consumption In Las Vegas Hotels And Casinos: Profitable Practices – Caesars Entertainment CEO Tom Rigg knew that during a recent earnings conference call he might field a question or two about how the expensive spending spree in Nevada was cutting into the company’s cash flow.
Many analysts said he brought up higher Energy prices in secret during background meetings with investors while they were in Las Vegas for the Global Gaming Expo in October. Caesars’ cash flow from Las Vegas casinos in the third quarter was $480 million, down 4 percent from a year ago.
Managing Energy Consumption In Las Vegas Hotels And Casinos: Profitable Practices
“If you normalize the utilities, which were initially just the prices in August, that’s actually the entire gap between the third quarter of 2022 and the third quarter of 2021,” Rigg said.
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Caesars wasn’t the only operator to see energy prices skyrocket in July, August and September — traditionally the hottest months of the year in Las Vegas.
Andrew Dees, director of government affairs for Mervolo Gaming Group, said energy costs are vastly different for the privately-owned company’s two casinos. Desert, which buys its electricity outside of NV Energy as part of the state’s 704B Act, stopped spending a year ago. 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 prices that everybody is paying right now through NV Energy (in Sahara), but we’re definitely feeling it at GSR,” Dess said in an interview. said in
Act 704B was created in 2001 to allow businesses with large power loads to leave NV Energy’s electric service and buy power from another provider, as long as they pay an “impact fee” set by state utility regulators. to pay More than a decade after the law was passed, a number of casino operators took part in the 704B process to reduce electricity costs. Others, such as the privately owned Resorts World Las Vegas, struck a market-based power supply deal with NV Energy with the goal of eventually powering the property with renewable resources.
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During conference calls, several Las Vegas gaming companies were reluctant to elaborate beyond acknowledging higher energy costs during the third quarter.
However, Trust Securities gaming analyst Barry Jonas was able to get more details from the company’s leadership during post-earnings discussions with the CEO. He has published these findings in several research notes.
Boyd Gaming said its maintenance and operating expenses increased 14 percent in the quarter. Management said the cost was “related to higher rates than usage and was concentrated in Las Vegas, where the third quarter is a power cycle.”
Golden Entertainment’s cash flow fell 23 percent in the third quarter due to labor and higher utility costs. The company owns Downtown Strat Resorts, one of the Las Vegas-based company’s eight casinos in Las Vegas, Laughlin and Pahrump. Golden also owns 65 hotels throughout the Las Vegas Valley.
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“If you look at our quarter-over-quarter decline, about half of that is related to fixed costs of labor and utilities and other types of maintenance,” Protel said on its third-quarter conference call. “You would expect to see some relief in energy price costs, as you get into the winter times versus where they are in the summer when you’re trying to cool the big buildings in Las Vegas.”
In an emailed statement, NV Energy spokeswoman Jennifer Schorich said natural gas prices have risen more than 65 percent nationwide since 2021. Natural gas is the primary fuel for generating electricity in Nevada. The company plans to transition to additional renewable energy sources, she said.
“NV Energy has developed a mechanism that increases the cost of natural gas over time to minimize the impact on customers,” said Schorich. “In this case, natural gas-related cost increases for customers are limited to between 25 and 30 percent.”
Natural gas costs are projected to decline in 2023, “which will be reflected in consumer prices,” she said.
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Beyond the dice and beyond commenting on the quarterly earnings call, most casino company executives declined to expand further on energy spending.
For two major casino companies – MGM Resorts International and Wynn Resorts – high energy prices are not an issue. Both companies left NV Energy in the 2010s under the 704B Act.
When asked at the company’s conference call whether MGM has the same issue with high energy costs as its competitors, CFO Jonathan Halyard said the casino operator has cut energy prices from other sources by 2023.
“We haven’t experienced any meaningful increases there,” Halyard said. “In fact, there has been a slight decrease in the use of our energy efficiency programs.”
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In 2015, MGM Resorts built one of the country’s largest rooftop solar arrays when it installed 26,000 panels at the Mandalay Bay Convention Center, which can generate 8.2 megawatts of energy.
Last year, MGM Resorts added to its solar initiative, partnering with renewable energy developer Inenergy to build the MGM Resorts Mega Solar Array, which has 323,000 solar panels, on a 640-acre site about 30 miles north of Las Vegas. .
, an MGM spokesman said the solar array generates 90 percent of the company’s daytime power needs in Las Vegas, covering 13 Strip properties that include more than 36,000 hotel rooms.
In 2018, Wynn secured a 160-acre site near Fallon for a 20-megawatt solar array that would meet 75 percent of the peak power needs for Wynn and Encore Las Vegas with renewable energy. The company added solar arrays to the roof of the Wayne Convention Center in Las Vegas, adding another 2 megawatts of solar power.
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Eric Hansen, Wayne’s chief sustainability officer, said the solar company’s use exceeds the requirements outlined in Nevada’s Renewable Portfolio Standard, which applies to both utilities such as NV Energy and private entities through Rule 704B. Leaving the service.
“One of the key contributing factors to why the 704B was so successful for major clients like MGM and Wynn and others was that we were able to integrate it into our renewables,” Hanson said in an interview. “We have the utility scale with offsite solar. Basically, it’s a barrier to the broader gas market.
President Joe Biden visits the Ticrin Solar Project near Boulder City on November 20, 2019, as he campaigns in Nevada. (Daniel Clark/The Nevada Independent)
Even companies in the 704B program face higher costs. Caesars, for example, is in the 704B program and does not buy electricity from NV Energy.
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Dess said Sahara buys power from Tenasca, a private energy company in the United States. He said Tenasca prices are poised to rise next year, possibly 30 percent above Gran Sierra’s current locked-in prices.
Game leaders said NV Energy’s rates include several line items passed by the state legislature that affect their bills and their employees’ bills. An example of a dice that was added to a protection plan for natural disaster coverage.
“The best way for the Legislature to handle things like this is to go before the Public Service Commission,” Deas said. “They are experts. 63 Legislators are not energy experts like the commissioners on the PUC.
Schuricht said the rates are the result of state policy mandates created 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 obligated to bill customers for the costs of these state-enforced programs,” she said. “Every rate charged by NV Energy is approved by the Public Service Commission.” The Las Vegas Strip claims as a newly released lawsuit that MGM, Caesars, Treasure Island and Wynn colluded to keep prices high on Wednesday, January 25, 2023. Vegas. (L.E. Baskow/Las Vegas Review-Journal) @Left_Eye_Images
Pedestrians walk through the lobby of the Link Hotel in Las Vegas on Friday, Jan. 20, 2023.
New Year’s Eve revelers watch the Bellagio fountain show on Saturday, December 31, 2022. (Amaya Edwards/Las Vegas Review-Journal) @amayaedw5
A class-action lawsuit was filed Wednesday that claims hotel operators in the strip artificially inflated hotel room rates above competitive levels.
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Lawyers with Seattle-based law firm Higgins Berman say the revenue management platform employed by many Strip hotels uses real-time pricing and information data from competitors on the platform to design price offers that “in Illegally increase the profit for the users of this hotel operator.”
Operators price rooms independently in a competitive market. However, data and algorithms shared through the Rainmaker platform deviated from normal competitive pricing and led to inflated room rates, according to the lawsuit filed in US District Court.
Prosecutors say the platform’s algorithm was designed to increase profits for hotel operators without increasing occupancy and reducing supply.
“Our antitrust lawyers uncovered what appeared to be an illegal agreement in which Rainmaker collected and shared information among Vegas hotel competitors to illegally raise hotel room rates,” said Steve Berman, at Higgins Berman. managing partner at, said in a news release. “What happens in Vegas doesn’t stay in Vegas anymore. We intend to expose the under-the-table deals made by these Vegas hotels, and we intend to
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