Decision pending on Southwest Gas rate increase plan

Friday, Aug. 1, 1997 | 9:17 a.m.

CARSON CITY -- A record-long hearing on the application of Southwest Gas to raise natural gas prices by 10 percent to customers in Clark County has ended and the state Public Service Commission has until Sept. 5 to make a decision.

And there's no relief in sight for homeowners in Southern Nevada.

Southwest Gas has another request pending to boost rates to the 300,000 consumers in the Las Vegas area by 18.6 percent. In addition, Nevada Power wants to raise electric rates by 4 percent to residential users in Clark County.

The hearing on Southwest Gas' application for an additional $12.4 million in rates in Clark County ended Wednesday night before Commissioner Judy Sheldrew, making it the longest hearing on a "purchased gas adjustment" case in the history of the PSC. It went six days.

Usually, purchased gas adjustment hearings are completed in one or two days since they are efforts by the utility to recover higher than expected costs for fuel purchased. The company does not make a profit but only is able to offset the higher fuel costs.

If granted, the average monthly rate for a residential user in Clark County who consumes 42 therms would go from $25.66 to $28.26.

But the staff of the PSC in this case charged the Las Vegas-based utility failed to use prudent judgment in buying the gas to supply Southern Nevada in the 1996-97 winter.

Sheldrew said this was the first time the prudency issue has been raised and it could set precedent for other rate increase applications in the future.

Instead of signing long-term contracts with their suppliers, Southwest Gas bought its fuel on the spot market or at short term index prices. But this last winter, there was spike in the fuel costs.

Instead of paying an expected $1 to $1.50 for 1,000-cubic-feet of gas, the price shot up to $4 and more. The staff contends this worked to the disadvantage of the consumer in Las Vegas. The utility, says the staff, should have entered into some long-term agreements with fixed rates to avoid "price shock."

But the utility says it used prudent practices and this is a new policy which has never been put forth by the PSC before. Company officials testified the strategy of short-term buying on the spot market has benefitted consumers in the past.

The 1996-97 winter was not especially cold, compared to some prior winters. But the price of natural gas was volatile. There apparently was a lot of speculation going among marketeers of the natural gas, according to PSC officials.

The staff suggests $2.7 million be chopped from the rate request. In the same case, the utility wants to boost rates by 15 percent to the 83,000 Northern Nevada customers to bring in an additional $6 million.

On the "piggyback" request for an additional 18.6 percent, the utility said that's due to higher costs incurred in buying natural gas and shipping it to Southern Nevada.

Southwest Gas said there was an increased demand for natural gas and the available supplies were quickly bought up. This caused a shortage and the price jumped dramatically.

The deadline for protesting the 18.6 percent price increase was July 2 and no one had filed a complaint. But Rick Hackman, a spokesman for the PSC, said it will continue to accept protests while the case is process.

The same holds true for Nevada Power, which says it needs an additional $54 million to offset higher prices it paid for natural gas and power. The deadline for protesting this application is Aug. 20 but the commission will accept them while the case is underway.

No hearings have been set on the last two cases.