Gas rate hike request cut

Tuesday, July 15, 1997 | 9:09 a.m.

CARSON CITY -- Southwest Gas Corp. has shaved its request for a rate increase for 300,000 natural gas customers in Clark County to about 10 percent.

The Las Vegas-based utility asked the Nevada Public Service Commission on June 2 for authorization to collect an additional $16.4 million, or a 16.2 percent increase, to offset higher prices it paid for natural gas supplies last winter.

But Southwest officials told the commission at the opening of its two-day hearing Monday that it now only needs $12.4 million from Clark County customers. It is still seeking an additional $6 million, or 15 percent, from its 83,000 Northern Nevada customers.

If granted, the average rate for a homeowner in Clark County who uses 42 therms would rise from $25.66 to $28.26 a month.

James Ramirez of Southwest testified that a $7 million refund from El Paso Natural Gas had not been included in the original application. And he said there are other accounting adjustments that eventually lowered the requested amount by $4 million.

Southwest won an opening round at the hearing when Public Service Commissioner Judy Sheldrew ruled that testimony from the state Consumer Advocate's Office on a proposed $3.1 million reduction could not be introduced. She said this should not be part of this case but could be considered in later cases involving Southwest Gas.

Consumer Advocate Fred Schmidt had asked to be allowed to present testimony from expert witness Jerome Mierzwa that Southwest Gas should charge $3.1 million of the added cost to its transportation customers -- or big users. These are the companies that buy natural gas from other firms and then ship it through the Southwest pipelines to their locations.

Mierzwa suggested these companies should bear some of the brunt of the higher cost of gas and it not be passed off only to other users.

Schmidt is suggesting that another $2.2 million be lopped off the $12.4 million request.

The PSC staff is also suggesting that $2.7 million be chopped from the request because of "imprudent" buying practices by Southwest. The price in the natural gas market shot up last year and Southwest purchased its energy at higher rates, staff members said.

Nevada law allows a utility to recover money it paid for higher energy costs. But the staff and Schmidt's office are challenging whether Southwest embarked on a sound policy of buying fuel.

Schmidt said Southwest "got burned last summer" when it purchased natural gas in the spot market during a time when there was a "price spike."

Mierzwa suggested at the hearing Monday the company purchase in the area of 50 percent of its power at fixed prices rather than buying short term. This would prevent ratepayer shock if the gas prices suddenly skyrocket.

But under questioning by Southwest attorneys, Mierzwa said no utility has done that in the past but many were moving toward this procedure in the East.

Schmidt said this incident shows a weakness in the law that the utility is able to recover dollar for dollar spent on the higher cost of energy. He said the company should not be penalized in this case but should be put on notice that this will be an issue in future rate cases.

Dante Pistone, public relations executive for Southwest, said this was the first rate hike request in a long time. In past years, he said, the price of natural gas had been declining.

The hearing recesses today and will continue July 24-25.