SOuthwest Gas seeks second rate increase

Wednesday, June 4, 1997 | 10:33 a.m.

Southwest Gas Corp. has applied to the Public Service Commission of Nevada for a second rate increase, saying it needs to recover the cost of purchased gas.

But state Consumer Advocate Fred Schmidt says a $10 per month total increase on the average customer's bill from the two requests won't pass muster without a challenge.

Schmidt is preparing testimony for the first 11 percent increase requested in February. That Public Service Commission hearing begins June 23.

"This is ridiculous," Schmidt said Tuesday. "God help us if we get into a deregulated market where there won't be such PSC oversight."

Cold-weather storms this winter boosted demand for natural gas to generate electricity and heat, Southwest Gas Senior Vice President Ed Zub said.

As chief of regulation and product pricing for Southwest Gas, Zub said the utility paid $5.05 in January to buy 1,000 cubic feet of natural gas, compared to $1.50 for the same amount three months later.

The issue is how prudent Southwest Gas acted when it bought natural gas on the market month to month for delivery to about 300,000 customers in Southern Nevada, Schmidt contends.

Under Public Service Commission rules any increases or decreases in a company's purchased energy costs are passed on to customers dollar-for-dollar. The company does not profit from this average $5.11-per-month requested rate increase.

In 1995 and 1996 natural gas prices were at their lowest levels in years, Zub said. This winter's price spike took only months to snowball into a $15.6 million deficit, he said.

"While the February filing and yesterday's filing both request substantial increases, they are not unlike the increases experienced by other natural gas utilities across the nation," Zub said.

The second request on purchased natural gas would have been larger if Southwest Gas had not included an anticipated price cut from pipeline supplier El Paso Natural Gas Co.

Along with power companies, natural gas utilities are experiencing deregulation, creating price fluctuations in the market. The competitive market can surprise companies as well as customers, Zub said.