Delay sought in LV natural gas price increase

Wednesday, Jan. 24, 2001 | 10:55 a.m.

Southern Nevada's primary natural gas provider is seeking its third -- and largest -- rate increase in four months.

Southwest Gas Corp., which has about 400,000 customers in Clark County, is asking the Public Utilities Commission of Nevada for a 28.6 percent rate increase to cover an unprecedented rise in wholesale gas prices. Southwest has asked the PUC for the new rate to take effect March 1.

But the state's consumer advocate is going to take a close look at the request and will propose that any increase be delayed to see if wholesale rates come down.

Tim Hay said he was disappointed with Southwest's filing and his office has hired a utility consultant to review the proposed rate increase and make recommendations that may downsize the amount.

"We were not anticipating the company was going to make a filing at this time," Hay said. "Because of its magnitude, we're going to oppose that it go into effect March 1 and that the ordinary time frame be allowed to run to review the proposal."

That means a delay of about five months to determine how close the company has come to projecting future fuel rate increases.

Both Hay and the company didn't anticipate another gas rate increase request until June.

The utility is asking permission to pass its fuel costs on to consumers. Fuel-increase costs fluctuations are routinely passed on to consumers and, in past years, rates have occasionally decreased. The average customer would see rates climb by $16.11 a month if the new request is approved.

Southwest already has had two other rate increases approved in recent weeks. The PUC authorized a 9.2 percent increase that took effect Dec. 1. The commission then allowed a 23.8 percent increase that kicked in Jan. 1. Those increases generated an additional $19.8 million and $36.4 million, respectively, for the company.

The most recent increase would produce an additional $87.2 million for the year for Southwest.

For the average Southern Nevada consumer, the monthly gas bill went up $3.69 in the first increase and another $7 for the second. That means if the proposed increase is approved, the average bill would have climbed $26.80 to about $66.92 a month in four months.

But Southwest officials say they aren't profiting from the increases and are only passing through the rate hikes they're getting from their suppliers.

Natural gas commodity prices reached historic highs shortly after the PUC authorized the Jan. 1 rate increase. Since Nov. 1, gas rates have increased nearly 35 percent in Southern Nevada and 44 percent in Northern Nevada.

"The driving forces behind these higher natural gas prices are the continuing pressure from using natural gas as a fuel to generate electricity and the coldest November and December weather on record nationwide," said Roger Montgomery, vice president of pricing for Southwest. "While these increases are difficult for our customers, an increase now will help minimize subsequent filings later this year."

Hay said he senses that consumers are growing less tolerant of rising utility costs, even though the pain is being felt all over the country.

"I think the patience of the consumer is going to be sorely tested (by this increase)," Hay said. "But we've just begun looking at the request and our consultant has not completed his review."

Hay said the consultant would examine the company's fuel-purchasing contracts to determine if it could have done a better job with its long-term contracts and its portfolio mix.

He said while higher gas prices are a national phenomenon, there may be some state-specific measures that can be implemented to lessen the price impact. And, as far as consumers are concerned, Hay said, equal-payment plans that spread out the cost of gas over an entire year "may be re-evaluated and re-emphasized."

The long-range solution, Hay said, is for suppliers to increase gas production to moderate price spikes and to reduce demand -- a process that takes several months to work its way through the marketplace.

Hay said Nevadans are less tolerant of wildly fluctuating utility costs because they have enjoyed relatively low rates for many years.