Southwest Gas rate increase may be trimmed

Kevin Rademacher

Monday, Sept. 8, 2003 | 11:16 a.m.

Southwest Gas Corp.'s request for a rate increase could fall to $24.4 million based on testimony filed on Friday by Nevada Public Utilities Commission staff members.

Southwest Gas had originally asked for a $26.2 million rate increase. That number, however, was based on estimated gas costs between April and July. PUC Staff testimony said the estimates between April and June were too high, leading to the smaller number. Actual gas costs are not yet available for July, staff said.

Executives for the utility had indicated in consumer sessions last month that the estimates were too high and that the final rate increase would likely be reduced.

The increase, called a "purchased gas adjustment," is designed to allow the utility to recover higher costs for natural gas.

If approved, a $24.4 million rate increase would amount to about a $4.65 increase on the average customer's winter gas bill.

Outside of adjustments associated the estimates, the increase drew little opposition from PUC staff members or the Bureau of Consumer Protection in testimony filed with the state on Friday.

Opposition to the utility's rate plan was limited to a request seeking permission to make monthly rate adjustments. Southwest Gas, under current rules, can only adjust its rate annually.

When Southwest Gas filed the plan with the PUC in June, it said monthly adjustments would means more frequent but smaller rate swings for consumers.

The Bureau of Consumer Protection argued in its testimony Friday that consumers, amid widespread problems in utility industry since the Western energy crisis, would not have the stomach for frequent rate changes.

"The BCP believes that the events in the energy markets involving allegations of energy price manipulation, withholding of power and withholding of pipeline capacity by energy companies have caused a lack of confidence in the energy markets and the regulatory process," said James Williamson, a financial analyst for the Bureau of Consumer Protection.

He also argued that monthly rate changes "may cause a deterioration of the required regulatory review."

While PUC staff proposed changes to the monthly rate adjustment plan, it did ultimately side in favor of the plan, calling for a three-year trial period.

Staff expressed concern that Southwest's current plan did not include any mechanism to distribute any surplus of deficit that currently exists in a "Gas Cost Balancing Account" from previous regulatory adjustments.

PUC staff emphasized that monthly adjustments would still be subject to an annual prudency review by the PUC. Such review on a monthly basis, however, "would be unduly burdensome, impractical and of little value," said Ronald Knecht, a PUC economist.

He added that while annual rate adjustments give the appearance of added stability, they are typically followed by much larger adjustments.

"Rate stability may lead some, such as those on fixed incomes, to favor annual (purchased gas adjustments), but prospects for rate shock (following a larger annual adjustment) will also be greater problems for those customers than for others," Knecht said.

The PUC will hear the rate case in a three-day hearing beginning Oct. 1.