Basic charge at issue in Southwest Gas case

Kevin Rademacher

Tuesday, July 20, 2004 | 11:03 a.m.

On the final day of hearings into Southwest Gas Corp.'s $18.9 million general rate case, the focus centered on a controversial proposal by the utility to raise the basic charge customers pay regardless of usage levels.

On Monday afternoon, company witnesses said the plan would provide more stable revenue as per-customer usage levels fall and warmer-than-normal weather cuts into profits. Those drops have made it harder to keep up with the high construction costs incurred keeping up with Southern Nevada's growth.

Since 1987, the average per-customer residential usage for natural gas has dropped from 682 therms a year to 496 in 2003, company statistics show.

In Southern Nevada, Southwest Gas has asked to raise the current $8 charge to $11.20 a month in the summer (between May and October) and $14.50 in the winter.

The company has said that some of the higher basic charge would be offset by lower commodity charges based on the cost of natural gas. Commodity charges, however, are just half of the rates paid by customers.

In this case -- in addition to the customer charge -- Southwest Gas is seeking higher general rates, which allow for the recovery of construction and maintenance costs for distribution systems as well as general administrative costs. Rates of return for shareholders also are set in these cases.

Questions from both the Bureau of Consumer Protection and the Public Utilities Commission staff, however, indicated concern over the effect the new basic charge would have on customers.

Eric Witkoski, a senior deputy attorney general with the BCP, questioned the company's attempt to notify customers of its plans to change the basic charge. The company's notice to customers that it had filed the rate case with the PUC made no mention of the basic service charge change, only percentage changes to various rate classes.

In a subsequent notice of public hearings on the rate case, the company said only that it had asked to establish a per-day basic service charge without mentioning the rate. The higher basic service charge would be calculated using a per-day formula but charged on a monthly basis.

Edward Gieseking, Southwest Gas' director of pricing and tariffs, said the firm didn't intend to keep the information from customers. And rate case participants indicated that the company is not bound by regulation to announce the service charge change in its notices.

"There's no reason we didn't do it," Gieseking said.

The company also said it did not consult with consumer groups prior to proposing the new basic charge.

Alaina Burtenshaw, staff counsel for the PUC, also questioned company executives on the proposal's effect on customers.

"Do you believe customers will be able to understand and accept service charges that change seasonally?" she asked Brooks Congdon, the utility's manager for pricing and tariffs.

"I would anticipate there would be some level of confusion," he responded. "But if the change is properly noticed, (the confusion) can be minimized."

Congdon added that the company's customer service staff has already been educated as to the proposal.

In testimony filed prior to the hearings, PUC staff and the BCP recommended the rejection of the change in rate structure. PUC staff instead recommended raising the basic customer service charge to $9.

If the case is approved as proposed, bills will rise by 6.2 percent beginning Sept. 1.