Southwest Gas seeks fifth rate hike in year

Kevin Rademacher

Wednesday, June 2, 2004 | 11:05 a.m.

Again blaming volatile U.S. natural gas prices, Southwest Gas Corp. of Las Vegas on Tuesday asked state regulators for permission to raise rates for the fifth time in a year.

In its annual "purchased gas adjustment" filing, the natural gas distribution company asked the state Public Utilities Commission for permission to increase its annual revenue by $16.3 million, a 5 percent overall increase.

The company asked that the increase, if approved, take effect Dec. 1.

The new rates would raise the average customer's winter bill from $65.55 to $68.80, a hike of 4.96 percent.

Nevada Consumer Advocate Tim Hay said that he had not yet had time to examine the filing, but expressed concern over the effect of rapid rate increases on consumers.

"We will be scrutinizing the case carefully," Hay said.

Keith Schwer, director of the UNLV Center for Business and Economic Research, said the rapid rate increases could send businesses that rely heavily on natural gas -- such as some manufacturing firms -- scrambling for an alternative fuel source.

"If there's no option for an alternative, you can begin to see a lot of price increases passed on to consumers," he said.

Purchase gas adjustment cases are designed by state regulators to allow the company to recoup unrecovered gas costs or make refunds for overcharges. Utilities are not allowed to earn a profit on gas costs. Every dollar spent on gas is passed on to customers at a one-to-one ratio.

On the same day that the company made the new request, rates increased 17.1 percent through a so-called out-of-cycle rate case filing the company made last year to offset higher gas prices. That case also included a 5.5 percent increase that went into effect in February when a refund to customers from an old rate case was terminated early.

Southwest officials have said that natural gas prices are 2 1/2 times higher than at the same point a year ago.

Roger Buehrer, a spokesman for Southwest Gas, said that Tuesday's filing is required by state regulation. He added that if the company had not made the out-of-cycle filing last year that the new case -- which would have included additional interest charges -- would have likely amounted to a 30 percent rate increase.

Buehrer also pointed out that in the most recent purchased gas case, state regulators found that all of the company's procurement practices were prudent.

"Just because of the fact that (Southwest Gas) appeared to be relatively responsible in past cases doesn't mean they will be responsible in any future period," Hay said.

Southwest Gas also has a "general" rate case pending with the PUC. That case would raise rates by 6.2 percent and generate an additional $18.9 million in annual revenue for the company.

In general rate cases, utilities are allowed to recover construction and maintenance costs for distribution systems as well as general administrative costs. Rates of return for shareholders are also set in these cases.

If approved, those new rates would begin Sept. 1.

Somer Hollingsworth, chief executive of the Nevada Development Authority, said rising utility rates are always a concern, but he added that the pass-through costs of higher natural gas prices won't disadvantage Nevada as it works to attract businesses because the pass-throughs affect all states similarly.

"Everybody that we compete with is going to get higher gas rates," Hollingsworth said.