Speakers critical of gas rate hike

Kevin Rademacher

Thursday, June 3, 2004 | 11:07 a.m.

Despite a mounting series of rate increase requests made on behalf of Southwest Gas Corp. of Las Vegas, attendance at a consumer session Wednesday on a proposed $18.9 million -- or 6.2 percent -- boost drew a mere six speakers.

But none of them was happy.

Arnold Lochner quickly pointed out that the general rate case proposal comes on the heels of a 17.1 percent rate increase approved by regulators last week, and the customers were still unaware of another $16.3 million, 5 percent rate increase the company made late Tuesday.

Midgene Spatz said the mounting gas rates are difficult to keep up with.

"It's more than the cost-of-living increases provided by Social Security," she said.

Ted Mendalski said the state Public Utilities Commission, which oversees the consumer sessions and must approve all rate case requests, must protect customers.

"If the PUC is going to keep granting all of these increases just because (the utilities) want it we might as well take the first name off and just call it the utilities commission," he said.

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.

Both the case approved last week and the new case filed on Tuesday are purchased gas cases 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.

Questioned by consumers at the hearing were claims by Southwest Gas that a higher return is needed because decreased gas usage by its customers is making it more difficult to recover fixed costs for running new gas lines and making new customer connections.

"When I heard that, I was pretty perplexed," Lochner said. "It sounds to me like we are being asked for another rate increase as a penalty for using less gas."

Mendalski agreed.

"I'd love to see an independent audit," he said.

Roger Buehrer, a spokesman for the company, said more energy efficient homes and appliances have meant lower usage. That means money invested in new lines and meters -- which carry fixed or increasing costs -- take longer to generate enough revenue to recover the initial expenditure. That delay has caused Wall Street investors to question the company's performance.

Southwest Gas figures showed that average monthly gas usage has declined from 683 therms per month in 1987 to an estimated 496 therms per month in 2004.

While not questioned at the hearing the case includes a request for an increase in the basic residential service charge in an effort to stabilize the company's cost recovery. In Southern Nevada, the company 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. That would be offset by a lower usage-based commodity charge, evening out customer bills.

The basic service charge is paid by every Southwest Gas customer, regardless of gas usage.

The result would be a more stable return for the company, executives have said.

That proposal, however, has been opposed by both the Bureau of Consumer Protection and the PUC staff experts.