SW Gas again asks for rate hike

Kevin Rademacher

Tuesday, March 9, 2004 | 10:58 a.m.

Southwest Gas Corp. of Las Vegas on Monday asked state regulators for an $18.9 million general rate increase for Southern Nevada customers.

If approved by the state Public Utilities Commission, the 6.2 percent increase could be the fourth upward rate adjustment for the natural gas provider in 12 months. In December, Southwest Gas raised rates 11 percent to compensate for higher gas prices.

Also based on gas prices, the company raised rates 5.5 percent last month when it received regulatory permission to cease a customer credit from a past rate case. The company also has a rate case pending with the PUC that would raise rates another 16.7 percent due to volatility in the natural gas market.

The new general rate case -- which could go into effect Sept. 1 -- is designed to allow the company to recover the cost of construction and maintenance needed to serve customers, administrative costs and provide a return for shareholders.

If that case as well and the pending "purchased gas" case are both approved, the average residential winter bill would climb from the current $49.34 to $62.95 or 27.6 percent.

Also included in the new case is 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, said Roger Montgomery, Southwest Gas vice president for pricing. He also said it would mean smaller spikes in customer bills in cold months when usage climbs.

The company has struggled to keep up with construction demands in recent years as per-customer gas use has fallen amid higher building standards and the emergence of more efficient appliances, Montgomery said. Since 1987, residential usage for natural gas has dropped from 682 therms a year to 496 in 2003, company statistics show.

Combined with recent warm winter weather, Southwest Gas has come under fire from Wall Street analysts for slow recovery of it construction expenses. Jake Mercer, a utilities analyst for Piper Jaffray & Co., has lobbied for a "weather normalization" program like the one proposed in the new case.

Last week, Moody's Investor Services lowered its rating outlook on Southwest Gas debt from stable to negative, citing warmer weather and the high capital expenditures necessary to keep up with its customer base.

"In terms of cash-flow, construction has been a real drain on the company,this should help," Mercer said. "The rating agencies are going to view this action favorably."