Consumer advocate moves against gas rate hike request

Kevin Rademacher

Tuesday, Sept. 28, 2004 | 10:39 a.m.

Nevada Consumer Advocate Tim Hay on Monday moved to block efforts to nearly double a request from Southwest Gas Corp. to raise rates in Southern Nevada by $16.3 million.

The staff of the state Public Utilities Commission last week recommended that the request for a 4.9 percent rate increase be increased by an additional $14 million, an overall increase of 9.25 percent.

Deviating from a traditional formula that uses information from a 12-month historical test year, PUC financial analyst Kellie J. Pister made the higher calculations using projections looking at future gas prices.

If Pister's recommendation is accepted, current average residential winter rates in Southern Nevada would increase from $68.04 to $74.16, an increase of $6.12 or about 9 percent.

In his motion, Hay argued that the dramatic change in the request comes after the PUC has held its consumer sessions on the case, limiting their participation in discussing higher rates. The new rate proposal also would vary dramatically from the proposal noticed in bill inserts sent to customers.

"Inherent in any notice requirement is the proposition that the notice will accurately reflect the subject matter to be addressed and that there would be some degree of specificity in the notice," Hay's notion said.

PUC spokeswoman Rebecca Wagner countered that the notices include language that indicates that the commission can ultimately make its final decision higher or lower than the original proposal.

Hay also argues that other parties participating in the case -- including his Bureau of Consumer Protection -- now do not have adequate time to respond to the proposal.

The PUC is scheduled to begin hearings on the rate case on Oct. 11. If approved, the new rates would go into effect Dec. 1.

The motion also said that the staff also has ultimately taken on the responsibility of the utility to make and defend its rate cases.

"Southwest has transferred Southwest's burden on itself by recommending an increase greater than Southwest's filing," Hay's motion said.

Wagner, however, cautioned that it will still be up to the commission to make any final decision on the company's original request and staff's recommendation.

"It is a recommendation," she said. "The commission will have to weigh that along with the evidence BCP presents."

The so-called purchase gas adjustment case is designed to allow the company to recoup unrecovered gas costs or make refunds for overcharges. Southwest Gas is 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.

Pister argued that the historical calculation method has failed to adequately account for the increasingly volatile natural gas market.

"While the costs incurred during a historic test period are known and measurable, they are outdated by the time the newly proposed rates go into effect," Pister's testimony said. "If the market price for natural gas were relatively stable, this method would be an adequate way to project future costs; however, when the market for natural gas is volatile, this method does not adequately reflect future gas costs."

When rates do not cover the full cost of natural gas, the company sees an unrecovered balance pile up over the year, accruing interest costs that are ultimately recovered from ratepayers in future rate cases.