Group questions effect of SW Gas rate hike

Kevin Rademacher

Thursday, June 9, 2005 | 11:13 a.m.

The state Bureau of Consumer Protection on Wednesday asked regulators for an order requiring Southwest Gas Corp. to notify customers that a requested 3 percent rate increase could ultimately come in more than 10 percentage points higher at almost 14 percent.

Last month Southwest Gas asked the state Public Utilities Commission for permission to increase Southern Nevada rates by 3 percent, an overall increase of about $11.3 million a year.

The so-called purchased gas adjustment request would raise residential rates by 2.65 percent pushing the average customer's winter bill up by $1.37 per month.

The Bureau of Consumer Protection, however, is questioning language in the natural gas distribution company's request that favors basing the increase on historical prices and not projected prices, which would call for a much higher 13.9 percent increase.

The BCP motion highlights a section of the utility's filing that indicates "at the time of filing this application, Southwest prefers the historic ... methodology."

The bureau's motion lays out a scenario in which the utility could change its mind on which increase to pursue after customers are notified of only the smallest possible increase.

"Given the company's rather ambiguous preference or reservation about choosing the historical method at this time, it is likely that after notices are already sent out and rebuttal testimony is filed, the parties may learn, at that time, Southwest prefers the projected methodology," the BCP motion said. "At that time, (it) will be too late for customers to have full and meaningful notice before the rates are put into effect."

Cynthia Messina, a spokeswoman for the utility, said the company complied with all state regulations in submitting its draft customer notification language. She also pointed out that the commission will ultimately decide what is included in final customer notification language.

Eric Witkoski, senior deputy attorney general for the BCP, said by leaving out the possibility for a large rate hike, customers are less likely to pursue conservation measures or participate in public hearings on the case.

"(Southwest Gas has) already calculated it," he said. "So let's put them both in there and notice customers of both."

A late change to a rate increase amount initially requested by the utility is not unprecedented.

In November, regulators approved a $30.6 million rate increase for Southwest Gas. It was the fifth jump in Southern Nevada natural gas bills in 12 months.

In that case, the PUC elected to favor projected rates proposed by PUC staff instead of historical rates proposed by the utility. The move nearly doubled Southwest Gas' original request for a rate increase of $16.3 million, or 4.9 percent.

Former regulator Adriana Escobar Chanos -- who is now the state consumer advocate and head of the BCP -- agreed with the need for the rates proposed by staff, but sharply criticized the process.

"I believe it is the party's responsibility to come in closer with their request," she said in November.

Members of the PUC have frequently expressed concern over setting the so-called base tariff energy rate for ongoing gas costs too low. The result leads to large unrecovered balances consumers must eventually make up, plus heavy interest costs.