Southwest Gas seeking 3 percent rate increase

Kevin Rademacher

Tuesday, May 17, 2005 | 10:56 a.m.

Earlier this month, Southwest Gas Corp. Chief Executive Jeffrey Shaw warned attendees at the company's annual shareholders meeting that natural gas prices continue to rise and a rate increase was expected.

Late Monday the company made good on that statement, asking 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. In the so-called purchased gas adjustment request, residential rates would jump by 2.65 percent.

The average customer's winter bill would go up by $1.37 per month.

Hearings must now be scheduled by regulators to review the request.

Purchased gas adjustment cases are designed to allow the company to recoup unrecovered gas costs or make refunds for overcharges based past gas sales. The cases also set rates going forward.

Southwest Gas is a distribution company and buys the gas it uses to serve customers on the open market. The Las Vegas-based utility 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, and the company makes a profit on distribution services.

In November, regulators approved a $30.6 million rate increase that pushed monthly bills up by about 9 percent beginning Dec. 1. It was the fifth jump in Southern Nevada natural gas bills in 12 months.

At that time PUC Commissioner Carl Linvill, who presided over the Southwest Gas case, said the rate increase is a product of an increasingly volatile market.

"It reflects the difficult reality we have to deal with in this order, in this state and in this country that natural gas prices are moving higher," he said in November.

Increases have been blamed on higher demand for natural gas, based at least in part on the soaring use of natural gas to fuel electric power plants since fuels such as nuclear and coal fell out of favor. At the same time, gas industry officials have said that federal policies are limiting the ability to drill for natural gas in known reserves.

A federal energy bill is again being weighed by Congress and could provide relief, Shaw said. Even if the bill is passed, however, it could take years for new supplies to hit the market and ease prices.