Wednesday, August 25, 2004
Copyright © Las Vegas Review-Journal

UTILITIES: Panel to consider gas-rate boost

How proposed increase would affect residential consumers is so far unclear

State regulators on Thursday will consider raising Southwest Gas Corp.'s general rates by an estimated 2 percent overall, about one-third of the 6.2 percent the utility requested.

Southwest Gas sought an $18.9 million yearly increase in rates in Southern Nevada, but Public Utilities Commissioner Adriana Escobar Chanos' proposed order would cut that number to $6.2 million.

In Northern Nevada, the company sought an $8.6 million increase, but she proposed raising those rates by $6.1 million.

The rate increase on nonfuel-related costs, if approved by the Public Utilities Commission as Escobar Chanos, would take effect Sept. 1.

The commissioner's proposed rate case order was released to the public Tuesday, but it was not clear how much rates would increase for the typical residential customer.

Southwest Gas was analyzing the 85-page order but had not yet determined how the proposed order would affect residential customers, Roger Buehrer, a spokesman for the utility, said Tuesday evening.

"It would be inappropriate to do these kinds of calculations until we get the final order from the commission," he added.

The three-member commission is scheduled to vote on the general rate case at a meeting that starts at 9 a.m. Thursday. The general rate case will adjust rates to reflect changes in the cost of capital for investments, administrative and maintenance expenses and profits -- but not the cost of natural gas itself.

The PUC will give consumers an opportunity to comment on a separate request by Southwest Gas to raise rates another 5 percent at a consumer session at 6 p.m. today at the Sahara West Library, 9600 W. Sahara Ave.

In that rate case, Southwest Gas is asking for approval to raise its rates to recoup the higher prices it is having to pay for natural gas.

Escobar Chanos noted the rate cases are separate but she acknowledged that customers "have already felt the pain of rising energy bills" related to the soaring price of gas. Her proposed rate case decision, however, also noted the increased financial stress on the company as it tries to keep up with Nevada's rapid growth.

"All areas of Southwest's Nevada's service territory continue to grow at a significant pace, which creates or exacerbates the impact of many of the issues in this (general rate) case," she stated.

She proposed that the basic service charge for residential customers be increased 50 cents to $8.50 per month. This charge is paid by all residential customers just to connect to Southwest's gas distribution system and doesn't change regardless how much gas the customer uses in a month.

Her proposed order accepts Southwest Gas' suggestion to use rates that decline per unit as a resident uses more gas in winter months. An expert witness retained by the attorney general's Bureau of Consumer Protection opposed the so-called "declining block rates," saying they encourage gas consumption and reduce customers' motivation to use energy efficient appliances.

Nevertheless, Escobar Chanos pointed to another reason to adopt declining block rates.

"The commission recognizes that Southwest is experiencing problems achieving revenue and income stability due to declining average residential customer usage and that Southwest's declining block rates are designed to help correct these problems," her proposed order states.

Her order would allow Southwest Gas to earn a 10.25 percent return on equity, a measure of profitability.