Hearings may lower Southwest Gas customers’ rates

Hearings began Tuesday in a series of Southwest Gas rate requests that could combine to lower consumers’ natural-gas bills before year’s end.

The state Public Utilities Commission held the first day of evidentiary hearings in the local gas utility’s general rate case, and the cross examination is scheduled to continue through Friday.

The commission’s decision in the case would set a new rate structure for Southwest Gas: It would be the first time one of the state’s two natural-gas utilities has asked for a decoupling of rates under a 2007 Nevada law that allows the procedure.

If the commission approves decoupling, Southwest Gas would be able to separate the cost of gas from the sale of gas. Plus, Southwest Gas collects some fixed costs, such as infrastructure and salaries, through the same mechanism it uses to collect fuel costs, which fluctuate with the market and change based on consumption. Without decoupling, a utility’s income can vary based on sales volumes, and warmer years could hurt earnings. Disconnect income from sales, and fixed costs from variable costs, and Southwest Gas could put programs in place to encourage gas conservation and avoid the earnings hit that could follow lighter consumption.

Company representatives said at Tuesday’s hearing that decoupling would also reduce volatility in the utility’s cash flow and prevent weather-caused undercollecting and overcollecting of rates to pay for fuel.

The general case, the first for Southwest Gas since 2004, would also set new rates for consumption. The company has requested a monthly rate increase of 6.9 percent, or $5.53, in winter, and 6.7 percent, or $2, in summer, to help cover operating costs including interest, taxes, inflation, returns for investors, capital investments and rising salaries.

The utility also wants state commissioners to consider changes in customer counts and natural-gas use. Southwest Gas says customer numbers have grown, even as the average amount of natural gas consumed per household has dropped.

To account for all those factors, Southwest Gas says it needs an additional $28.8 million annually in revenue from rates. Its overall revenue in 2008 was $2.14 billion.

But Southwest Gas has filed separate rate cases and advice letters that would lower gas bills if the Public Utilities Commission OKs them all.

The utility’s annual deferred-energy rate case would cut the average monthly household gas bill by 1.3 percent, or 89 cents, in winter, and 1 percent, or 31 cents, in summer. Plus, the company has submitted an advice letter on quarterly energy costs and filed another rate case on interest-rate expenses. Put all those filings together, and the typical local gas bill would actually drop $1.95 a month averaged over a year, or $3.20 a month in winter, utility executives said at a public-comment session in July.

The Public Utilities Commission is expected to issue a decision on the general rate case by late October. A hearing on the company’s interest-rate case is scheduled for Sept. 24.

All the rate requests Southwest Gas has filed would take effect Nov. 1.

Contact reporter Jennifer Robison at jrobison@reviewjournal.com or 702-380-4512.