Tuesday, June 3, 2003 | 11:13 a.m.
Southwest Gas Corp. asked state regulators on Monday for permission to raise rates by $26.2 million in Southern Nevada.
The Las Vegas-based company is seeking a so-called "purchased gas adjustment" to recover higher natural gas prices paid during the 12 months ending July 31, 2003. The request, filed with the state Public Utilities Commission, represents a 12.6 percent increase over all rate classes, and an 11 percent increase for residential users.
That would raise the average residential customer's winter gas bill by $4.99.
Company executives said consistently higher gas prices are behind the request and reflect large price swings that began in 1999, when the Western power market began slipping into turmoil.
"Natural gas prices have become much more volatile in recent years," said Roger Montgomery, the company's vice president for pricing. "Because of this volatility and the current system of adjusting gas cost rates annually, customers bills are impacted by large swings in their rates."
To reduce those swings -- which have ranged from a 19 percent decrease in February 2002 to an increase of 24 percent in January 2001 -- Southwest Gas has submitted a second rate proposal to the PUC. That plan requests the same increase, but based on a 12-month rolling average.
That plan, which would take the place of the first if approved, would allow the company to make monthly adjustments that would more accurately reflect current gas prices. That treatment would increase all rates by 9.4 percent, 8.2 percent or $3.72 on an average residential winter bill.
In future years, the increases would be smaller, once the past year's outstanding balance is cleared.
"The industry has changed," said Thomas Armstrong, Southwest Gas vice president for gas resources and energy services. "The current rate structure was established when we had regulated prices at the well-head. We are trying to update our rate system to reflect changes in the industry."
Nevada Consumer Advocate Tim Hay said the new rate plan could work if properly conceived.
"It's certainly an interesting proposal," Hay said, emphasizing that he had not had a chance to review the details of the plan. "There can be some advantages, but we need to make sure the mechanics are right."
The monthly plan, he agreed, would prevent sharp swings -- or "rate shock" -- for customers. It would also give customers a more accurate idea of current prices, allowing customers the chance to adjust usage accordingly, Hay added.
PUC staff members had not had a chance to review the filing late Monday afternoon and could not comment on the validity of the Southwest Gas proposal.
Edward Gieseking, Southwest Gas senior manager for pricing and tariffs, said the company has used a similar rate plan in Arizona since 1997. "We have that experience behind us," he said.
"This allows for gradual changes, so we don't build up large balances," Armstrong said.
Gieseking said the change to the monthly plan would not alter the PUC's ability to regulate gas prices or make prudency reviews of the company's purchasing practices.
"We will still file an annual gas supply report," Armstrong said, explaining that the commission will still be able to adjust rates according to findings in its review of that report.
That purchased gas report is currently filed as part of the annual purchased gas adjustment case.
Southwest Gas also filed for a $6 million rate reduction for Northern Nevada customers, a 7.3 percent decrease.
Armstrong said the Northern Nevada decrease illustrates the flaws of the current system, dictating rate cuts while gas prices are on the rise.
"Under the existing system, the rates that go into effect don't entirely reflect the current market," he said.
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