Rate ruling lowers Southwest Gas bills: Utility's initial request for bigger cut denied

Oct 29, 2009 (Las Vegas Review-Journal - McClatchy-Tribune Information Services via COMTEX) -- SWX | Quote | Chart | News | PowerRating -- Staying warm this winter just got a little cheaper.

The state Public Utilities Commission signed off Wednesday on an order that will mean a 2.5 percent drop in natural gas bills this winter. The decrease will reduce the average monthly bill by $1.85 a month in colder months, from $74.41 to $72.56.

The new rates take effect Sunday.

The commission's decision allows Southwest Gas Corp. to raise the portion of its rates that covers operational costs such as interest, taxes, inflation, returns for investors and capital investments. But the order also accounted for drops in expenses for fuel and interest charges, and those decreases cancel out the jump in the rate that pays for operating costs.

The commission did grant less of a rate decrease than Southwest Gas was willing to accept: The utility's initial rate filings would have combined to reduce winter bills even more.

The commission's decision on the overall rate decrease disappointed Nevada consumer advocate Eric Witkoski, especially because Southwest Gas requested a bigger reduction than the commission granted.

To get to its larger proposed cut, Southwest Gas asked the commission to add a fifth quarter of expense data to its rate case, though Nevada law says annual filings are supposed to cover one year, or four quarters. Southwest Gas' initial April filing accounted for fuel costs in the year before March 31, but the utility later suggested adding cost statistics from the quarter that ended June 30.

The commission said in its order that Nevada law wouldn't allow the agency to include three months of additional data in an annual filing, and it added that neither commissioners nor the Bureau of Consumer Protection had time to audit the costs Southwest Gas recorded in the extra quarter.

Witkoski argued that the commission could have legally considered the fifth quarter, and those fresher statistics would have led to an 8.3 percent cut in winter gas bills.

The commission's order also granted the utility's request for a new, decoupled rate structure that will let Southwest Gas promote conservation among ratepayers.

Southwest Gas can now separate the cost of gas from the sale of gas. It can also sever fixed costs, such as infrastructure and salaries, from fuel expenses, which fluctuate with the market and change based on consumption.

Without decoupling, a utility's income can change based on sales volumes, and warmer years could hurt earnings. Disconnect income from sales, and fixed costs from variable expenses, and Southwest Gas could launch programs that reward conservation and avoid the earnings hit that could follow lighter consumption.

Because decoupled rates reduce risks for Southwest Gas, the commission cut the maximum return on investment it will allow Southwest Gas to earn. The return ceiling will drop from 10.5 percent to 10.2 percent.

Shares of Southwest Gas rose 4 cents, or 0.16 percent, on Wednesday to close at $25.25 on the New York Stock Exchange.

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

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