Southwest Gas Rate Case: Commission Cuts Total
Rate Increase & Adjusts Rate Design

PHOENIX – The Arizona Corporation Commission yesterday approved a revenue increase of $49.3 million for Southwest Gas.  Southwest Gas had applied for an increase of $66.9 million in its first full rate case since 2001.  Commission staff argued for an increase of $51.6 million and the Residential Utility Consumer Office (RUCO) supported an increase of $48.5 million.  After a full evidentiary hearing, the Commission’s administrative law judge found that Southwest Gas was entitled to an increase of $49.3 million.

Everyone involved in this case, including consumer advocates, agreed that an increase was necessary due to the rising costs of natural gas, increased costs of maintaining its infrastructure to ensure safe and reliable utility service and increased operating costs. 

“All expenses that Southwest Gas sought to recover through rates were thoroughly audited and analyzed by the Commission staff before being included in the rate formulas,” Commission Chairman Jeff Hatch-Miller said.

Southwest Gas’ last full rate case was filed in May 2000 and was voted on by the Commissioners in 2001.

Effect on Consumers

“Rate design – the method of calculating seasonal rates and properly breaking down the various rate elements among different categories of customers – is as much an art as it is a science,” Commissioner Marc Spitzer said.  “Rate design was one of the main issues in this case.”

“After review and input from all the parties, our decision adjusts the rate design to reduce the burden on ratepayers during the winter when usage is high,” Commissioner Bill Mundell explained.

The Commission’s decision will result in increases for most consumers but will protect qualifying low income customers from any significant increases.  The following calculations were made using data provided by Southwest Gas to show the effect of the new rates on an average January and August bill.

Typical Customers                                   Current Rates           New Rates            Difference

Average August usage - 10 therms                20.62                       22.86                  +2.24

Average January usage - 72 therms               96.14                     102.94                  +6.80

“One of the bright spots in this case is the requirement of a benchmark study to compare Southwest Gas’ procurement practices with other utilities,” Commissioner Kristin Mayes said.  “This study will help the ACC in future cases as we deal with escalating fuel costs.”

“It is always difficult to vote for a rate increase,” Commissioner Mike Gleason said.  “However, it is important that the people of Arizona get reliable, dependable utility service.  An increase was necessary to ensure that Southwest Gas could continue providing quality service to its customers.”

The decision was unanimous.