News Release

 

TO: Editors, News Directors

DATE: October 24, 2001

FOR: Immediate Release

 

 

Southwest Gas Rate Case: Commission Cuts Total Rate Increase & Boosts Low Income Discount

PHOENIX - The Arizona Corporation Commission today approved a revenue increase of $21.6 million for Southwest Gas. Southwest Gas had applied for an increase of $37.1 million. Staff argued for an increase of $21 million and the Residential Utility Consumer Office (RUCO) supported an increase of $18.1 million. After a full evidentiary hearing, the Commission's administrative law judge found that Southwest Gas was entitled to an increase of $25 million. Chairman Bill Mundell and Commissioner Marc Spitzer voted to cut the administrative law judge's recommendation and approve an increase of only $21.6 million. The Commissioners also approved a lower rate of return than the 8.32 percent recommended by the administrative law judge. The Commissioners set Southwest Gas' rate of return at 7.21 percent.

Effect on Consumers

Today's decision will result in moderate increases for most consumers but will protect qualifying low income customers from any increases. There are three primary components to the consumer's bill:
  • the basic service charge, which is paid regardless of consumption;
  • the commodity charge for each therm of gas; and,
    		•
  • the purchased gas adjuster that represents the actual cost of natural gas, factored on a 12-month rolling average.

    • The estimates below exclude the third bill component because it varies each month and is a direct pass-through of costs from the utility. Southwest Gas, like other Arizona gas companies, uses a 12-month rolling average to factor the costs of gas and is not allowed to collect any revenue on its fuel costs. The 12-month rolling average insulates consumers from spikes in the cost of buying natural gas from the well sites.

    The rates shown here include the increased monthly service charge, which will go from $7 to $8 under the plan approved today. It also factors in the new rate per therm of gas.

    Typical Customers

    Current Rates

    New Rates

    Difference

    Summer Usage averages 17 therms

    14.63

    16.29

    +1.66

    Winter Usage averages 54 therms

    29.69

    33.15

    +3.46

    (Winter is defined as November through April.)

    Protections for Low Income Customers

    The Commissioners kept the basic monthly service charge at $7 customers who qualify for Southwest Gas' Low Income Rate Assistance. Additionally, the Commissioners expanded the discounts off the commodity charge of gas to include the first 150 therms used during the winter months, up from only 100 therms. Southwest Gas representatives testified that the expanded discount will effectively shield 99 percent of their low-income customers from any increase.

    The Commission also required Southwest Gas to notify customers of the availability of the Low Income Rate Assistance program and Low Income Energy Conservation programs through bilingual (English/Spanish) quarterly billing inserts.

    Procedural History

    Southwest Gas filed this rate case in May 2000. The Commission in 1997 approved the last Southwest Gas rate case. In April 2001, the Commissioners rejected a negotiated settlement and sent the case back for additional testimony and hearings. After several days of testimony and cross-examination, the administrative law judge drafted the recommended order that the Commissioners began deliberating in an Open Meeting yesterday. The Commissioners reconvened the Open Meeting today to discuss the final numbers and vote on the case.

    Commissioners Applaud Participants

    Both Chairman Mundell and Commissioner Spitzer thanked the applicant, staff and interveners for cooperating and conceding where necessary to reach a decision that, in Commissioner Spitzer's words, accomplishes the goal of any Commission proceeding. Spitzer said, "This was a complicated case - it is our job to balance competing interests. We have to promote conservation as well as protect ratepayers who expect reliable utility services at reasonable prices. I believe we accomplished this today."

    Chairman Mundell cited several key provisions of the decision before casting his vote. "First, the company wanted a $37 million plus increase. The administrative law judge found a need for a $25 million increase. We are cutting that to $21.6 million, which is less than the settlement. We protected low-income users by extending the discount by an additional 50 therms. And we kept the basic rate at $7 for low income users."

    "Any time we have to decide a rate case I take great pains to ensure that our decision is fair to ratepayers and the company," Chairman Mundell added later. "Given that everyone acknowledged that a rate increase was warranted by the evidence, this decision we made today balances the company's needs while protecting the consumers."

    Southwest Gas expects to implement the changes beginning with the November billing cycle.

     

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