Southwest Gas seeks largest rate increase in Arizona
Southwest Gas requested an 11.5% — $90 million a year — rate increase for its captive Arizona customers, citing increased customer growth since 2019 as justification. The average monthly bill for a single-family residence will increase by $5.12 per month if the application is accepted as is. Utilities regulators approved a 9.68% increase for Southwest Gas in December 2020. An analysis of the latest rate case application details how Southwest Gas (SWG) – one of the nation’s largest gas utilities – attempts to charge its customers a significantly higher price. return on equity, which is the percentage the utility is allowed to earn from its capital investments. SWG also intends to charge its customers for the company’s political trade association dues and expenses it did not collect when it suspended late payment fees due to COVID-19. The company also wants to introduce a new carbon offset program for customers.
Intervenor groups including Wildfire, formerly the Arizona Community Action Association, and the Southwest Energy Efficiency Project will file direct and rebuttal testimony in August, and hearings before the ACC will take place in late September.
SWG demands higher profit margin from regulators
SWG is asking for a return on equity (ROE) of 9.9%, a significant increase from the 9.1% approved by the ACC in 2020.
ROE is what drives profits for investor-owned utilities. When a utility makes a capital investment, such as building a new pipeline, regulators allow it to recoup the costs of the expense plus a profit determined by ROE. Investors in a utility generally want the ROE to be as high as possible.
SWG requested the same ROE of 9.9% in its last rate filing with the Public Utilities Commission of Nevada (PUCN), where SWG also has a monopoly. Instead, the PUCN approved the company’s ROE at 9.4%. The Nevada Consumer Protection Bureau provided evidence that gas utility ROEs had been trending downward since 2018 and argued that the 9.9% ROE demand was “not in line with trends and / or regulatory and market facts”.
Southwest Gas aims to make Arizona customers pay industry membership dues
SWG is asking Arizona regulators to allow it to charge taxpayers hundreds of thousands of dollars a year in dues to support the utility’s membership in professional associations. Utilities typically seek authority to recover expenses they have placed in the 930.2 account through rate proceedings, and then pass the charges on to customers. Trade association groups use these revenues for strategies to undermine electrification policies and promote those that encourage the use of fossil gas.
Among the costs included in the rate increase request are $664,596 in 2021 membership dues for the American Gas Association (AGA). AGA has coordinated legislative efforts opposing electrification, including in Arizona. In 2020, the Arizona Legislature passed HB 2686, which prohibited cities and towns from passing codes or ordinances to restrict service from a utility provider, such as SWG’s Fossil Gas. SWG supported HB 2686 and gave lawmakers sponsoring the bill thousands of dollars in contributions.
AGA has also launched social media advertising campaigns to improve public perceptions of gas cooking, despite years of research showing that pollutants released from gas stoves have serious health effects. SWG recently used the same tactic when it launched a social media campaign touting the benefits of fossil gas in Nevada.
SWG’s request includes waiving 3.8% of AGM membership dues identified as “lobbying in nature”. However, the AGA relies on a narrow Internal Revenue Service (IRS) definition of the term lobbying that does not accurately reflect the trade group’s wide range of political activities and advocacy work. SWG will charge ratepayers for these fees unless the PUCN refuses permission.
Additionally, SWG is seeking to recover Coalition for Renewable Natural Gas (RNG Coalition) 2021 membership dues which total $30,000, although it did not include a portion of these dues in its latest rate filing. in Nevada. The RNG Coalition is a 501(c)6 trade association that promotes the expansion of “renewable natural gas” (RNG) markets. The group often appears in public testimony and commentary for state regulatory commissions and legislative meetings across the county. In Nevada’s 2021 “Future of Gas” filing, the RNG Coalition submitted comments supporting the development of RNG in the state.
The Coalition is pushing RNG at the state level despite the fuel’s lack of viability to economically replace fossil gas on a large scale. In May 2021, the Arizona Corporation Commission hosted an RNG workshop and invited representatives from SWG, AGA, and the RNG Coalition to present. In response to questions from the Arizona PIRG Education Fund, the RNG Coalition admitted that “the estimated potential of RNG from anaerobic digestion feedstocks by 2040” could replace only 5.4% of current consumption of country gas in the residential, commercial, industrial, and fossil gas vehicle sectors.
In a 2020 report, Earthjustice and the Sierra Club found that RNG is not available at the scale needed to decarbonize buildings, nor will it solve many related air pollution problems. to the use of gas. The report also found that adopting RNG would result in higher costs for customers.
Stakeholders, commission staff and regulators across the country are increasingly voicing concern over the utility’s collection of trade association dues in tariff cases without proving the clear benefit customers receive for paying these fees. In Arizona, utility regulators recently accepted the Residential Utility Consumer Office’s recommendation to allow Arizona Public Service, an electric utility, to recoup only 50% of its industry association dues.
The matter is before the Federal Energy Regulatory Commission (FERC). The Center for Biological Diversity (CBD) has asked FERC to issue regulations to change the Uniform Accounting System to require utilities to record their trade association dues as presumptively unrecoverable (less than per line and billed to shareholders) for rate collection purposes. . FERC issued a Notice of Investigation into the matter in December, asking the public and trade groups to intervene. Utility regulators, attorneys general and taxpayer advocates from 14 states submitted comments urging FERC to strengthen its accounting requirements for utilities seeking to recoup those dues. .
SWG seeks COVID-19 recovery after being denied by Nevada Public Utilities Commission
SWG is asking ACC for permission to charge customers $2.5 million in waived and waived late payment fees. From April 1, 2020 through March 31, 2021, the utility implemented a temporary moratorium on collecting late fees from customers who have fallen behind in paying their utility bills on time. In 2020, the ACC enabled SWG to track COVID-19-related expenses, including late fees it would otherwise have collected for possible collection at a later date.
Consumer rights advocates have called the late-payment efforts “punishments” that “punish people for being poor,” and SWG’s other state regulators have denied their reinstatement. In SWG’s most recent Nevada rate case, the PUCN denied SWG’s request to recover $6.6 million in late payment fees for COVID-19 recovery costs. The PUCN determined that “late payment fees are not considered costs of maintaining service to customers impacted by the COVID-19 pandemic.” Although the ACC includes these costs as eligible for “possible” recovery, the Commission explicitly stated that the 2020 case was opened due to concerns for “the physical and financial health and safety of utility customers, regulated utilities and their employees”. Utilities say late-payment fees are meant to encourage customers to pay their bills, not devastate them financially. The PUCN has found that fees do not represent a significant portion of a utility’s revenue and are unnecessary.
SWG Proposes Pricing Change for Voluntary Carbon Offset Credit Program
SWG is also proposing an amendment to Arizona’s gas tariff to include its voluntary MOVE2ZERO (M2Z) program, allowing Arizona customers to offset fossil gas greenhouse gas emissions through the purchase and withdrawal by SWG of carbon offset credits. Customers who choose to participate in the program are responsible for the monthly premium fees associated with the number of carbon offset “blocks” they purchase. SWG is responsible for purchasing the blocks on behalf of the customer. Each block costs $5 per month and would offset 10 therms of fossil gas usage per month, according to SWG.
M2Z – and other carbon offset credit programs like it – ignore the critical findings determined by the UN’s recent IPCC report. To maintain a reasonable chance of keeping global temperature rise below 1.5 degrees Celsius, scientists say it is necessary to reduce methane emissions from burning fossil gas, rather than just reducing them. compensate for. Instead, SWG charges customers carbon offset credits while simultaneously developing fossil gas infrastructure.