Most home customers of Southwest Gas in Arizona will see an average monthly increase of less than $3 starting in February, while low-income customers may see lower bills under new rates approved by state regulators Tuesday.
And the Arizona Corporation Commission rejected proposals to potentially limit natural-gas development, by requiring gas-infrastructure spending reviews and ending subsidies for gas lines in new development.
The commission mostly went along with an administrative law judge’s recommended rate order, which would add about $3 or 6.7% to the monthly residential gas bill for average usage of 24 therms, while small-business customers would see an average monthly increase of nearly 13%.
Southwest Gas‘ latest rate increase follows on the heels of an increase that went into effect in January 2021, which raised average home gas bills by 9.7%.
The commission agreed to allow Southwest Gas to expand its Low Income Ratepayer Assistance (LIRA) program by extending the 30% discount to apply year-round, instead of from November through April now, and to increase the income eligibility threshold to 250% of the Federal Poverty Level, from 200% currently.
On average, LIRA customers will see a decrease in the summer months of $3.41, or 15.99%, and an increase in the winter months of $3.13, or 6.37%, the company said.
Cutting costs
The commission also voted to cut some controversial expenses for board director fees, an employee educational assistance program and insurance for company officers and directors, electing to have shareholders share half of those expenses, for an overall reduction of about $633,000.
As a result, the project bill increases will be slightly smaller than in the judge’s recommended order, though adjusted bill impacts were not immediately available after the ACC’s vote.
The rate case passed on a 4-1 vote, with sole Democrat Anna Tovar voting against it.
“Right now, given the economy, customers can’t afford to shoulder a rate increase, especially during the winter,” Tovar said.
Newly elected commission member Nick Myers said he doesn’t like voting for rate increases but wants to ensure the reliability and stability of the gas system as a critical underpinning of the state economy.
“We can’t hinder not just our economic growth but our electric grids and water grids — everything is dependent on natural gas,” said Myers, a Queen Creek Republican who served as policy advisor to former commissioner Justin Olson.
Myers was joined in voting for the rate increase by Commission Chairman Jim O’Connor and commissioners Kevin Thompson and former commission chair Lea Marquez Peterson.
Marquez Peterson, former head of the Tucson Hispanic Chamber of Commerce, expressed concern over the relatively large increase in small-business rates but found no support among her colleagues to adjust those rates during the open meeting Tuesday.
Too much, too soon?
Even so, the rate increase presented to the commission is much less than the 11.6% increase Southwest Gas originally requested in December 2021 — about a year after its last rate increase.
The company later agreed to drop its overall revenue increase request by nearly a third, to $61.7 million, with other adjustments reducing the average monthly home bill increase to $3.38 or 7.6%.
Speakers representing several nonprofit advocacy groups opposed the increase and supported a proposal by the Southwest Energy Efficiency Project (SWEEP) to require Southwest Gas to prepare gas infrastructure investment plans for review by regulators before making major system investments.
SWEEP says the reviews are needed to avoid unnecessary costs as individual gas usage is falling and the trend is growing to replace gas appliances with electric models that nowadays can be more economical and powered with non-polluting renewable resources.
Tim Hogan, a lawyer with the Center for Law in the Public Interest representing SWEEP, cited a consultant’s study showing the Southwest Gas system is in good shape compared to similar utilities.
“It’s not just a gas transition that’s occurring, what we’re also seeing already is a massive investment in the distribution system by Southwest Gas,” Hogan said, citing more than $700 million in recent infrastructure spending the company is seeking to recover.
Other public commenters said Southwest Gas was asking for too much, too soon after the last rate hike, especially with high inflation already hitting families hard.
“For families struggling to make ends meet, another increase at this time will result in choosing between heating and other needs,” said Christie Black, a chapter leader with Mormon Women for Ethical Government. “For small businesses, the price increase is crippling, eating into already slim profit margins.”
Southwest Gas contends that gas demand is rising overall, and its system improvements are needed to ensure safe and reliable service.
Matt Derr, vice president of regulation for Southwest Gas, disputed that there is an ongoing transition away from natural gas and said any infrastructure planning proposal should be considered separate from the rate case.
The commission — which includes two new elected members in a 4-1 Republican majority — agreed with the judge’s recommendation in rejecting SWEEP’s proposals for the new gas-planning process and its bid to cut line extension subsidies for new development and for customer-owned yard lines for those not on low-income rates.
The company supported the proposed rate order, though it objected to the judge’s exclusion of half of the cost of dues it pays to a gas-industry trade association and wanted the rate increase to go into effect about 10 days sooner.
SWEEP argued that there is a growing transition away from natural gas use and supports electrification with power supplied by renewable resources to protect the environment and public health.
Its proposals were supported by commenters including the Arizona Public Interest Research Group Education Fund, Western Resource Advocates, and Arizona Interfaith Power & Light.
Protecting gas choice
But SWEEP’s proposals raised vehement opposition from an array of business groups including Sun Corridor Inc. — the Tucson region’s main economic development group — the Arizona Chamber of Commerce, the Arizona Manufacturers Council and the Arizona Restaurant Association, along with key legislators, who said the measures would raise costs, limit consumer choice and curtail economic development.
In a letter to the ACC, Senate Natural Resources, Energy and Water Committee Chairwoman Sen. Sine Kerr, and Rep. Gail Griffin, her House counterpart, urged the commission to reject SWEEP’s “anti-natural gas” proposals.
The lawmakers said any major policy changes should be vetted in a wider stakeholder process and noted that the Legislature has moved to protect natural gas development in the state.
“Natural gas has played an important role in Arizona’s prosperity by contributing to residents’ quality of life and supporting our state’s rapid economic growth,” the legislators wrote. “Adopting SWEEP’s proposals would hurt consumers and businesses and harm the work the Legislature has done to protect fuel choice in our state.”
The Arizona Legislature passed a law in 2020 prohibiting local governments from adopting measures that would ban natural gas in new construction, and since then some 20 states with GOP-controlled legislatures have passed similar laws.
As the cold days of fall and winter begin, you may be trying to think of ways to reduce your energy bill this winter.
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