Southwest Gas seeks ‘blank check,’ for unnecessary effort, say opponents
Natural gas will eventually serve a smaller rate base of “less-fortunate citizens who will be left to pay for the gas system,” said the state’s Consumer Advocate. (Photo: Southwest Gas Holdings)
The pipe carrying natural gas beneath homes and businesses in Southern Nevada may be more at risk of leaking than other types of conduit, but not enough to warrant saddling ratepayers with the bill to replace it at a time when gas bills are skyrocketing and the state is seeking to reduce its dependence on fossil fuels, according to testimony Wednesday from environmentalists and consumer watchdogs.
Sen. Skip Daly, a Democrat from Washoe County, sponsored Senate Bill 116, which he says is necessary to ensure the safety of Nevadans, even as the state encourages investment in renewable sources. Daly cited a 2012 advisory issued by the U.S. Department of Transportation as justification for the legislation, which would allow the utility to recoup its cost more rapidly than through a general rate hike request.
Nevada’s consumer advocate Ernest Figueroa testified Nevada’s natural gas system is modern, and shows no evidence of leaking or failure. He added that as a state-sanctioned monopoly, Southwest Gas is already obligated to repair safety risks such as leaking pipes.
“To their credit, they have operated one of the safest systems in the United States,” Figueroa told lawmakers. “it would be one thing if the proponents could say that while it would increase rates, it would at least add a benefit of serving an important function that does not currently exist. But that is not the case.”
Driscopipe 7000/8000, the polyethylene pipe at issue, has been blamed for several explosions in Arizona. But in 2020, Arizona utility regulators halted Southwest Gas’ pipe replacement program and denied the utility’s request to implement an accelerated replacement program, according to an exhibit filed by the Consumer Protection Bureau.
In September 2021, Southwest Gas told Arizona regulators that of 10,358 miles of Driscopipe in Arizona, a “small subset” can present higher risk. Of that small subset, 99.99% has been found not to be leaking.
Southwest Gas, the public utility that provides natural gas to Southern Nevada homes and businesses, is asking lawmakers to approve a measure that would allow it to speed up its recovery of an estimated $3 billion to replace 5,200 miles of pipe in Southern Nevada, a figure that prompted an outpouring of support for the project from labor unions.
“This is a safety problem that exists and we know about it, and therefore we can prevent it from becoming a bigger problem,” said Danny Thompson, representing Operating Engineers Locals 3 and 12. “And it’s not a question of if it’s going to become a problem. It’s when is it going to become a problem?”
Peter Guzman of the Latin Chamber of Commerce voiced “full support” for the bill for safety reasons, and because “this is economic development. This is going to create incredible paying jobs…”
“This legislation is necessary, and also complementary to the existing regulatory process that we have in place,” Justin Brown of Southwest Gas testified.
The Consumer Advocate argued that Southwest Gas and Sierra Pacific have accelerated pipe replacement “through the normal general rate case process without the need for single-issue ratemaking mechanisms,” a process he says is costly to consumers and benefits shareholders, who receive a return on profit and a return of depreciation expense absent the scrutiny of the general rate case process.
In 2022, Southwest Gas’ $22 million in increased revenue from Gas Infrastructure Replacement exceeded increased revenue of $14 million from general rate cases, according to Consumer Advocate Figueroa.
He said the regulated utility’s authorized rate base has increased by about ten percent from 2017 – 2022. “While this fact is good for shareholders who profit from increases to rate base, it’s not so good for ratepayers.”
In Southern Nevada, a single-family residential customer using 62 therms per
month from November through April saw a monthly increase in their bill from $47 in April 2021 to $102 in April 2023, a 116% increase, according to the Consumer Advocate.
Northern Nevada customers using 100 therms per month have seen bills increase from $98 in April 2021 to $184 in April 2023 this year, an 88% increase.
Figueroa said “ratepayers are angry and confused” and “bill affordability” is an issue that warrants the concern of all public officials, especially as NV Energy prepares for a general rate case submission in June.
As Nevada moves toward a zero-carbon future, “new investments in fossil fuel infrastructure should be scrutinized, not expedited,” Figueroa said, adding as affluent customers “take advantage of incentives to electrify or purchase all-new electric homes,” natural gas will eventually serve a smaller rate base of “less-fortunate citizens who will be left to pay for the gas system.”
New pipe has an estimated useful life of 50 years, according to the Bureau of Consumer Protection, and carries a risk of becoming stranded assets – those that lose value and their costs can’t be recouped, posing a risk to investors.
Garrett Weir, general counsel of the PUC, explained Southwest Gas can recapture the cost of replacing pipe in the normal course of business, but that process “doesn’t provide for the timing that this does.”
Sen. Dallas Harris, chair of the Committee on Growth and Infrastructure and formerly an attorney with the Public Utilities Commission, asked Weir if it’s the agency’s opinion that the pipe poses an imminent risk.
“The commission has not proactively required the accelerated replacements for the gas utility,” he responded.
The committee took no action on the measure.
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