The Nevada Public Utilities Commission has modified a request by Southwest Gas Corporation for authority to increase base rates and to reset its Gas Infrastructure Rate (GIR). The request included a statewide annual increase of approximately $32.5 million to account for $14.4 million in increases in cost of service including certain capital expenditures and the inclusion of $18.1 million in gas infrastructure related investments.

The commission made a series of specific findings that the utility will quantify when it revises its current base rate tariffs in accordance with the commission directives. Among other things, the commission rejected a claim by the company that its allowed rate of return on equity (ROE) should include an upward adjustment to account for recent increases in interest rates. It also disallowed a significant level of proposed rate base additions for both GIR and other capital projects finding that the utility had failed to support the prudency of the investments. According to the commission, its decision to disallow these costs “... is substantiated by evidence that reveals a systemic lack of accountability, oversight, and prudent management by SWG…”
The commission rejected a contention put forth by the utility that in setting an updated ROE, the commission must consider recent decisions by the Federal Reserve to increase the borrowing rate on Treasury bonds. Specifically, the utility had argued that the Federal Reserve has increased the Federal Funds target rate by 25 basis points since December 2016, with corresponding increases in short-term and long-term interest rates.

In rejecting the proposal, the commission ruled that that increases in the federal borrowing rate must be considered in the proper context—the federal borrowing rate was at or near zero percent as the base prior to the recent increases. The commission also said that federal borrowing rates have been and remain at historic lows. It concluded that the evidence on the record did not support or indicate the occurrence of significant increases in federal interest rates in the near term that would justify the prospective increase in ROE recommended by the utility. Re Southwest Gas Corp., Docket No. 18-05031, Feb. 15, 2019 (Nev.P.U.C.).

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