Offering two alternatives for consideration, a Southwest Gas Corp. rate case settlement valued at $52.6-54.9 million began the Arizona regulatory process earlier this month and hearings continued Wednesday. Each alternative attempts to decouple monthly gas utility charges from revenues among other things to avoid penalizing the utility for successful energy saving efforts.

As part of the hearing process at the Arizona Corporation Commission (ACC), the settlement could be changed, an ACC spokesperson told NGI. In addition, the five-member elected ACC ultimately could change the deal as part of its final decision on the rate case for the Las Vegas, NV-based company that is Arizona’s major gas utility.

The two alternatives also include “lots of caveats,” according to the Phoenix-based ACC spokesperson. Hearings are scheduled through Aug. 19.

Alternative A calls for a partial revenue decoupling mechanism, a monthly weather adjuster and an overall proposed annual revenue increase of $54.9 million, carrying a return on equity (ROE) of 9.75% and a fair value rate of return (FVROR) of 7.02%. Alternative B would include a full revenue decoupling, a monthly weather adjuster and overall annual revenue increases of $52.6 million, including a 9.5% ROE and a 6.93% FVROR, based on the ACC staff’s fair value methodology.

Southwest Gas originally filed last November for a $73.2 million general rate increase, seeking an 11% ROE and a 7.5% FVROR. ACC staff made several recommendations that whittled down the request to $54.9 million. A major intervenor, the Residential Utility Consumer Office (RUCO), recommended that the increase be slashed to $29.2 million, with a 9% ROE.

“Because of the unique circumstances presented by the revenue decoupling proposals offered in this proceeding, the signatories [RUCO, Tucson Electric Power and a dozen other “parties”] agreed to present the ACC two alternatives,” the ACC said in the proposed settlement agreement. ACC staff supports both.

The utility supported offering a choice, but it also is being permitted to choose one during the ongoing hearings. The settlement was presented to the ACC as resolving “all issues presented” in the case. Either alternative is characterized as being in the public interest.

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