How Gas Rates Are Set

The rates used by Southwest Gas Corporation are set by state regulatory commissions using a process called the "rate case cycle." Because of individual state regulations, the rate case cycle differs slightly for each state. So that we can help you understand how gas rates are set, use the pull-down menu below to access the state you would like to understand.
How Gas Rates Are Set
Arizona
Determination of Need/Preparation of Application
To determine if a rate case must be filed, a test year must be established. The test year is a twelve-month historical period that will be used to evaluate the need for a requested change in rates. The number of customers, sales volumes, expenses, and other items are accumulated for the test period. Expenses such as labor rates, employee benefits, and materials and supplies, for instance, are examined to determine if they are materially different from when rates were previously set. Other items such as the addition of new service lines and meters, or a significant increase or decrease in the number or types of customers served will impact the need to request changes in rates. If it is determined that current operating revenues are deficient and do not recover the cost of providing service, an application is prepared for filing with the Arizona Corporation Commission (ACC or Commission).
 
Another more common type of rate proceeding is the Purchased Gas Adjustment (PGA) Rate Proceeding. The PGA process is the manner in which the cost of gas is determined. In Arizona, the PGA is adjusted monthly in order to more closely reflect the cost of gas that Southwest Gas is purchasing on the customers' behalf. The cost that customers pay each month is based on the average price paid over the previous twelve-month period. Each month, the new rate is calculated according to certain parameters, which are outlined in the tariff. For example, one of the parameters provides that the rate in place for the month cannot be $ 0.15 per therm more or less than any rate charged within the last twelve-month period. These rates are automatically implemented; however, an informational filing is made each month with the Commission.
Filing
A comprehensive presentation is prepared in support of the rates and adjustments Southwest Gas will propose in the rate case. In addition to a legal pleading, the presentation contains testimony, exhibits, and schedules. This package of materials is referred to as the rate case. The Application is filed with the Commission and the Commission has thirteen months to investigate and make a ruling on the case presented.
Discovery and Audit
A significant part of the rate case process involves discovery and audit. The process provides Commission Staff, Consumer Advocates, and other interested participants (parties) the opportunity to ask questions regarding the information that Southwest Gas filed in its rate case application. These questions are known as data requests. From the answers to these questions, their review of Southwest Gas' case, and an audit of Southwest Gas' accounting records, the Commission Staff, Consumer Advocates, and other parties file testimony stating their opinion as to the appropriate resolution of the rate case.
Hearings and/or Settlement
The Commission conducts an evidentiary hearing where each party makes its presentation through sworn testimony and is subject to cross-examination by the other parties. The formal hearing process is conducted at the Commission's offices and is presided over by the Hearing Officer. Like other legal proceedings, evidence is presented and witnesses testify in support of, and are cross-examined on, their respective cases. Occasionally, the parties are not that far apart in their respective positions and are able to resolve their differences through negotiation. When that occurs, a settlement document is prepared and presented to the Commission. The parties may initiate settlement discussions at any time prior to, during, or after the hearing process. However, most settlement discussions occur prior to hearing.
Proposed Decision
Once all of the evidence and witnesses are presented, the hearing officer issues a proposed decision. The proposed decision is submitted for consideration, and potential modification, by the Arizona Corporation Commission.
Commission Order
The final step in the process is the issuance of the Commission Order. The Order describes what requests are approved and how and when those changes will take effect. The Commission Order can grant some, all, or none of the changes requested by the Utility.
California
Determination of Need/Preparation of Application
To determine if a rate case must be filed, a test year must be established. The test year is a twelve-month projected period that will be used to evaluate the need for a requested change in rates. The number of customers, sales volumes, expenses, and other items are projected for the chosen time period. Expenses such as labor rates, employee benefits, and materials and supplies, for instance, are examined to determine if they are materially different from when rates were previously set. Other items such as the addition of new service lines and meters, or a significant increase or decrease in the number or types of customers served will impact the need to request changes in rates. If it is determined that current or projected operating revenues are deficient and do not recover the cost of providing service, an application is prepared for filing with the California Public Utilities Commission (CPUC). The Commission has established a rate case cycle for all utilities that typically calls for each utility to file a rate case every three years, in general.
 
Another more common type of rate proceeding is the Monthly Gas Cost Adjustment. The cost of gas that customers pay each month is adjusted based on the projected cost that Southwest Gas pays suppliers to purchase gas for customer use during that month. When the gas cost that customers pay does not exactly match what Southwest ultimately pays, the difference is either refunded or collected in future months. Gas Cost rates are automatically implemented; however, an informational filing is made each month with the Commission.
 
Filing
A comprehensive presentation is prepared in support of the rates and adjustments Southwest will propose in the rate case. In addition to a legal pleading, the presentation contains testimony, exhibits, and schedules. This package of materials is referred to as the rate case. The Application is filed with the Commission. Since the test period is a future test period, the rate case process is intended to be concluded prior to the beginning of the test period so that rates may be implemented on January 1 of the test period year.
Discovery and Audit
A significant part of the rate case process involves discovery and audit. The process provides Commission Staff, Consumer Advocates, and other interested participants (parties) the opportunity to ask questions regarding the information that Southwest filed in its rate case application. These questions are known as data requests. From the answers to these questions, their review of Southwest's case, and an audit of Southwest's accounting records, the Commission Staff, Consumer Advocates, and other parties file testimony stating their opinion as to the appropriate resolution of the rate case.
Hearings and/or Settlement
The Commission conducts an evidentiary hearing where each party makes its presentation through sworn testimony and is subject to cross-examination by the other parties. The formal hearing process is conducted at the Commission's offices and is presided over by the Administrative Law Judge (ALJ). Like other legal proceedings, evidence is presented and witnesses testify in support of, and are cross-examined on, their respective cases. Once all of the evidence and witnesses are presented, the ALJ issues a proposed decision.
 
Occasionally, the parties are not that far apart in their respective positions and are able to resolve their differences through negotiation. When that occurs, a settlement document is prepared and presented to the Commission. The parties may initiate settlement discussions at any time prior to, during, or after the hearing process. However, most settlement discussions occur prior to the hearing.
 
Proposed Decision
Once all of the evidence and witnesses are presented, the Administrative Law Judge issues a proposed decision. The proposed decision is submitted for consideration, and potential modification, by the Commission.
Commission Order
The final step in the process is the Commission Order. This details what requested changes were approved and how and when those changes will take effect. The Commission Order can grant some, all, or none of the rate changes requested by the Utility. 
Nevada
Determination of Need/Preparation of Application
To determine if a rate case must be filed, a test year must be established. The test year is a twelve-month historical period that will be used to evaluate the need for a requested change in rates. The number of customers, sales volumes, expenses, and other items are accumulated for the test period. Expenses such as labor rates, employee benefits, and materials and supplies, for instance, are examined to determine if they are materially different from when rates were previously set. Other items such as the addition of new service lines and meters, or a significant increase or decrease in the number or types of customers served will impact the need to request changes in rates. If it is determined that current operating revenues are deficient and do not recover the cost of providing service, an application is prepared for filing with the Public Utilities Commission of Nevada (PUCN or Commission).
 
Another more common type of rate proceeding is the Annual Rate Adjustment (ARA) Rate Proceeding. The ARA process is the manner in which the Company requests ity to establish rates pursuant to the Variable Interest Expense Recovery Mechanism; Unrecovered Gas Cost Expense Rates; System Shrinkage Rates; Imbalance Commodity and Reservation Rates; Renewable Energy Program Rates; General Revenues Adjustment Rates; and Conservation and Energy Efficiency Rates.  In Nevada, the annual ARA filing is made in early June.  The Company also files Applications related to the Gas Infrastructure Replacement Mechanism in June and October each year.
Filing
In both a general rate case and other Application filing, a comprehensive presentation is prepared in support of the rates and/or request the Company is proposing.  In addition to a legal pleading, the rate case or other Applications generally contain expert testimony, as well as supporting exhibits and schedules. Once the general rate case or other Application is filed with the Commission, a ruling is issued within 210 days from the date of the filing on the case presented.
Discovery and Audit
A significant part of the regulatory process involves discovery and audit. The process provides Commission Staff, Consumer Advocates, and other interested participants (parties) the opportunity to ask questions regarding the information that Southwest Gas filed. These questions are known as data requests. From the answers to these questions, their review of Southwest Gas' case, and an audit of Southwest Gas' accounting records, the Commission Staff, Consumer Advocates, and other parties file testimony stating their opinion as to the appropriate resolution of the rate case, other application or regulatory proceeding.
Hearings and/or Settlement
The Commission conducts an evidentiary hearing where each party makes its presentation through sworn testimony and is subject to cross-examination by the other parties. The formal hearing process is conducted at the Commission's offices and is presided over by the assigned Commissioner. Like other legal proceedings, evidence is presented and witnesses testify in support of, and are cross-examined on, their respective cases. Occasionally, the parties are not that far apart in their respective positions and are able to resolve their differences through negotiation. When that occurs, a settlement document is prepared and presented to the Commission. The parties may initiate settlement discussions at any time prior to, during, or after the hearing process. However most settlement discussions occur prior to hearing.
Commission Order
The final step in the process is the issuance of the Commission Order. The Order is prepared by the assigned Commissioner, but does not become effective unless approved by a majority vote of the full Commission. The Order describes what requests are approved and how and when those changes will take effect. The Commission Order can grant some, all, or none of the changes requested by the Utility.