Fancy dinners, car rides found in Southwest Gas rate request

Southwest Gas filed an application with the Public Utilities Commission of Nevada in May to raise its rates for natural gas to the tune of roughly $4 per month per house on average. The utility said that the rate increase is needed because of a change in the cost of capital, updated costs of capital investments and incremental expenses related to its Customer Data Modernization Initiative, which would replace outdated customer data systems.

But tucked inside the list of expenses that Southwest Gas was trying to recover as part of that rate increase, state regulators found several costs they said were inappropriate and have no business being passed onto ratepayers. Those include:

Senior executives racking up a dinner tab of more than $4,700, including more than $1,500 worth of alcohol.

Chartering a luxury vehicle for two executives in New York City, totaling $604. Staff noted that an estimated Uber ride for the same trip would have cost $68.

Several stays for board members at the Four Seasons in Las Vegas, which included several mini-bar charges, a limousine and even a manicure and pedicure at the hotel’s spa for one board member

There were also Vegas Golden Knights tickets for board members, multiple first-class airline tickets when regulators said staff and board members could have flown coach, and even a $1,425 charge from a zip line adventuring company in Pennsylvania, according to the report written by Paul Maguire, a regulatory staff member for PUC, filed into the case docket on July 24.

Charges will be removed

Southwest Gas in a statement Wednesday said that the company has agreed to remove those expenses from the rate case.

“Maintaining the trust of our customers and serving our communities responsibly drives us to operate our gas system safely and efficiently, while keeping natural gas bills one of the lowest utility bills for our customers,” the statement said. “Unfortunately, there were a handful of expenses identified by the parties that should arguably not be recovered in rates. The Company agreed and removed them from consideration and those remaining in the Company’s proposal reflect a level of business expenses incurred by similarly situated companies.”

The PUC held a hearing on the rate case last week, and a draft order is expected to be issued in late September.

Maguire noted in his testimony that the utility can only ask for recovery of costs related directly to expenditures and investments that go toward providing natural gas services to customers.

“If (Southwest Gas) wants to spend money on these types of expenditures, it can so do by taking it out of shareholder profits,” Maguire wrote.

In the documents filed last month, regulators noted the company’s response to their questions about whether it was appropriate of the utility to pass those types of costs onto Nevada ratepayers. Southwest Gas called the various expenses “reasonable.”

That appeared to irk regulators working on the rate case.

The company’s response, PUC fiscal analyst Nicole Loar wrote in another document filed last month, is basically that charges are small, but never actually defended why they should be considered prudent to pass onto customers.

“Overall, I believe Ratepayers should not bear the cost of expenses that are unreasonable, no matter how small they become after allocations,” Loar wrote.

Past problems with charges

This isn’t the first time the gas utility has included these kinds of costs as part of their reasoning for rate increases.

Southwest Gas last requested a rate increase in 2018, and PUC regulators found very similar expenses then, from extravagant dinners, some $1,600 for regular 10-minute chair massages and a golf club membership.

Despite staff finding those issues two years ago, it didn’t seem to change the company’s behavior, Maguire noted.

Maguire recommended that the PUC reduce the executive salaries attributable to rate recoveries by 10 percent. But, he wrote that he wanted to give the board flexibility to approve a 20 percent cut “if the commission wants to send a stronger signal that (Southwest Gas) should not have sought recovery in rates for these types of costs and expenses, especially when the majority of customers have been either laid off or are facing some kind of financial stress given the current economic crisis occurring because of the COVID-19 pandemic.”

“It has been my experience that when senior management is held accountable for the problems within a company, those problems are typically addressed very quickly.”

Contact Capital Bureau Chief Colton Lochhead at clochhead@reviewjournal.com. Follow @ColtonLochhead on Twitter.