Southwest Gas home customers in Tucson and across Arizona can expect to pay about $5 more per month for the next two years after state regulators approved higher rates to pay for increased wholesale natural-gas costs.
But a break on a separate part of their bill will soften the blow.
The Arizona Corporation Commission, at its July open meeting, voted 4-1 to allow Southwest Gas to recover about $357 million by raising a usage-based rate adjustment mechanism that covers excess costs for wholesale gas.
With the higher surcharge, a residential customer using an average of 24 therms per month would see an estimated bill increase of about $4.98 per month over the year, varying from $2.33 per month during the summer to $7.61 in winter months.
Small-business customers will see their bills rise an average of $49.58 per month, and other business customers will see commensurate bill increases. Ratepayers with higher-than-average gas usage will see larger increases.
Also at its July 12 open meeting, the commission ordered a decrease in Southwest Gas' Delivery Charge Adjustment Rate, resulting in an average residential bill decrease of $2.25 per month.
Commissioner Nick Myers noted that the decrease in that rate, which is adjusted annually to reflect any difference between Southwest Gas' authorized revenues and actual revenues, should help offset the increase in the wholesale-gas surcharge.
Southwest Gas, which distributes but doesn’t produce natural gas, said factors such as colder weather, higher commodity costs and lower storage inventories caused significant volatility and higher-than-average prices in the wholesale gas market.
Wholesale natural-gas prices rose amid the pandemic emergency and the war in Ukraine, with a benchmark weekly spot price peaking at a 14-year record high of more than $9 per thousand cubic feet of gas last August.
But prices have since declined, averaging around $2 per thousand cubic feet in June before rebounding recently, according to the U.S. Energy Department.
The higher purchased-gas charge comes after the ACC approved a general rate increase for Southwest Gas in January expected to raise the average monthly bills of home customers by about $3 or 6.7%.
The company had initially sought a revenue increase that would have raised home gas bills 11.6%, after a 9.7% increase that went into effect in January 2021, to recover about $677 million in system upgrades the company has made or planned since 2019.
Southwest Gas serves more than 2 million customers in Arizona, California and Nevada, including more than a million customers across Central and Southern Arizona.
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