12-05-2025
Southwest Gas asks to recover higher costs of ‘Call Before You Dig' line location
(Photo: Southwest Gas excavation safety presentation)
Southwest Gas says it's getting more requests to locate customers' gas lines through its 'Call Before You Dig' service than anticipated in its last general rate request, and is asking the Nevada Public Utilities Commission to allow it to pass on the costs to customers via a process called single-issue ratemaking.
''In 2023, close to 30 percent of Southwest Gas' companywide damages were due to homeowners and contractors not calling 811 before excavation,' says the utility's website.
''Call 811' line marking service is free for residential and commercial digging jobs of all sizes and for all types of projects, and is the law.'
While free to the caller, the service comes at a cost to the customer.
From June 2022 to May 2023, line location expenses paid by customers totaled just under $11.7 million in Southern Nevada and about $2 million in the north.
The utility won approval to recover those yearly costs as part of a $59.1 million general rate hike that went into effect last year. Now Southwest Gas is asking for authority to recover an estimated $3.5 million a year for the next two years.
Southwest Gas contends it's not technically seeking a rate hike, but rather permission from the PUC to establish a regulatory account 'to track the actual level of line location-related expenses the Company incurs. This will allow the Company to recover its actual costs – no more, no less – at a future date after consideration by the PUCN,' spokesperson Amy Washburn said via email.
In testimony provided to the PUC, utility executives contend the cost of line location has skyrocketed since 2016, with the utility recovering a smaller portion of the expense.
David Chairez, regulatory manager for the Nevada Attorney General's Bureau of Consumer Protection, testified to the PUC that the utility's holding company, Southwest Gas Holdings, 'is doing very well… with net income of $261 million, an increase of $19 million' over the previous year, while its operation and maintenance expenses per customer are unchanged.
Chairez argues the PUC should deny the application to establish a regulatory asset for line locating expenses because it's an attempt to engage in single-issue ratemaking – legislative or commission actions that set or affect rates outside of a general rate case. The practice is permitted in some cases, such as when it's required by statute, or because of a natural disaster, such as a hurricane, that results in unforeseen expenses for the utility.
Opposition to single-issue ratemaking is based on the premise that a utility's revenue requirement is calculated on aggregate costs, rather than one cost related to a single component of its operations.
Rates are designed to cover a utility's costs and provide for a fair and reasonable return on investment. Chairez argues the proposed rate solely benefits Southwest Gas shareholders.
When requests from Nevada's Consumer Advocate for single-issue ratemaking would have benefitted the customer, Southwest Gas and the PUC opposed it, Chairez testified, including when President Donald Trump, in his first term, lowered corporate tax rates from 35% to 21%, resulting in a windfall for the utility.
The utility, which enjoyed the tax relief immediately, delayed passing the savings of Trump's corporate tax adjustment to ratepayers for nine months until its next rate case, during which time customers were paying rates that were based on the utility having to pay a higher federal tax rate than it was actually paying. That cost Southern Nevada customers $7.2 million in savings and Northern Nevada customers $1.3 million by waiting, Chairez estimated.
The Bureau of Consumer Protection's position is at odds with that of PUC staff, who support the application.
'Southwest Gas asserts it has experienced a dramatic increase in the level of line locate requests in recent years,' PUC staffer John Brownrigg testified, and recommended that regulators approve the utility's request to account separately for the increased line location costs now, and include the expense in the utility's next general rate case.
Unlike electric utilities, Southwest Gas is not bound by law to file a general rate case every three years, but rather at its discretion.
The average customer currently pays $15.20 a year for line location efforts. The utility's request, if approved by the PUC, would eventually add about $5 a year.
Chairez, in his testimony, notes Southwest Gas is required to comply with the 'Call Before You Dig' statute 'and that obligation will not change if the PUC denies the request.'
Southwest Gas is also currently asking state lawmakers to allow it to engage in alternative ratemaking, a policy shift that could pose a cost burden to customers, according to opponents of the legislation, because it avoids the transparency of a general rate case.
