Southwest Gas Corporation is asking Nevada regulators to allow it to charge its customers in Nevada hundreds of thousands of dollars in dues to support the gas utility’s membership in a trade association that is leading the industry’s political efforts to undermine policies to electrify buildings.
The request by Southwest Gas Corporation (SWG) – one of the largest gas utilities in the nation, with over 2 million customers throughout Arizona, California, and Nevada – comes as part of an application to the Public Utilities Commission of Nevada (PUCN) to increase retail gas rates by 5.6% and 3.81% in its Southern and Northern Nevada rate jurisdictions, respectively. SWG says the purpose of its broader rate increase request is to cover capital investment projects and a service expansion to Mesquite, NV, among other reasons.
The trade association that SWG is requesting its customers to fund, the American Gas Association (AGA), has promoted gas-friendly building codes and coordinated efforts to pass laws that would make it more difficult for cities to adopt building electrification policies. AGA’s activities bolster Southwest Gas’ planned investments in fossil fuel infrastructure as it looks to maintain its long-term viability in its service states.
AGA uses dues from utility customers to fight electrification
Among costs included in the rate increase requests are 2021 membership dues for the AGA that total $664,594. It appears, according to SWG’s request, that AGA allocated only 3.8%, or $25,255, of those dues to lobbying for 2021, which SWG deducted from Account 930.2. Utilities typically request permission to recover expenditures they have placed in the 930.2 account in rate case proceedings.
In 2020, AGA reported over $30.2 million in revenue, of which $28 million came from utility membership dues, according to the trade association’s tax filings. Utilities like SWG then pass these fees on to their customers to pay each month through their gas bills if regulators allow them to do so in a rate case. AGA has used this revenue to coordinate efforts to block local action to cut greenhouse gas emissions.
Beyond coordinating legislative efforts, the trade group also launched ad campaigns on Facebook and Instagram in an effort to improve public perceptions of cooking with gas after years of research has shown that pollutants released by gas stoves have negative health effects.
SWG is fighting electrification in Nevada, Arizona
The battles that AGA has fought around the country to maintain gas utilities viability as cities and states move toward building electrification as a way to address climate change have touched down in SWG’s primary jurisdictions of Arizona and Nevada.
In 2020, Arizona’s legislature passed HB 2686, which banned cities and towns from passing codes or ordinances that could restrict the use of service from a utility provider. HB 2686 passed despite the plans of many Arizona cities to achieve an 80 percent reduction in GHG emissions by 2050. The cities of Phoenix and Tucson opposed the legislation. SWG supported the legislation and gave thousands of dollars to the campaigns of Arizona Senate President Karen Fann and Speaker of the House Rusty Bowers weeks ahead of those legislators’ introduction of the legislation favorable to the utility. The law became a template for other states to pass similar policies preempting cities from taking action.
AGA’s executives have denied the group’s role in “coordinating” those legislative efforts, likely because regulators often forbid member utilities like SWG from recovering costs of political advocacy from customers.
But AGA internal documents and audio recordings obtained and published by NPR suggest otherwise:
‘“We have run pro-gas choice legislation [in] Arizona, Tennessee, Louisiana … and Oklahoma. And so those states now, you have an option. You can’t deny someone natural gas service in their home,’ the AGA’s George Lowe told colleagues during an industry conference last November. Lowe, vice president of governmental affairs and public policy, said AGA member companies were eyeing 15 to 20 other states to pass similar bills this year.”’
In Nevada, Governor Steve Sisolak committed the state to reach net-zero emissions by 2050. During the 2021 legislative session, bill AB 380 — intended to introduce a managed phase-out of natural gas in buildings – died in committee. SWG mobilized chambers of commerce, public officials, and unions to defeat the legislation.
Pushback against utilities recovering trade association dues
Intervenors, commission staff, and regulators around the country are increasingly voicing concerns over utilities’ recovery of trade association dues in rate cases without proving the clear benefit customers receive for paying these fees. In Arizona, utility regulators recently agreed with the Residential Utility Consumer Office’s recommendation to allow Arizona Public Service to recover only 50% of its industry association dues. APS will now only be entitled to recover $1.17 million through rates for industry dues, rather than $3.58 million originally requested. The ruling may provide precedent for SWG’s rate case filed on December 3. Other states have gone further in their orders. For example, Kentucky regulators ruled in June 2021 that Kentucky Utilities’ cannot recover any of its dues to the Edison Electric Institute, the equivalent trade association to AGA for electric utilities, from ratepayers. The regulators said that the utility did not demonstrate how the trade association dues were “fair, just and reasonable.”
A similar question also sits before the Federal Energy Regulatory Commision (FERC). The Center for Biological Diversity (CBD) petitioned for a rulemaking to amend the Uniform System of Accounts to require that utilities record their trade association dues as presumptively non-recoverable (below-the-line and charged to shareholders) for rate recovery purposes.
Dozens of environmental groups, clean energy and consumer advocates – including the Nevada Attorney General’s Bureau of Consumer Protection (BCP), which participates in Nevada rate cases on behalf of customers – filed comments supporting the CBD petition. In their comments filed with FERC, the BCP wrote,
“By virtue of including trade associations costs and dues in Account 930.2 where those costs are presumed recoverable, the burden shifts from the utility companies to other groups, including the BCP, to argue against including these costs in rates. Instead, BCP agrees that trade association costs should be included in an account – Account 426 – where the utility has to justify inclusion of these costs rather than the other way around. Consumer advocates like the BCP do not have the same amount of resources available to them as private companies like utilities. By treating trade association costs as presumed non-recoverable, customers are prevented from being required to pay for costs and dues that act against the interests of the customers.” (Emphasis added)
FERC is scheduled to respond to CBD’s petition during its December 16 open meeting.
In Southwest Gas’ Nevada rate case, intervenors including the BCP will file direct testimony by January 14.