Southwest Gas fined $94,000 by utility regulators over cost recovery from 2016 gas explosion

Nevada News

State utility regulators have agreed to assess a nearly six-figure fine against Southwest Gas after discovering the natural gas company had ignored a previous directive and attempted to finance the cost of replacement equipment through higher rates on its customers.

The Public Utilities Commission voted unanimously on Wednesday to approve a $94,000 fine against Southwest Gas after commission staff discovered that the company had sought to include the cost of a replacement backhoe destroyed in a 2016 gas leak and explosion in its proposed rates to customers.

The natural gas leak and explosion — caused by a Southwest Gas construction crew hitting a natural gas pipeline — was deemed by the PUC to be the most significant pipeline-related accident in the state since 2010, causing more than 3,000 homes to lose service and 30 homes to be evacuated. The commission and the company reached an initial settlement in 2017 that required Southwest Gas to pay a $300,000 civil penalty and included an order to not pay for a replacement backhoe destroyed in the explosion through rates charged to the utility’s customers.

But PUC staff discovered during the company’s 2018 general rate case that the cost of the replacement backhoe was not removed from the gas utility’s proposed rates. The $94,000 fine was computed based on the maximum $1,000 per-day fine over the 94 days that elapsed between the initial general rate case filing and the filing of a corrected version.

Attorneys for Southwest Gas opposed the fine, saying that inclusion of the cost for a replacement backhoe was an “administrative error” that was caught before any customers had to pay for the replacement equipment through their rates. But in their order approving the fine, members of the Commission wrote that the size of the fine was appropriate and that it wasn’t clear that the replacement costs would have been removed sans intervention by PUC staff.

“The Commission rejects any insinuation by Southwest Gas that staff’s intervention in Southwest Gas’s failure to comply with a Commission order somehow absolves Southwest Gas from the repercussions of violating not only the Commision order, but the stipulated agreement to which it was a signatory,” commissioners wrote in the order.

The order requires the administrative fine to be paid within 60 days.

Leave a Reply