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Get the Facts on Decoupling

With utility companies in Arizona pursuing decoupling, there is a lot of talk about its impact on customers and utilities. Get the facts on decoupling by learning whatís true and whatís not.

MYTH: If I use less gas, my gas bill will remain the same or be higher

FACT: Customers who reduce their natural gas consumption will save money. For every unit of natural gas a customer saves, they will not pay for the natural gas they did not consume. The following example further illustrates this point.

Example: If Mr. and Mrs. Smith consume the system average amount of natural gas and reduce their usage by 10 therms, they will not pay the associated $1.00/therm cost of natural gas, which means they save $10.00. Even if the maximum decoupling adjustment of $1.50 is on their bill that month, Mr. and Mrs. Smith still realize net savings of $8.50.

MYTH: Decoupling guarantees a profit for Southwest Gas

FACT: Decoupling does not guarantee profits for Southwest Gas. Decoupling ensures Southwest Gas retains no more and no less revenue than what is authorized by the Arizona Corporation Commission (ACC). Decoupling actually increases the incentive for Southwest Gas to prudently manage costs because it will no longer be able to increase profits through increased sales.

MYTH: Decoupling shifts risk from the Company to its ratepayers without consumer protections

FACT: There are multiple consumer protections included in the decoupling options currently being considered by the ACC. Those protections include: a cap on the decoupling surcharge, a decrease in the Companyís return on equity (ROE), an earnings test to ensure the Company is not over-earning, quarterly and annual reporting requirements to ensure the decoupling mechanism is working as expected, and a limit on when the Company can return for a rate increase. In fact, these protections exceed those requested by the advocacy group, AARP, in a recent white paper.

MYTH: Customers could face significantly higher bills as a result of decoupling adjustments

FACT: The proposed settlement agreement in Southwest Gasí pending rate case establishes customer protections, one of which is a cap on the amount Southwest Gas will be permitted to recover through the decoupling mechanism. Southwest Gas anticipates that most decoupling adjustments will be less than $1.50. This belief is supported by industry studies that have found decoupling adjustments to be very modest. In Nevada, Southwest Gas is currently applying customer credits after earning more than authorized by the Public Utility Commission.

MYTH: Decoupling is a ratemaking scheme designed by the Company

FACT: Due to the increased focus on energy efficiency and conservation, decoupling is a growing trend in the United States and nearly half the public utility commissions in the United States have approved revenue decoupling mechanisms. Click here for a map showing which states have adopted decoupling. This concept has been thoroughly studied and vetted in Arizona in various ACC workshops, hearings, and other public meetings. The decoupling options proposed in the Southwest Gas General Rate Case are the product of the ACCís decoupling policy statement and settlement negotiations that included diverse stakeholder groups and interested parties.

MYTH: I donít care to pursue energy efficiency, so decoupling does not provide any benefits for me.

FACT: There are a variety of customer benefits associated with decoupling and the proposed settlement agreement. In addition to allowing the Company to aggressively support energy efficiency, it also:

  • Ensures customers pay no more than the amount authorized by the Commission
  • Prevents the utility from increasing profits through increased sales
  • Protects customers from large bill increases following an extreme weather event
  • Limits the size of the decoupling adjustment to no more than $1.50 per month
  • Requires an annual earnings test to ensure the Company does not over-earn, as well as quarterly and annual reporting requirement
  • Requires a customer outreach and education plan
  • Implements a 5-year rate case moratorium that will provide bill stability to customers