Nov 28 - Knight Ridder/Tribune Business News - John G. Edwards Las Vegas Review-Journal

Typical residential customers in Southern Nevada are paying $875 more each year for electricity and natural gas than they did about six years ago, Public Utilities Commission data show. Blame the increase on skyrocketing prices for natural gas, which is in short supply and is used for most power generation in the West, as well as home space heating and cooking.

Nevada Power Co. customers are paying about 51 percent more for electricity than they were in May 2000, shortly before the Western energy crisis, the regulatory agency said. In dollars and cents, that means the typical residential customer's monthly bill is now $127.39, or about $43.10 more each month than in 2000.

That adds up to an extra $517.20 each year for electricity for a typical customer, compared with six years ago.

Bills for Southwest Gas Corp.'s residential customers have more than doubled since November 1999, although the dollar effect has been less.

On a year-round basis, the typical residential natural gas consumer is paying $57.52 a month, compared with the average bill of $27.65 per month six years ago. Winter bills are typically the highest bills for natural gas consumers, however.

Together, the average household is paying nearly $900 more each year on utility bills, even though the consumer price index rose 18 percent between November 1999 and September this year, the latest month for which the number is available from the U.S. Bureau of Labor Statistics.

"I can believe that," said Ellsworth "E.T." Lambert, a 70-year-old retired oil-field worker. He is raising two teenage grandchildren with his wife, Glenetta Lambert, and has been struggling to pay bills on his and his wife's Social Security benefits.

"Everything has gone up except Social Security," he said.

He is exaggerating some. Over the past five years, Social Security cost of living increases have boosted benefits by 12.9 percent, a small change compared with increases in natural gas and electric power rates.

Soaring utility bills have squeezed the budgets of consumers who live on so-called fixed incomes, such as Social Security.

Although many younger people can take a second job to make ends meet, Lambert said he cannot work anymore because of medical problems, including a heart condition. His wife has been unable to work since a motorist drove into the bus she was driving in California 12 years ago.

They are raising two grandchildren: Maurissa Morones, 13, and her brother, Jacob Morones, 12.

"They eat us right out of house and home," he said, laughing.

The family rents a four-bedroom house so the children can have separate bedrooms. They rely on $1,650 in monthly income from Social Security to cover living expenses.

Their power bill hit $270 a month over the summer.

"Our electric bill was way sky high, because I can't take the heat. So I have to keep the cooler on," he said.

Help of Southern Nevada, a nonprofit organization, provided the family with financial assistance to help pay their power bills. Lambert is grateful.

"I love those people," Lambert said.

Given Southern Nevada's warm winters, natural gas bills are "easier to handle," he said.

Many residential customers, however, may not realize how much gas rates are increasing.

The Public Utilities Commission authorized Southwest Gas to increase its wintertime bills 15.6 percent beginning this month.

That's an extra $11.50 per month, bringing the monthly tally to $82.29 for the typical resident using 6,400 cubic feet of gas.

Local utilities have not been getting fat with profits, however. Most of the money has slipped through their fingers as they pay more and more for fuel and, in the case of Nevada Power, wholesale power priced based on the price of generating electricity from gas-fired plants.

"What's driven the majority of the increases has been the fuel and purchased power," said Eric Witkoski, the state consumer advocate. "The general (nonfuel and energy) rates have been fairly normal."

General rates are the parts of rates that reflect administrative, operation and maintenance costs, along with return on investments.

Roberto Denis, senior vice president of Nevada Power parent Sierra Pacific Resources, agreed with Witkoski that fuel is driving rates higher. Nevada Power's total nonenergy costs increased 9.2 percent since May 2000, pocket change compared with the 89 percent increase in fuel and purchased power costs, utilities commission data show.

Continually climbing prices for natural gas are a key factor in rate changes at Nevada Power, as well as at Southwest Gas. About 80 percent of the power that Nevada Power sells to customers is generated at natural-gas fired plants Nevada Power owns or gas-fired plants owned by others, Denis said.

At Southwest Gas, the portion of the bill stemming from general, or nonfuel, rates increased 20 percent between November 1999 and today, General rates reflect the utility's profit, administrative expenses, operational costs, maintenance costs and capital improvements. But the part of the bill that compensates Southwest Gas for the prices it is paying for the fuel soared 137 percent.

"As we've been saying for some time -- new supplies of natural gas have not kept pace with increased demand," Southwest Gas Vice President Bill Moody said in a statement.

He attributed some of the increased demand to use of gas for power generation and said the nation needs to increase natural gas exploration and development.

Southwest Gas owns no gas wells; the company can only hedge the risk of higher prices for natural gas by buying financial instruments that cap the price the utility pays for gas on the wholesale market.

Nevada Power can similarly cap the price it pays for fuels, including natural gas and coal, for a price. But Denis said the company has asked state officials to keep its proposed hedging strategy confidential for fear the information could affect the prices it pays for hedging.

Meanwhile, Denis said, the electric company is seeking to diversify the types of fuels it uses by reducing its reliance on gas for power generation and pursuing renewable power sources, such as solar and wind power, and power from coal-fired plants.

Increases in the cost of fuel and purchased power do not contribute to Nevada Power's profits. So the company and stockholders also are affected by increases in fuel and purchased power prices, particularly when those prices influence consumer behavior.

"The higher the prices go, the less the consumer consumes," Denis said.

Neither investors nor gas and electric utility customers can expect big declines in gas prices soon.

"Until the existing supply and demand balance changes, including diversifying the fuel mix for electric generation ... (gas) prices will continue to be impacted," Moody said.