Southwest Gas could soon change its Arizona base rates every year instead of waiting years between rate cases, and the Arizona Corporation Commission's own staff now supports the idea. Staff backed it in testimony filed October 13 in docket G-01551A-26-0018, though with more conditions attached than the utility asked for. Commissioners have not ruled. Hearings start December 7 in Phoenix, according to the company's public notice.
The case began in February, when Southwest Gas, which serves about 1.2 million Arizona customers, asked for roughly $101 million more a year. That is about 10.41% above current revenue, and the company also wants a 10.25% return on equity. Staff had already pushed back on the size of the request in earlier testimony, recommending $58.2 million instead.
What Staff Wants in Return
Staff's version keeps the commission involved at every step. Each annual update would rest on auditable historical accounts, minus any costs commissioners have already disallowed, and no new rate would take effect until they sign off. Southwest Gas would get one adjustment a year and five at most before it has to file a full rate case again. Return on equity, depreciation and the way costs are split among customer classes would stay fixed in the meantime.
Rates set in this case would also need a full year in effect before the first adjustment. The sharpest disagreement is over how far earnings can drift before anything happens. Staff wants a band of 50 basis points on either side of the authorized return, where the company proposed 20. Under staff's approach, a year of modest over- or under-earning would leave rates alone.
Arizona Has Tried This Once
UNS Gas went first. Commissioners approved its mechanism on a 4–1 vote in February, with the chairman arguing it would cut regulatory lag and make increases more gradual, and promising to watch it closely. That approval used a 50-basis-point band as well. The first real test came September 1, when UNS Gas made its initial annual update filing. The utility says it earned about 7.0% on equity, below its allowed range, and it is asking for roughly $6.1 million, or 7.7%, in added non-fuel revenue starting in April 2027.
Not everyone accepts the model. Attorney General Kris Mayes asked the commission in March to rehear the UNS Gas decision, arguing it moves financial burden from shareholders to customers and leaves too little time to contest each increase. Elsewhere, Maryland regulators recently ended a multi-year rate plan pilot, another departure from the traditional rate case.
What Changes on the Bill
Arizona gas customers already live with one moving part. Southwest Gas resets its gas-cost rate every month, and an annual mechanism would add a second on the delivery side. Staff would also retire several existing adjusters if the framework is approved, among them the delivery charge decoupling mechanism. Some costs would be collected differently, not necessarily eliminated.
For a business with Arizona sites, the practical move is to budget commodity and delivery costs as separate lines and to check efficiency paybacks against more than one delivery-rate path. Arizona is not alone in this debate. Regulators elsewhere are taking a harder look at utility capital spending as investment runs ahead of cost recovery. Southwest Gas gets to answer staff before the December hearing, where commissioners will hear whether the company can live with the tighter version.
