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Wendover Gas customers will not be hit by a 50 percent increase in their monthly bill said company trustee Steve Shute but rather an 11 to 13 percent hike.
“I know the city attorney and the lawyers for the casinos quoted a 50 to 60 percent rate hike,” Shute said Wednesday. “But that simply isn’t true. There is a 50 to 60 percent increase but it is only one small component in the overall calculation for the rate increase.”
According to Shute, that increase is in the margin or profit Wendover Gas would be allowed to take on every gallon of gas it sells.
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“I will send you the paper work and you can do the math yourself,” Shute added. “I don’t know why everyone got it so wrong but they did.”
Shute’s letter:
I have worked with and for Nancy Green since inception of Wendover Gas ca 1996. I was appointed by the Nevada Public Utilities Commission in late 2008 to help the utility through a tough winter. We are still working on a long-term solution.
As Receiver, I raised rates in January 2009, but those rates were still below the true cost of service. The utility needed another rate increase to sustain operations this winter.
The new rates I recently implemented are closer to that cost of service, and I believe are enough to sustain the utility. The various reports of 50-60% increases are inaccurate. Gas utility rates are usually 3 components, only one of which changed:
1) Gas Cost is the actual cost of the commodity, in this case propane. The Utility adjusts its rates monthly to pass through the exact cost of gas, which is currently about $1.80 per gallon or $2.00 per Therm. As do most modern gas utilities, WenGas bills by the Therm (100,000 BTU) to allow customers to compare costs with other fuels. This calculation method did not change.
2) Monthly Charge is a fixed fee each month for service regardless of use, much like the phone or CATV companies. This charge is $10 for Residential and $30 for Commercial customers. This did not change.
3) Commodity Charge is the margin charged by the utility for gas delivered, like a UPS fee to deliver a package. This charge increased from $0.65 to $1.00 per therm for Residential customers, and the same increase for Commercials.
The average Commodity Charge (component #3) increased by about 60%, but the average annual bill did not.
The average Residential uses 360 Therms per year. The average bill would increase from $1074 to $1200 per year, or $10.50 per month and about 11.7%.
Commercials use about 2500 Therms per year and would see a 13.5% increase.
At today’s rates, the utility is still distributing propane for about 20c per gallon less than typcial charges for tank deliveries of propane.
We have worked to get Natural Gas to replace propane in Wendover for the last 3 years. We had a viable Liquefied Natl Gas or LNG project in 2011 which would save the community at least $400,000 per year. The casinos refused to discuss it in detail.
Natural Gas is currently the best long-term heating solution for most homes and businesses, but any project to bring gas to Wendover must include the casinos.
The 50 to 60 percent rate increase was mentioned by city attorney Gary di Grazia in the West Wendover City Council’s mid December meeting and was quoted in friend of the court briefs opposing the rate increase by the Wendover Casino industry.
If Shute is correct and the hike is kept to 11 to 13 percent there might be life for the company. If he is wrong far from a life line that would save her company the emergency approval to raise gas rates 50 to 60 percent could be the final nail in the coffin for Wendover Gas.
“Last year we paid Wendover Gas $216,000,” said Elko School Superintendent Jeff Zander. “If the price is increased 50 to 60 percent you are talking about a $90,000 to $100,000 increase. We would certainly looked for alternatives.”
The emergency rate increase was approved last week in Elko District Court .
The hike was sought by local business Wendover Gas owned by Nancy Green at least in part to help offset a franchise fee debt, Green has been collecting from her customers but not paying to the city of West Wendover.
According to City Manager Chris Melville the financially troubled company is about $20,000 in arrears in paying the city its franchise fee and without the rate increase may go deeper in arrears.
“They are behind two quarters,” Melville said two weeks ago. “And those were light quarters during the spring and summer when the demand is light. For the year the franchise fee is about $60,000.”
While the Elko County School District is one of Wendover Gas’ biggest customer it will not be alone in looking for alternatives to minimize the impact of the rate increase or to avoid it all together.
Already the price Wendover Gas charges its customers is higher than trucked in propane that is delivered to tanks by other gas companies. The price difference lead to loss of Wendover Gas’ largest customers, the five Wendover Casinos, over the past decade.
“When you are talking about heating an entire hotel casino a couple of cents per gallon adds up to a huge savings,” said one casino maintenance manager. “Those savings allow us to spend more on jobs and promotion of our business. We understand that Wendover Gas is a local company but we have to look out for our interests and our bottom line.”
If it is imposed the 50 to 60 percent rate hike will mean be more than just a ‘couple of cents’ per gallon and may spur many smaller businesses and residential customers to look for a different source of gas or an alternative heating solution.
“One of my neighbors gets his propane trucked in,” said one Wendover resident. “I thought about it but it really didn’t seem worth the hassle of changing over, getting a tank installed and all that. But if the increase goes into effect I will either switch over or buy an electric water heater.”
While the 11 to 13 percent increase is much less it could still tip the balance between staying with Wendover Gas or looking elsewhere.
Shute however was optimistic that the increase would not cause a decline in the company’s customer base but put it well on the way to financial stability at least for the short term.
“My number one goal is to bring natural gas to Wendover to replace propane altogether,” he said. “I did put together a deal this summer that would have linked with the pipeline and would have put Wendover gas almost completely out of the picture. It would have also saved the West Wendover, Nevada and Wendover, Utah a combined $400,000 a year in energy costs. But to work we needed the support of Wendover casino industry. We didn’t get it.”
Shute acknowledge the one of the reasons for the projects failure is the animosity between Nancy Green and some of the other principle players in town.
“There are certainly personalities involved,” Shute added. “One would think that they wouldn’t be a concern in business decisions.”
The hard feeling between Green and City Manager Chris Melville as obvious during last week’s council meeting when Melville asked the council to act on the delinquent franchise fees owed to the city.
The council did act but not in the direction Melville wanted, instead of demanding immediate payment the council gave Green until April 1, 2012 to catch up on her arrears.
In addition to Wendover Gas, West Wendover charges a franchise fee to a variety of companies providing utilities to the public such as the telephone company, the electric company, cable television and cel phone providers.
In addition to being the smallest company assessed a franchise fee, Wendover Gas is also unique from the rest because it must by a physical product, gas, from a wholesaler and store it on site.
However the council’s largesse toward Green has raised some eyebrows first from her customers who assumed that charge had already gone to the city and also by other franchise holders.
“I think keeping it could be considered illegal,” said one Wendover business owner assessed a similar fee. “The money collected from shouldn’t be touched by the business and go directly to the city.”
But even with the deadline extension and the hefty rate increase doubts remain about the continued viability of one of Wendover’s oldest family owned businesses.
A major supplier of propane in Wendover for almost half a century, Green created Wendover Gas in 1997 and began piping propane to some residences and businesses.
In order to secure funding and right of way to lay the pipes Green and the city agreed on a franchise ordinance that gave Wendover Gas a monopoly on all piped gas. Where the ordinance falls short Green complained to the council is that the monopoly applies only to piped gas. There is nothing in the ordinance that prevents a business or a home from buying propane from another supplier and filling a tank on a regular basis.
Also by installing gas lines, Green’s pricing came under the jurisdiction of the Public Utilities Commission which had to approve each and every price adjustment Green wanted to make, while any potential competitor could slash the price of propane they were charging at a moment’s notice.
And that is exactly what happened Green told the council. Where she once had all of the five major Wendover casinos as her customers Green said now she had none.
While Green lost most of her major commercial accounts she has been able to retain most of her residential customers. That could end when the rate hike goes into effect.
This is not the first time Wendover Gas had problems securing supply are remaining solvent. PUC investigators made frequent mention of supply problems in 2005 and in 2007. In 2009 Green was just days away of losing her company to the city when at the almost the last minute she was able to secure a new source of propane after her original supplier refused to deliver more until he had been paid at least half of a $140,000 bill.