Rising Costs Push Gas Rate Request

August 16, 2002
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Rising operating and maintenance costs are driving Aquila Networks’ proposal to increase two of its natural gas rates by $14.28 million.

Aquila, formerly known as Michigan Gas Utilities, is seeking approval from state regulators to raise its transportation and distribution rates an average of 8.1 percent. Aquila’s commodity charge, the price customers pay for just natural gas, is unaffected by the utility’s Aug. 2 filing to the Michigan Public Service Commission.

The primary supplier of natural gas to the Grand Haven-Spring Lake area, Aquila Networks contends the higher transportation and distribution rates are required to recoup the costs of needed capital improvements undertaken in recent years on its natural gas and customer service systems. Aquila has asked the MPSC to rule its existing rates “unreasonably low and inadequate.”

“The company requires additional revenues to maintain system reliability and safety standards. Significant capital investments and increased operation and maintenance expenditures are essential,” Aquila stated in an extensive filing to the MPSC. “The company’s presently authorized rates will not allow it to collect revenues sufficient to cover its reasonable costs of providing safe and reliable natural gas service.”

The Kansas City-based Aquila Networks has more than 155,000 residential, commercial and industrial natural gas customers in Michigan, about 37,500 of them in northwest Ottawa County around the Grand Haven-Spring Lake area, as well as in Allegan County and a small portion of southern Muskegon County.

While the utility’s natural gas commodity charge has fluctuated greatly in the past two years because of intense volatility in the wholesale natural gas market nationwide that subsided late in 2001, transportation and distribution rates have not changed since 1995.

Aquila needs to increase rates even though the seven-year average operating expenses have grown at less than the rate of inflation, said Charles Hauska, the Monroe-based general manager for Aquila in Michigan.

“But like all other businesses, eventually the company must adjust its prices to recover the increased costs of doing business,” Hauska said.

Under the proposal to the MPSC, Aquila wants to raise its monthly “distribution charge” — which covers the cost of transmitting natural gas to customers — from $1.25 to $2 per thousand cubic foot of natural gas.

Aquila’s “customer charge” would increase from $7.25 to $8 a month for residential customers, and from $15 to $20 a month for small businesses. The customer charge covers the cost of internal operations such as meter reading, billing, customer service and labor.

Aquila estimates the rate increases would cost the average business customer $133 annually.

The MPSC is expected to take several months to consider and rule on Aquila’s request. Citing an immediate need to raise rates, Aquila has asked the commission to approve an interim increase of $9.2 million until the larger request is settled.

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