MPC asks for increase in gas rates

By CHARLES S. JOHNSON Missoulian State Bureau

HELENA - Montana Power Co. on Friday asked the state Public Service Commission for a pair of rate increases that would raise natural gas bills by 21 percent, or about $11 a month for the typical consumer.

The utility's rate increase request would have been higher - 49 percent - but was offset partially by proceeds from the sale of its oil and gas business, according to Pat Corcoran, MPC vice president for regulatory affairs.

So in one filing Montana Power requested a $90.7 million annual increase, or a 49 percent increase. Its other filing offsets the first one by $32.5 million to leave a net increase of $58.2 million a year, or 21 percent.

For the typical "core" Montana Power customer who uses 120 dekatherms of natural gas a year, the net results of the two filings will be an overall increase of $132.36 a year, which averages $11.03 a month, but would be higher in winter months and lower in summer months. Under the plan, a typical consumer would pay on average, $64.56 a month, including the full rate increase, with the actual rates varying by season.

The rate increase, if approved by the PSC, will affect 154,172 customers, both residential and small commercial, according to Claudia Sears Rapkoch, a spokeswoman for the company.

Montana Power asked the PSC to grant it the full rate increase request as an interim or temporary rate boost until the permanent rate is determined by the state regulatory board.

Corcoran called the filings "a good news story" because the net request is not as high as it could have been.

"Really Montana Power Co.'s customers are benefiting from a low-cost gas supply contract as well as the sharing of the proceeds," Corcoran said.

He said Montana Power files a gas tracking case, or "tracker," annually to update its gas commodity costs. The first filing calculated the amount of under- or overcollection of gas costs for the previous tracking period and adjusts the amount upward or downward to the forecasted gas costs for the next year. He said it was a flow-through cost to customers, and Montana Power does not earn any profit on the gas commodity costs.

The filing that proposed the 49 percent rate increase was because of an under-collection for the previous year and estimated higher prices for gas in the future.

The second filing, Corcoran said, helps ease the burden of the increases. Montana Power agreed, as part of its natural gas restructuring case in 1997, to share certain profits it realized from selling gas production properties that historically were part of the utility.

On Oct. 31, 2000, Montana Power sold its oil and gas business to PanCanadian Petroleum Ltd. of Calgary, which included the former utility properties. The amount of that gain that will be returned to several classes of Montana Power customers - core customers such as residences and small businesses that are still on the system, and Tier Two customers such as schools and hospitals - is $32.5 million, which partially offsets the gas cost increase.

Corcoran said Montana Power obtains about half of its supply through a buy-back contract with PanCanadian at $1.50 to$1.60 per dekatherms, which expires July 1, 2002. That portion of the supply costs has not increased.

The rest of MPC's gas supply is bought from 15-20 different suppliers using a variety of long- and short-term contracts. Some at are fixed prices, while others are tied to market rates. He said market rates for natural gas in this region have been trading as high as $9 per dekatherms this winter.

A year ago, Corcoran said Montana Power projected that gas costs would be $1.97 per dekatherms, while actual costs are now $6-$7 per dekatherm. With the buy-back contract factored into the overall mix, the company projects costs of $3.83 per dekatherms.

Natural gas costs are rising nationally, Corcoran said, because of a temporary lag between increased demand and production has pushed wholesale prices to new highs. Two years ago, natural gas producers cut back on drilling because low wholesale prices limited their ability to sell gas profitably. However, homes, businesses, factories and power generation plants have used more natural gas, he said,

The number of rigs drilling for natural gas has more than doubled from last spring, which should relieve price pressures next year, the American Gas Association said. But a forecasted cold winter is expected to keep prices high this heating season.

The U.S. Department of Energy forecasts on average residential customers will pay 40-50 percent more for their natural gas service this year.

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-- Martin Thompson (mthom1927@aol.com), January 20, 2001