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MDU rate settlement approved, but final impact to customers unclear

BISMARCK – About 99,000 North Dakota customers of Montana-Dakota Utilities who saw a temporary increase in their natural gas bills last month will continue to pay higher rates after state regulators Monday approved the company’s first general rate hike since 2004.

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However, the precise impact on customers’ monthly bills isn’t known yet because the settlement agreement between the Public Service Commission and MDU didn’t resolve issues over how the company will collect the revenue across its different classes of customers and whether there will be a change in the basic service charge.

A public hearing on those issues is set for 8:30 a.m. Feb. 5 in the commission’s hearing room at the Capitol.

In September, MDU applied to increase its North Dakota natural gas service rates to boost annual revenues by $6.8 million, or 6.4 percent over current rates.  

To justify the increase, the company cited about $100 million it has invested in its distribution system and other infrastructure and services since 2004. The proposal included increasing charges for residential customers by 9.5 percent.

In October, the commission approved MDU’s request for an interim rate increase of up to $4.5 million, or about 4.2 percent. That across-the-board increase took effect Nov. 17, resulting in the average customer paying an additional $2.52 per month on their bill.

The final settlement agreement approved Monday calls for a $4.2 million increase in annual revenues and a 3.95 percent overall rate increase.

Commissioner Julie Fedorchak called it a good settlement agreement, noting it’s more than $2 million less than what MDU originally sought.

“I think the company has shown that they are doing what they can to hold down costs and making significant investments in the distribution service to customers in North Dakota,” she said.

Fedorchak said the rate hike may seem counterintuitive as the public sees the price of natural gas dropping.

“It’s important to emphasize that this rate increase is being driven by the infrastructure to receive the gas, not by the price of gas,” she said.

MDU spokesman Mark Hanson said it’s a good agreement for the company “and, we feel, for the customers, as well.”

Under the rate design changes proposed by MDU, residential customers would see a final rate increase of $2.72 per month, or 32 cents more than the interim rate hike.

That would be an increase of about 5 percent for residential customers, while the rate for commercial customers would increase 2.2 percent. Hanson said a study of the costs of service found that residential customers weren’t paying as much as much as they should when compared to other classes.

In another rate-design issue that still must be resolved, MDU proposes doubling its basic service charge from $9 per month to $18 per month. In turn, it would eliminate its volume-based distribution delivery charge that tends to fluctuate with the seasons.

Fedorchak said the commission will be “scrutinizing pretty carefully” the new rate designs.

In North Dakota, MDU serves 99,000 natural gas customers in 76 communities, including Bismarck, Devils Lake, Dickinson, Jamestown, Minot, Valley City and Williston. About 87 percent of those are residential customers.

Mike Nowatzki

Mike Nowatzki reports for Forum News Service. He can be reached at (701) 255-5607.