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PSC approves MDU natural gas rate hike

BISMARCK - North Dakota utility regulators on Wednesday approved a natural gas rate increase for customers of Montana-Dakota Utilities Co. that is smaller than what the company originally proposed but still spreads out the costs in a way that dre...

BISMARCK – North Dakota utility regulators on Wednesday approved a natural gas rate increase for customers of Montana-Dakota Utilities Co. that is smaller than what the company originally proposed but still spreads out the costs in a way that drew objections from AARP North Dakota.

The rate hike will generate an additional $2.6 million in annual revenue for MDU, or nearly a 2 percent increase, which is down from the 3.4 percent, $4.3 million increase that was proposed in February and approved as an interim rate increase in March.

Because the final increase is smaller than the interim increase, the average MDU natural gas customer will receive a refund of about $7 as a credit on their February bill. The average customer has been paying an additional $2.40 monthly under the interim increase, and the final increase will be $2.03.

MDU says the increase is needed to recover $212 million in investments in its natural gas facilities, which spokesman Mark Hanson said is being driven mostly by growing demand from the residential and commercial sectors.

AARP North Dakota, which intervened in the case, supported the overall lower revenue increase but objected to how residential ratepayers will bear the brunt of it – $2.26 million, or a 3.3 percent increase – while three of the four other ratepayer classes will see a decrease or no change.

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Commissioner Brian Kalk said a cost-of-service study by MDU showed that two customer classes – the Minot Air Force Base and the large interruptible class made up of MDU’s seven largest customers – were essentially subsidizing the residential class.

“Those groups that we held at zero or reduced were already paying more than their fair share,” he said.

Commissioners noted that even with the increase, MDU’s rate of return on the residential class will be about 6.9 percent, well below the 33.6 percent return on the air base and 10.6 percent return on the large interruptible class.

“This does not get it back to equal,” Kalk said.

Customers also will see a change in how their bill is structured. The PSC approved MDU’s request to increase its basic service charge from $15 to $19.60 per month and do away with a distribution charge based on the volume of gas used and a stabilization mechanism that adjusts rates based on seasonal differences.

In a statement Wednesday, the AARP said it was disappointed that the PSC approved the change, noting it comes only a year after MDU increased its basic service charge from $9 to $15 per month.

“Raising the fixed monthly charge is unfair because it lessens consumers’ ability to control their own costs,” the statement read.

Commissioners said the change will make monthly bills more transparent and less confusing, lead to smaller swings in gas bills between winter and summer months and reduce inequities between high- and low-usage customers. Chairwoman Julie Fedorchak also pointed out that Xcel Energy adopted a similar structure about a decade ago with positive results.

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The last natural gas rate increase by MDU was a 4 percent hike approved in December 2013, the first increase since a 2.1 percent bump in September 2004.

MDU serves more than 107,000 natural gas customers – about 85 percent of them residential – in 74 communities in North Dakota.

 

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