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What High Gas Prices? UniSource Drops Gas Charge

Facing softer wholesale natural gas prices this winter compared with last year, Tucson-based UniSource Energy last month dropped a surcharge for its gas utility customers in northern Arizona that are served by its UniSource Energy Services (UES) unit. UES's per-therm gas service rate in December will be $1.12, and the utility said it expects the rate to remain the same through the winter.

In April the rate could go up to $1.13/th, UES said. Last December the charge was $1.12/th and rose to $1.17/th in February, $1.27/th in March and $1.28/th in April.

UES reduced its purchased-gas adjuster (PGA) surcharge to 5 cents/th from a range of 15 cents/th to 25 cents/th. In late November, the Arizona Corporation Commission (ACC) approved UES's request, reflecting a recent drop in wholesale prices. The surcharge is scheduled to expire in April.

The recent wholesale price drop doesn't impact the utility's request for a 7% rate increase in residential bills. The rate hike still needs to be processed and approved by the ACC, which is expected to act by August, according to a UniSource spokesperson.

Regarding short-term gas prices, the utility said the current estimates for stable prices represent its "best estimate at this time," and it acknowledged that fluctuations in the wholesale gas market could increase or decrease the actual amount customers will pay for gas this winter.

UES has not changed its rates since August 2003. It has told state regulators that current rates are based on 2001 system expenses, and that those costs -- including equipment, fuel, construction expenses and salaries and benefits -- have increased "significantly" over the past five years.

UES is proposing to lower its per-therm rates, but increase the fixed monthly customer charge from $7 to $11. Use-based charges are proposed to decrease from 30 cents/th to 19 cents/th.

"The new rates proposed by UES would recover a greater percentage of the company's fixed costs through a higher customer charge," according to a company fact sheet on the rate case. "The resulting reduction of per-therm charges would more equitably divide responsibility for UES system costs among high- and low-usage customers."

When it filed its proposed rate increase in July, UniSource proposed to mitigate the impact of the higher monthly customer charge by varying it on a seasonal basis. In the winter months of December through March a smaller increased charge would apply, and in the rest of the year, a larger rate would be charged, but the average would be $11/month on a calendar year basis.

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