Kansas regulators on Monday approved a 2.4% rate increase settlement, or $2.7 million, for Aquila Inc. to recover the costs of investments that it made in the company’s natural gas transmission and distribution operations that service 104,000 customers in the state.

This was less than half of the 5.5% rate increase, or $6.2 million hike in annual revenues, that the Kansas City, MO-based utility sought in November 2004. The new rates, which will apply to residential, commercial and industrial customers in Kansas, are expected to take effect on June 1, subject to a written order by the Kansas Corporation Commission (KCC). This is Aquila’s first increase in base natural gas rates in Kansas since 2000.

“We believe this settlement is a reasonable resolution of the rate proceedings,” said Chuck Loomis, operating vice president for Aquila in Kansas. The settlement was reached through a “cooperative process” between the Commission staff, Citizens’ Utility Ratepayers Board, gas marketers, customers participating in the case and Aquila, the company said.

As part of the settlement, a three-year surcharge of $243,600 per year will be reflected as a separate item on customers’ bills, Aquila said. The surcharge is less than 1% per one thousand cubic feet (Mcf) of gas and will average about 71 cents annually for residential customers and $1.66 a year for small commercial customers, the utility noted. The surcharge is for accelerating a pipeline replacement project, and will be in addition to the $2.7 million annual revenue increase.

With the new rates and surcharge, a typical residential customer using 750 therms (one therm equals 100 cubic feet of gas) a year will see a hike of about $2.30 per month, or approximately 7.6 cent a day. Small commercial customers using 1,750 therms of gas a year would experience a decrease of $1.72 monthly, or about 5.7 cents a day.

The new rates will apply to the delivery of natural gas to Aquila customers and are not related to the cost of natural gas, which typically comprises about 70 to 75 cents of a monthly bill.

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