Tucson, AZ-based UniSource Energy Corp. natural gas utility UniSource Energy Services (UES) will increase its customer bills an average of 5% this winter, despite continuing wholesale gas price reductions. The expiration of a year-long credit and an increased monthly energy service charge combined to drive up the monthly bills.

UES said for average residential customers gas bills are expected to reach a seasonal peak next month of about $119, before taxes and fees. "That estimate includes the new monthly customer charge and is based on usage of 102 therms, so customers with higher consumption should expect higher bills," a utility spokesperson said.

A temporary credit linked to lower gas prices last year reduced last winter's cost of service to about $1/therm. That credit expired the end of last month, boosting this month's cost of service to $1.07/therm. That cost -- including the cost of natural gas and delivery charges -- is expected to fall steadily over the winter to $1.03/therm by April next year, UES said.

Under the year-long credit that expired Oct. 31, an 8-cent/th credit was applied to UES customers monthly bills from November 2009 through October 2010 to pass along gas cost reductions that weren't reflected in previous bills. "Although wholesale gas prices have actually fallen a few cents per therm since last year, the expiration of that credit will result in higher gas costs on this winter's bills," the spokesperson said.

Like most utilities, UES buys gas at market prices and passes that cost along to customers without any markup along with its state regulatory approved delivery rates. Gas costs on customer bills is calculated each month based on average gas prices over the previous 12 months.

The formula was designed by the Arizona Corporation Commission (ACC) to cushion the impact of wholesale price fluctuations. As a result, the revenue UES recovers through this charge can exceed or lag its actual gas purchase costs. When the amount of over- or under-collected, revenue grows large enough, UES seeks ACC approval for a temporary surcharge or credit to reduce the balance.

This winter's bills also will include the higher monthly customer charge that took effect last April under new rates approved by the ACC. The change added $1.50 to the monthly charge, boosting the fee for residential customers from $8.50 to $10/month.

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