Although critical of the utility’s handling of market risk, Idaho regulators Tuesday approved a $22.1 million, or 10%, rate hike for Intermountain Gas to cover increased wholesale natural gas costs, and they encouraged the utility to file another rate adjustment late this summer, before the winter heating season. The new rates take effect Thursday.

“The increase approved does not reflect a permanent rate change, but is part of the company’s purchased gas cost adjustment, typically a yearly process that adjusts the gas purchase portion of customer bills up or down depending on the cost of natural gas in the wholesale market,” said an Idaho Public Utilities Commission spokesperson. In making its decision, the regulators said wholesale gas prices “have fluctuated dramatically” in recent years.

Noting that the utility makes no profits from this rate change, the PUC said the increase goes directly to pay Intermountain’s interstate suppliers. The utility is totally dependent on the wholesale market for serving its 230,000 customers in southern Idaho.

Tuesday’s action follows a 33% purchased gas rate increase last year for Intermountain and a 28% decrease in 2002.

The PUC spokesperson said that the regulators placed nearly $700,000 of the increase in a reserve account “until the company complies with previous commission orders to create a hedging and risk management strategy that makes it easier for the commission to assess the company’s gas purchasing decisions.”

PUC commissioners were critical of Intermountain’s past requests to the change the way it handles market risk in the wholesale gas market, noting that “although considerable time has passed, these concerns (of the regulators) have not been adequately addressed.”

In an effort to move the annual purchased gas filings closer to the advent of the winter heating season, the PUC ordered Intermountain to file a 2005 PGA case by Aug. 15, or face action by the state regulators by Oct. 1.

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