Bankrupt NorthWestern Energy said Tuesday its Montana utility operations expect wholesale natural gas prices to remain in the $5-6/Dth range, but it expects retail rates to drop about 3% because of an accounting change in how deferred gas cost amortization is handled. NorthWestern’s filing with state regulators assumes that its natural gas supply costs in July will average $5.93/Dth, which the company said was unchanged from its previously filed June rate.

Wholesale prices in June and July are projected to run about $1/Dth higher than they averaged for the same months last year, NorthWestern said.

The company contracts for about 96% of its supplies from producers in the Rocky Mountains, including Montana. The rest comes from short-term spot purchases with durations of less than a year, the company said.

Noting that it doesn’t earn any profits on the cost of gas, as it does in its charges for pipeline transmission/distribution of natural gas to retail customers throughout Montana and parts of Nebraska and South Dakota, NorthWestern made its annual filing Tuesday to the Montana Public Service Commission, noting that the market wholesale price of gas is expected to “remain above historical averages for the foreseeable future.”

While acknowledging that natural gas has become increasingly popular with small domestic and commercial users, but production has lagged behind demand, Pat Corcoran, NorthWestern vice president for regulatory affairs, said, “Unfortunately, higher natural gas prices, like gasoline and other energy costs, don’t show signs of weakening anytime soon. We’re watching market conditions and will continue to inject natural gas into storage throughout the summer in preparation for the winter heating season.”

NorthWestern said it has switched from an annual gas cost adjustment to monthly adjustments, “which helps to control significant over- or undercollections.” For the 12 months from July last year through this month, NorthWestern said it has been allowed to recover approximately 34 cents/Dth in undercollected gas costs from the previous 2002-03 period.

“This number drops to 15 cents/Dth for the current tracker period, which will save customers on the average $2.60/month on their retail utility bills,” the company said.

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