Utah regulators awarded Questar Gas an immediate increase in its general rates of slightly more than 3%, effective Dec. 30. The Salt Lake City, UT-based natural gas distribution company also had its allowed rate of return on equity raised to 11.2% from 11%.

The approved rate increase, which totals $11.2 million, will raise the average monthly bill for a typical residential customer served by Questar Gas by about $2, according to the company. The distributor serves 735,000 gas customers in Utah, southwestern Wyoming and a portion of southeastern Idaho.

“Questar Gas’ financial underperformance in recent years stems primarily from two factors. First, Utah has been the only state in the country that set next year’s rates based on last year’s conditions,” said Questar Gas President and CEO Nick Rose. This prevented Utah Gas from recovering its full costs, he noted. Rose said he was “encouraged” that the Utah Public Service Commission had agreed to set “next year’s rates based primarily on year-end 2002 conditions.”

Secondly, he called the decision by Utah regulators to increase the company’s rate of return “a step in the right direction,” but he added “we are disappointed that Questar Gas’ allowed returns still remain well below those that other states are allowing similarly well-run utilities to earn.”

Questar Gas’ parent, Questar Corp., has nearly doubled its investment in Questar Gas to $650 million over the past decade, the gas utility said. At the same time, Questar Gas noted it has cut costs and improved its productivity. “But Questar Corp. in recent years has not been allowed to benefit from its increased investment and cost-cutting efforts. [And] Questar Gas’ net income today is about the same as it was in 1990.”

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