Aquila service rates could go up 10.3 percent

The Iowa Utilities Board has made a Spencer location available to Aquila customers who would like to address the company's plan to increase its natural gas service rates in Iowa.

Comment hearings will take place at 6:30 p.m. Thursday, Aug. 7, throughout the state using the Iowa Communications Network.

The ICN room at Spencer High School, 800 East Third Street, will be the local site.

Rob Hillesland, an information specialist for the Iowa Utilities Board said members look for practical comments about how the rate change will impact customers.

"At this point, the board has to look at the reasonableness of the rate proposal by the utility," he said. "They are looking at how this will affect customers as well."

It's also a chance for customers to ask Aquila officials how the proposed rate increase would improve natural gas service.

Members of the statewide utilities board say it's typically the only verbal opportunity Iowans have to tell the board and the company involved about the impact of a rate increase.

Ideally, Hillesland said the Iowa Utilities Board tries to send out a public hearing notice with the customer's utility bill. The natural gas company's request didn't come in time to be included in the last billing cycle before the hearing.

Hillesland also said the IUB typically doesn't grant the full increase requested by a company. A settlement is often reached before the matter reaches the board for final action.

On Monday, Rapid City, S.D.-based Black Hills Corp., announced the acquisition of Aquila's natural gas and electric utilities in Colorado, Iowa, Kansas and Nebraska for $940 million. Aquila is in the process of changing its name to Black Hills Energy to reflect the transaction.

The company serves about 17,500 natural gas customers in the Spencer region. It employs about a dozen employees out of the regional office in Spencer. The local service area includes customers in the Iowa Great Lakes, the Estherville area, households in the Newel and Pocahontas areas as well as locations near Royal, Paullina and Primghar.

The permanent rate proposal filed by Aquila on June 2 calls for a permanent annual revenue increase of approximately $13.56 million, which is 7.6 percent revenue increase. If granted, the increase would raise monthly bills of residential customers an average of 10.3 percent.

"This does not pertain to the cost of natural gas itself," Hillesland said. "It reflects the cost of providing service such as metering, customer service costs and infrastructure."

In addition to the general rate increase request, Aquila has requested a three-year pilot program for a Capital Additions Tracker, which would recover capital costs of infrastructure improvements.

Under Iowa law, Aquila was already allowed to initiate a temporary rate increase of about 5.3 percent, a $9.38 million annual revenue increase, without pre-approval from the Iowa Utilities Board. That Aquila increase went into effect on June 13. If the permanent rates granted are less than the temporary rates, customers will receive a refund plus interest for any over-collection.

Hearing participants can direct their questions and comments to representatives of Aquila, the IUB, and the Office of Consumer Advocate, which represents the general interests of customers in IUB proceedings.

The comments then become part of the permanent record in Aquila's rate case. Under Iowa law, the board has until at least April 2, 2009, to investigate and reach a conclusion on the permanent rate proposal made by Aquila.

Other ICN sites participating in the Aug. 7 hearing are located in Newton, Decorah, Forest City and Webster City. Follow-up hearings will be held on Aug. 12 in Dubuque and Aug. 13 in Council Bluffs.

According to its 2007 Annual Report information, Aquila serves more than 147,000 natural gas customers in Iowa.