Press Release

March 22, 2007

CURB Reduces Aquila Rate Request by 52%

In testimony filed Monday, March 19, 2007, the Citizens' Utility Ratepayer Board is urging the Kansas Corporation Commission to substantially reduce Aquila rate increase request for its natural gas distribution customers.

On November 1, 2006, Aquila filed an application with the Kansas Corporation Commission seeking to increase delivery rates for natural gas on its system by $7.24 million annually. Aquila's request is for a 21% increase in delivery revenue for the residential customer class and a 32% increase for small commercial customers. (See KCC Docket No. 07-AQLG-431-RTS). Aquila serves approximately 89,000 natural gas customers in Lawrence, Wichita, Dodge City and Goodland and many smaller Kansas cities. The increase does not affect the cost of gas which makes up a large portion of the gas bill.

After reviewing Aquila's application and documentation, CURB's consultant Andrea Crane filed testimony recommending only a $3.45 million increase. While some of Aquila's costs have increased, CURB is recommending lower profit levels for shareholders, removal of inappropriate items from rate base, reductions in salary and wage increases and elimination of vacant positions. Other employee-related benefits are adjusted to more reasonable levels.

Aquila is also proposing to change customer billing methods. Currently, residential customers pay a monthly customer charge of $12.00, and a commodity charge of 15 cents per Therm for natural gas used, plus the cost of the natural gas. The average residential customer uses about 750 therms of natural gas per year. Aquila seeks to reduce the per therm commodity charge to 1.9 cents, and replace it with a fixed "demand" charge based on a customer's highest monthly usage in the last three years. The demand charge will look like the monthly customer charge in that it is a fixed amount each month. Aquila also seeks to increase the monthly customer charge to $13.00. The result is that residential customers will pay a fixed charge each month above $20, even if they use no gas. Small commercial customers will be similarly affected. As an alternative, Aquila is proposing to collect all of its revenues through the monthly customer charge by increasing the monthly customer charge to $27.62 and eliminating the per/therm commodity charge.

CURB rate design consultant Brian Kalcic filed testimony rejecting Aquila's proposed rate design as simply an attempt to decrease shareholder risk by collecting all of its revenue through fixed monthly customer charges. CURB proposes a rate design that spreads any rate increase between the customer charge and the commodity charge in a manner similar to existing rates.

Aquila also proposes creating a fund to provide customer rebates designed to encourage replacing furnace and water heater equipment with more efficient models. Programs to aid weatherization in low income households will also be considered as part of the fund. The fund will be collected by charging each customer .7 cents per therm (less than one penny per therm). The average residential customer will contribute about $5.25 per year under this plan.

"We are discouraged that once again rates will increase for consumers," said David Springe, Consumer Counsel. "However, we hope that the new rebate and weatherization fund will help consumers invest in energy conservation to reduce their natural gas usage. Reducing usage through conservation can more than offset any rate increase granted in this case."

Public hearings are scheduled as follows:

Wichita:March 29, 2007, 7:00 p.m.
Hilton Wichita Airport Executive Conference
Center, Salon #1, 2098 Airport Road, Wichita
Dodge City:April 3, 2007, 7:00 p.m.
Dodge City Civic Center VIP Room
2100 First Avenue, Dodge City
Lawrence:April 9, 2007, 7:00 p.m.
The Robert J. Dole Institute
Simons Family Media Center Room
2350 Petefish Drive, Lawrence