Kansas Gas Service Seeking $73.4 Million Rate Increase

May 16, 2006

On May 15, 2006, Kansas Gas Service Company (KGS) filed an application with the Kansas Corporation Commission (KCC) seeking to increase customer rates by $73.4 million per year. KGS claims that if the increase is granted in full, the average residential customer bill will increase $7.63 per month, or about $92 per year. The requested rate increase will only affect the non-gas portion (customer charge and energy charge) of the KGS bill. Recovery of the cost of natural gas and upstream transportation, the "COGR" charge on customer bills is not affected by this requested increase.

According to KGS, the need for the rate increase is caused by KGS's increased investment in facilities combined with increases in wages, benefits, pension expenses and the costs of materials and supplies to provide gas service to customers. KGS is also seeking to recover the costs of a previously approved KCC program to replace distribution facilities in mobile home parks.

KGS is seeking a generous 11.25% profit return for shareholders. This compares to the 10% that the KCC recently allowed Westar.

KGS proposes a new "customer-choice" rate design that will allow customers to choose between having a higher monthly customer charge but lower non-gas volumetric usage charges, or having a low monthly customer charge but higher non-gas volumetric usage charges.

CURB will review the KGS filing in detail and will make recommendations to the KCC later this fall. No hearings have been set in the case at this time. The KCC has 240 days to issue a decision in the case, meaning that any rate changes will not show up on customer bills until January or February of 2007.

KGS's rates were last increased by $45 million in a settlement reached in September of 2003. KGS is the largest gas distribution company in Kansas serving over 642,000 customers in 336 Kansas communities.

To review the application, see KCC Docket No. 06-KGSG-1209-RTS.