Idaho Public Utilities Commission

October 1, 2008

Case No. INT-G-08-03

Contact: Gene Fadness (208) 334-0339, 890-2712

Wholesale market prices force increase in gas supply surcharge

After two years of receiving credits, customers of Intermountain Gas will this year pay a surcharge on their gas bills as a result of increasing worldwide demand for energy and production constraints that contributed to energy prices hitting record highs over the past year.

The surcharge, effective today, increases the gas supply portion of Intermountain Gas rates from 63.6 cents per therm to about 78.5 cents per therm. For an average residential customer who uses natural gas for space heating only, the proposed one-year increase is about $7.90 per month, or about 15 percent. For residential customers who use natural gas for space and water heating, the increase is about $12.30 per month or about 18 percent. Commercial customers’ bills will increase by about $55.30 per month, or 18 percent.

The surcharge increases the company’s annual revenue by $54.3 million. None of that revenue can go to increase company profits. Revenues from the surcharge are kept in a deferred account, audited by the commission, and are used only to meet gas supply and related expenses, including transportation and storage.

Every year on Oct. 1, gas rates are adjusted either downward or upward through the Purchased Gas Cost Adjustment (PGA) process to account for the always-fluctuating wholesale prices for natural gas. When wholesale gas prices are lower than anticipated, customers get a credit. When they are higher, customers get a surcharge. In 2007, Intermountain Gas customers got an 8 percent PGA decrease. In 2006, customers got a 4 percent decrease. However, during the last year wholesale gas market prices have soared to levels not seen since Hurricanes Rita and Katrina in 2005.

Although natural gas prices have declined in recent months, prices remain above levels at this time a year ago. If prices materially deviate from the 78.5 cents per therm approved by the commission, Intermountain Gas will file an application to adjust rates accordingly.

“Wholesale natural gas prices fluctuate, and recently have become quite volatile,” the commission said. It directed Intermountain Gas to work with commission staff to explore the creation of a low-income weatherization program for residences heated using natural gas. Intermountain Gas, with other utilities, will also be participating in commission-sponsored energy affordability workshops planned this fall.

Interested parties may petition the commission for reconsideration by no later than Oct. 21. Petitions for reconsideration must set forth specifically why the petitioner contends that the order is unreasonable, unlawful or erroneous. Petitions should include a statement of the nature and quantity of evidence the petitioner will offer if reconsideration is granted.

Petitions can be delivered to the commission at 472 W. Washington St. in Boise, mailed to P.O. Box 83720, Boise, ID, 83720-0074, or faxed to 208-334-3762.

A full text of the commission’s order, along with other documents related to this case, is available on the commission’s Web site at www.puc.idaho.gov. Click on “File Room” and then on “Gas Cases” and scroll down to Case Number INT-G-08-03.