NorthWestern says it will seek large natural gas increase

HELENA (AP) - NorthWestern Energy says it intends to seek another large increase in natural gas rates for its Montana customers, beginning as early as July 1.

Company officials told the Public Service Commission Wednesday that the prices it pays for natural gas are rising, and it intends to file paperwork with the commission next week to increase rates for its 158,000 natural gas customers in Montana.

''We're projecting fairly significant increases in gas costs and, therefore, customers' bills,'' said Pat Corcoran, NorthWestern's vice president for regulatory affairs. ''The gas market is changing every day.''

Corcoran declined to reveal the total amount, saying the company is still evaluating the numbers. But he added that he expects ''it's going to be a big increase.''

A Cut Bank energy marketer predicted the increase could be 30 percent, which would be on top of an interim 36 percent increase granted to the company last December.

Ron Perry, president of Commercial Energy of Montana in Cut Bank, said he based his estimate on his own forecasts for the natural gas market, where prices already are more than double what they were last summer.

NorthWestern officials wouldn't comment on Perry's estimate.

Discussion of NorthWestern's future rate increase came during a PSC hearing on the 36 percent increase NorthWestern was granted last year.

The PSC is considering whether the company acted ''prudently'' in arranging gas contracts last summer, and whether that increase should become permanent.

George Donkin, an expert witness for the Montana Consumer Counsel, noted Wednesday that NorthWestern had a low-priced, five-year contract to buy gas for its customers, but that contract expired last year.

Since then, NorthWestern Energy has arranged almost no longer-term contracts to buy gas, instead relying on contracts tied to fluctuating market prices, he said.

But Donkin declined to characterize that as a bad decision.

''Was it an unreasonable decision not to enter into fixed-price contracts at the time?'' he asked. ''That's a tough one. I've not come to that conclusion.''

Donkin recommended the PSC set up a panel of experts and customers to analyze how NorthWestern might take steps to ''hedge'' against volatile gas prices that would be passed on to customers.

Company officials said they're not opposed to the idea.

Market prices for natural gas have risen sharply since last summer, from around $2 per dekatherm to current prices ranging from $4.50 to $5 per dekatherm.

A dekatherm is the thermal equivalent of 1,000 cubic feet of natural gas. An average household using natural gas consumes about 120 dekatherms per year.

Currently, NorthWestern customers pay $6.22 per dekatherm. That price includes delivery costs of about $3 per dekatherm and another $3.16 per dekatherm for the natural gas itself.