PSC approves temporary gas rate hike

HELENA (AP) - NorthWestern Energy has won narrow approval from the Public Service Commission to raise natural gas rates temporarily, but for less than the company wanted.

The temporary rate increase was approved Monday, but the exact amount was being worked out today.

NorthWestern had requested an increase of 45 percent for its 151,000 gas customers in Montana. PSC adjustments are expected to lower the increase to about 30 percent, partly because the 3-2 commission majority found NorthWestern hadn't prudently lined up purchases for part of its gas supply. Earlier in June, the PSC had estimated the increase at 33 percent, but there have been later adjustments.

''It's better than it was a couple of days ago,'' said Commissioner Tom Schneider, D-Helena.

Company and PSC rate analysts were making calculations today to develop the final amount of the increase. NorthWestern planned to file the specific rates with the PSC late in the day. The rate changes were to be effective immediately.

NorthWestern disputed the PSC finding that the company had acted imprudently in securing some of its gas supply by not lining up some fixed-price contracts. The company will ask the commission to reconsider its order once a final order is prepared, which could be the first step in a legal challenge.

''We used the same established procurement method that is used by MDU (Montana-Dakota Utilities) and Energy West, and the PSC has approved that for the past several years,'' said NorthWestern spokeswoman Claudia Rapkoch. ''We used that method because there is no clear policy direction on natural gas procurement.''

She said the PSC appears to be setting a double standard, ''with NorthWestern expected to subsidize the price of gas for its customers, while MDU and Energy West are afforded full-cost recovery.''

Three commissioners voted for the order: Bob Rowe, D-Missoula, Matt Brainard, R-Florence, and Schneider. Dissenting were Commissioners Greg Jergeson, D-Chinook, and Jay Stovall, R-Billings.

The temporary increase will remain in effect until after the PSC has a formal hearing and decides on a final rate adjustment. If the permanent rate change is lower or higher than the interim increase, adjustments are made in bills.

In June, the PSC adopted the permanent 35 percent natural gas rate increase sought by NorthWestern in December. The PSC had approved that rate increase on a temporary basis in mid-December.

Although it made permanent the 35 percent temporary increase, the PSC majority also concluded that the utility hadn't arranged for part of its gas supply prudently. Although the PSC didn't penalize the company in the earlier case for the ''imprudence,'' it used that finding as the basis to reduce some of the requested increase in the later case.

The three-commissioner majority criticized NorthWestern for failing to lock in some fixed-price, longer-term natural gas contracts, even though it knew a five-year buy-back contract for 42 percent of its supply was set to expire on June 30, 2002. Instead, NorthWestern relied on more volatile priced gas contracts indexed to market prices for nearly 100 percent of its gas supply.