North Dakota Public Service Commission OKs MDU gas rate increase
The North Dakota Public Service Commission approved a natural gas rate increase from Montana-Dakota Utilities on Thursday.
Rates for MDU's 117,000 natural gas customers in the state are set to increase by just over 6%, or about $3.55, more a month for the average customer. This will allow MDU to recover an additional $9.4 million, annually.
Customers, however, are technically set to see a slight decrease on their monthly gas bills starting in December because the interim rates that the PSC had approved late last year were higher than the rate which was eventually decided on.
The originally proposed hike would have resulted in an increase of 7.45% for the average customer - or $11.6 million for customers statewide, annually.
MDU officials testified that the rate hike was needed to recover costs related to $35 million of investments in its gas systems since the last rate increase in 2021. The cash would also help cover increased expenses related to infrastructure depreciation, property taxes, labor and other inflationary factors.
The smaller rate increase comes after an intervention by AARP North Dakota, which is a group representing people over the age of 50.
The rate increase was reduced by lowering MDU's return on equity, removing charges for some delayed projects, and reducing money going to employees that MDU says incentivizes better service.
AARP sought to also lower the basic service charges as part of the proposed hike. Basic service charges are the same across customers. The nonprofit argued that raising rates there did not allow for enough flexibility for its members to lower their costs by adjusting usage - referred to as volumetric charges. Under the settlement, there is no increase for the basic service charge for customers except for those in the Wahpeton-area who are being served by a new natural gas pipeline that allows for nonstop gas service which had previously been interruptible because the area relied on a different pipeline.
PSC commissioners said they recognize the benefit of relying on volumetric charges as part of rate increases but noted there are limits to their usefulness. Rates help pay for an infrastructure system that every customer is affected by.
"As ratemaking is considered an art, I am pleased to see that the order includes a provision that MDU is to study the impacts of increased volumetric charges on energy conservation and usage, and to provide an analysis in the next rate case when they apply," Commissioner Sheri Haugen-Hoffart said.
Northern States Power Co., a subsidiary of Minnesota-based Xcel Energy, also received an approval for a statewide natural gas rate increase of 8.2% on Thursday. AARP North Dakota intervened in that case as well, making similar arguments and achieving a settlement with the company and the PSC. Northern States mainly has gas service in the eastern part of North Dakota.
Rates last until companies make a new filing. Utilities are only allowed to recover enough money to achieve a PSC-approved return on equity which is evaluated by the commission annually.
Gas rates are expected to continue to rise in the coming years as older systems need replacements and more infrastructure is built out to service an increase in demand.
Reach Joey Harris at 701-250-8252 or .
Energy/Environment Reporter
