Higher natural gas costs force UES to seek new surcharge

FLAGSTAFF, Ariz., August 18, 2005 (BUSINESS WIRE) — UniSource Energy Services (UES) has asked the Arizona Corporation Commission (ACC) to approve a new surcharge on customers’ gas bills beginning Oct. 1 to recover the rising cost of natural gas purchases.

The new 27-cent surcharge would represent a 24-cent increase over the 3 cent-per-therm surcharge that has appeared on customers’ bills since April. Steep increases in the wholesale price of gas and an impending rate increase by El Paso Natural Gas Co. (EPNG), which delivers gas to UES, will drive this winter’s gas costs well beyond the level that can be recovered through current rates.

If the ACC approves this request, the typical UES residential customer’s monthly bills would increase by an average of $18 per month from November through April — when gas usage peaks — and by an average of $4.80 per month from May through October.

“The rising price of natural gas will be increasing costs for consumers across the country this winter,” said Dennis Nelson, chief operating officer for UES. “Warm summer weather has driven up demand for gas among electric generators at a time that UES and other gas utilities are establishing their supplies for the upcoming home heating season.”

UES would not profit from the proposed surcharge. Under rates approved by the ACC, UES passes the wholesale cost of gas along to customers through a formula designed to ease dramatic price fluctuations. When gas prices rise dramatically, though, UES must seek a surcharge to recover the costs it incurs to purchase gas for its customers.

The wholesale cost of natural gas for use this winter has risen to $0.95 per therm, well above the price of between $0.60 and $0.70 per therm that was anticipated when UES asked the ACC to approve a 6 cent-per-therm surcharge in January 2005. The ACC approved the current 3 cent-per-therm surcharge in March 2005.

The EPNG rate increase, which will take effect in January 2006, will add approximately $9 million per year to transportation costs that UES pays in association with its gas purchases. That cost was not built into either the current surcharge or the basic UES rates that took effect in August 2003.

UES has asked the ACC to consider its request during an open meeting scheduled for Sept. 8 so that the surcharge might take effect beginning Oct. 1.

If the current 3-cent surcharge is not increased, UES expects to accumulate $25 million in uncollected gas costs by January 2006 and $45 million by January 2007. Those costs ultimately would be passed on to UES customers in coming years, forcing future residents to subsidize the cost of natural gas used this winter.

“If the surcharge isn’t increased, this winter’s gas costs will become a burden on our customers’ bills for years to come,” Nelson said.

UES offers several options that can help customers make their winter gas bills more manageable:

Budget Billing. UES’ Budget Billing program eliminates seasonal swings in energy costs by charging a fixed monthly amount based on customers’ estimated annual gas use. Since most people use more gas when the weather gets cold, Budget Billing typically reduces winter bills and increases summer bills by spreading out home heating costs across warm weather months. Customers who sign up for the program now would likely be billed an amount that represents an increase over their typical summer bill and a savings off their typical winter bill. UES adjusts the amount periodically to account for changes in usage, so customers’ costs will rise if they increase their year-round energy use.

Energy Efficiency. UES can help customers find ways to reduce their bills through conserving energy. The company’s Web site, uesaz.com, features a variety of energy saving tips as well as the UES Energy Advisor, an interactive guide to improving a home’s energy efficiency. Customers also can call 877-UES4YOU (877-837-4968) for more energy saving advice.

Low-Income Assistance. UES offers several programs designed to help those hardest hit by high energy costs.

The CARES program offers discounts of up to $15 per month to customers whose household income does not exceed 150 percent of the federal poverty level. A family of four earning $2,420 or less per month is eligible for assistance through CARES. To find out if they qualify for this discount, customers should contact UES soon to be sure their registration can be completed before heating season arrives.

UES has joined its customers in supporting Warm Spirit, a program that provides qualified residents with emergency assistance in paying their bills. In 2005, UES began matching its customers’ contributions to Warm Spirit dollar for dollar to provide additional resources for needy families.

UES also provides “weatherization” funding to support the efforts of social service agencies that help low income customers make their homes more energy efficient. The program provides up to $2,000 per home for increased insulation, weather stripping, furnace replacement and other improvements.

To apply for weatherization assistance, customers in Coconino, Navajo and Yavapai Counties can contact NACOG, 119 E. Aspen Ave. in Flagstaff, Ariz., at 928-774-3756. Mohave County customers can contact the Western Arizona Council of Governments, 208 N. 4th St. in Kingman, Ariz., at 928-753-6247. Santa Cruz County customers can contact the Southeastern Arizona Community Action Program, 490 Chenoweth in Nogales, Ariz., at 520-287-5066.

For more information about any UES program, customers are encouraged to call 877-UES4YOU (877-837-4968) or visit the UES Web site at uesaz.com. Customers also should look for bill inserts promoting these programs.

About UniSource Energy Services

UniSource Energy Services, a subsidiary of UniSource Energy Corp., provides electricity and natural gas to more than 223,000 customers across Arizona. For more information about UES, visit uesaz.com. For more information about UniSource Energy, visit unisourceenergy.com.

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