DISCLAIMER

 

06-0617R

 

RESOLUTION ESTABLISHING REVISED NATURAL GAS RATES EFFECTIVE WITH METER READINGS AFTER NOVEMBER 1, 2006, AND RESCINDING ALL PRIOR INCONSISTENT OR CONFLICTING RESOLUTIONS WITH RESPECT TO SUCH RATES.

BY COUNCILOR STOVER:

     RESOLVED, effective with the natural gas readings after November 1, 2006, all customers of the natural gas utility of the public works and utilities department of the city of Duluth, whose natural gas supply is measured by meter, shall be charged for such natural gas in accordance with the schedule of rates established by this resolution as follows:

CUSTOMER RATE SCHEDULE BASED UPON MONTHLY METERED VOLUME

 

Fixed monthly charge

Per 100 cubic feet

Effective November 1, 2006, rate

Effective November 1, 2005, rate

Effective November 1, 2006, rate

Effective November 1, 2005 rate

Firm sales service

Residential small volume

$7.50

$6.00

$1.241

$0.548

Residential large volume

$200.00

N/A

$1.140

N/A

Commercial/indus-trial small volume

$40.00

$25.00

$1.157

$0.453

Commercial/indus-trial large volume

$200.00

$250.00

$1.127

$0.395

Interruptible sales service

Commercial/indus-trial large volume

$450.00

$275.00

$1.005

$0.304

Firm transport service

Commercial/indus-trial small volume

$40.00

$50.00

$0.100

$0.095

Commercial/indus-trial large volume

$200.00

$275.00

$0.080

$0.057

Purchased gas adjustment (PGA)

If the wholesale price of gas purchased by the city of Duluth is increased or decreased as compared to the 2006 base gas cost rate of $0.920 per CCF, and any such change results in an average unit cost of gas in excess, or less than the 2006 base gas costs, the unit commodity charge ($ per CCF) for gas sold under the applicable rate schedule shall be increased or decreased on the customer’s monthly bill in the same amount as the unit cost of gas has been increased or decreased. The PGA will include a proportional charge or credit for the payment in lieu of taxes (PILOT) transfer.

     RESOLVED FURTHER, that effective November 1, 2006, the fixed monthly charge and variable rate for interruptible sales service for commercial/industrial small volume customers shall be $175 per month and $1.035 per CCF respectively for gas customers currently billed in that customer classification. This rate shall be effective until July 1, 2008, whereupon that date all customers in this classification shall be reclassified to the firm sales service for commercial/industrial small volume customer classification rates in effect at that time.

     RESOLVED FURTHER, that effective immediately upon approval of this resolution the interruptible sales service for commercial/industrial small volume customer rate classification shall not be available to any new gas utility customers.

     RESOLVED FURTHER, that effective immediately upon approval of this resolution the interruptible transport service rate classification for both large volume and small volume commercial/industrial customers shall be eliminated from the rate schedule and not offered to gas customers.

     RESOLVED FURTHER, that any prior rate resolutions inconsistent or conflicting with this resolution are hereby rescinded.


STATEMENT OF PURPOSE:  This resolution will increase the natural gas utility fund revenues approximately $2.3 million to fund increased operating costs and the retiree health care accrued actuarial liability annual contribution. Variable rates and customer (fixed) charges are based on recommendations from the August 2006 Gas Cost of Service and Unbundled Rate Study conducted by R.W. Beck, St. Paul, Minnesota. The rates will realize a 5.7% increase in gas utility revenues, revise the purchase gas adjustment base to minimize PGA surcharges, and adjust individual customer class rates to more fairly allocate the recovery of utility costs to each customer class.


Increased revenues will in part be directed to the $920,000 annual contribution to the accrued actuarial liability for retiree health care.


The last rate increase for operating expenses occurred in 1996. Since then, two small rate increases totaling $.025 per CCF were approved in 2003 and 2005 to offset the Payment in Lieu of Tax (PILOT) transfer to the General Fund for purchased gas adjustment revenues which were at that time escalating dramatically.


This resolution will also eliminate three interruptible rate categories which are no longer needed. Since the connection to the Great Lakes Gas Transmission pipeline via a city-owned interstate transmission pipeline and the completion of the internal gas distribution system upgrades, gas supply capacity has increased and become more reliable to the point where the interruptible service classes for the small volume customer and both small and large volume transport customers can be eliminated. Existing small volume interruptible customers will be kept in the interruptible class until July 1, 2008 to give them time to adjust to the higher rate in the firm service classification. The only customer currently in the transport interruptible classification came into that classification three weeks ago and will be given notice that they will be placed into the firm transport classification upon approval of the new gas rates.