Just as summer is hitting and ratepayers across Northern Wyoming are burning less natural gas, the utility serving several cities and towns wants to charge more for delivering gas to homes and businesses.
Montana-Dakota Utilities has negotiated a settlement agreement that would increase natural gas rates for residential customers by 15%. The increase would result in a $2.12 million annual increase for the power company, down from the company's original $2.6 million request.
The compromise would result in an average monthly increase of $8.12 for residential customers — reduced from the initially proposed $9.80.
The Wyoming Public Service Commission will consider the settlement at a public hearing on June 24.
The utility serves approximately 20,000 customers across nine Wyoming communities: Big Horn, Buffalo, Colony, Cowley, Kaycee, Lovell, Powell, Sheridan and Story. The rate adjustment reflects millions in investments since their last increase in 2020, according to the utility.
"The biggest part of this is investment in infrastructure," said Mark Hanson, senior public relations representative with Montana-Dakota Utilities. "Since that time, the company invested about $15 million in the system."
The investments include pipeline replacement projects and an improved connection in Sheridan.
"It's the spot where natural gas transfers from a transmission line from our supplier," Hanson explained. "And from there, the pressure is reduced. And that's where we take ownership of it and then it runs through our system within the community."
Original Request
The settlement, according to Anthony Ornelas with the Wyoming Office of Consumer Advocate, “Represents the first general rate increase since 2019, and a decrease from the company's original request of approximately 18%."
"It is common practice to engage in settlement discussions with applicants, if and when we believe there is the opportunity to reach a just and reasonable result," Ornelas said.
The settlement provides an 11.68% overall increase, though impacts vary by customer class.
"The basis of the stipulated increase reflects recovery of additional investments to the system to upgrade obsolete pipes, to accommodate growth in demand on the system," Ornelas said.
Rate impacts vary: residential customers face a 15.46% increase, small commercial customers see 10.55%, while large commercial users face just 3.87%.
"The reason each customer group has a different increase level is because it's taking into consideration studies to determine the full cost to serve each customer group," Hanson said. "The goal is for each customer group to pay for its cost of service, rather than one group being subsidized by another customer group."
Ornelas provided specific monthly impacts: “The average rate increase for small general service is estimated at 10.6% or approximately $9. For large general service it results in an average increase of 3.9%, or $20."
Rate Recovery
Hanson explained the regulated utility model: "Since we're a regulated utility, the commission, Public Service Commission determines here's what you're allowed on a rate of return on your investments, since we're a publicly traded company."
More than half of customer bills reflect the actual cost of natural gas, which the company passes through without markup, said Hanson.
"The company doesn't earn anything on that," Hanson noted. "So whatever the company pays for that natural gas, that's what the customer pays for."
Montana-Dakota sources gas from multiple regional basins through an integrated interstate pipeline system spanning Montana, North Dakota, South Dakota, and Wyoming.
The regional supply basins include the Rockies, which spans Colorado, Montana and Wyoming.
Gas for Montana-Dakota customers also comes from the Bakken in Montana and North Dakota, and the Bowdoin Field in Montana, and some comes from Canada.
"We do some longer-term contracts, shorter-term, where we have access to where we could put natural gas and storage, where it's at a lower price," Hanson explained. "So we put it in storage and then we can draw it out in the winter, on the coldest days."
If approved by the Wyoming Public Service Commission on June 24, new rates would take effect Aug. 1.
Complete documentation can be reviewed online at https://dms.wyo.gov/external/publicusers.aspx using Record No. 17710.
