On Wednesday, December 7, 2005, Alabama Gas Corporation (Alagasco) consented to a request by the Alabama Public Service Commission (APSC) that the utility maintain its rates through March 31, 2006, at levels no higher than those now in place. Citing concerns over the potential negative impact on customers from the high natural gas prices being experienced across the country, the APSC on Tuesday, December 6, 2005, asked Alagasco and the other major natural gas utility under its jurisdiction to refrain from enacting any additional rate increases through the winter heating season (March 31, 2006). Alagasco's rates, which were last revised effective December 1, 2005, consist of those established by the Rate Stabilization and Equalization (RSE) rate-setting methodology as well as those established under the Gas Supply Adjustment rider (GSA). Under RSE, Alagasco has the opportunity to earn a return on average equity at the end of its rate-year (September 30) between 13.15% and 13.65%. The GSA rider is designed to capture the Company's cost of natural gas and provides for a pass-through of gas cost fluctuations to customers without markup; the cost of gas includes the commodity cost, pipeline capacity, transportation and fuel costs, and risk management gains and losses. For the 2005-2006 winter heating season (November 2005-March 2006), Alagasco has hedged all of its estimated, weather-normalized, core-market gas supply purchases. The Company's effort to minimize commodity price volatility through hedging is reflected in Alagasco's current rates. |
