Gas Rate Freeze Deal Good for Consumers

St. Louis Post-Disptach, July 3, 2013

Laclede Gas Co. would not raise natural gas delivery rates for St. Louis area customers for at least two years under an agreement submitted this week to help the utility win approval of its $975 million purchase of Missouri Gas Energy.

The 43-page agreement, filed Tuesday with the Public Service Commission, was signed by Laclede, the Missouri Office of Public Counsel, the PSC staff and several other parties. [CCM note: The agreement includes Consumers Council of Missouri.]

It still must be approved by the five-member commission.

The agreement as submitted would bar Laclede from seeking a gas-delivery rate increase before Oct. 1, 2015, unless there’s an “unusual event” such as a terrorist act or severe downturn in financial markets that produces a net loss greater than

$5 million.

The utility also would not be allowed to recover any transaction-related costs from utility customers or any costs related to the acquisition premium.

But that doesn’t mean gas bills won’t rise during the next two years.

The agreement would permit Laclede to pass through changes in fuel costs, which make up about two-thirds of residential gas bills. The utility would also be allowed to seek increases in an infrastructure surcharge to raise money for the replacement of older cast iron and bare steel gas mains.

The agreement also allows Laclede to seek a rate increase for its MGE Division service area in western Missouri if it does so before Sept. 18. Otherwise, the utility cannot ask for higher rates until Oct. 1, 2015.

St. Louis-based Laclede in December agreed to a $1.04 billion purchase of two natural gas utilities. The centerpiece of the deal is Missouri Gas Energy, which serves about 500,000 customers in the Kansas City area.

The transaction would produce the fourth-largest gas distribution utility in the nation and almost double Laclede’s customer base in its home state.

Earlier this year, Laclede agreed to forgo a proposed $48.4 million rate increase to provide PSC staff additional time to focus on its analysis of the Missouri Gas Energy acquisition.

In a statement Wednesday afternoon, Laclede Gas President Steve Lindsey said the company is “pleased to have reached an agreement in principle with most of the parties to the Missouri Gas Energy acquisition case. This is a transformative transaction for Laclede, our shareholders and our customers.”

Laclede expects to close the transaction by the end of its fiscal year on Sept. 30.