SourceGas seeks Nebraska rate increase

LAKEWOOD, Colo. -- SourceGas Distribution LLC ("SourceGas") today announced it has filed a request with the Nebraska Public Service Commission to increase the non-gas component of its rates to cover the increased costs associated with providing natural gas service to approximately 90,000 customers across Nebraska. The last increase in the general distribution rates, which covers items such as infrastructure, equipment, labor, materials, and safety services, was approved in 2006, and was based on 2005 costs.

"SourceGas is experiencing the combination of higher costs, due to several factors including facility investments, increased taxes and general inflation, and at the same time, lower revenues from reduced usage per customer, and fewer customers served." said Dan Watson, President of SourceGas. "Despite a reduction in usage and customers, the Company continues to make investments in its system to provide the level of service its customers expect. After a thorough analysis, we have determined that we must adjust our rates in order to keep pace with the impact of lower revenues and higher costs."

SourceGas is proposing, along with other items, to increase its base distribution rates. If the filing is approved, the increase for the average residential customer would be approximately $7.43 per month or 12.3% on their average monthly bill. The increase for the average small commercial customer would be $8.76 per month or 7.9% of their average monthly bill. Mr. Watson added that even with the rate increase requested, natural gas remains the economic fuel of choice for home energy needs for Nebraska customers.

Nebraska law requires that SourceGas be afforded the opportunity to earn a fair and reasonable rate of return as compensation for its investment in the pipelines and infrastructure that deliver natural gas safely, reliably and efficiently. Under volumetric rate designs, such as those SourceGas has had in place, it becomes necessary for utilities to file their updated costs and revenues with the Commission every 2-3 years. With the proposed rate adjustment mechanisms, SourceGas's filing addresses this situation to reduce rate case costs.

The Company's base distribution rates are comprised of two elements addressed by this filing: 1) a fixed, monthly customer charge and 2) a two-step distribution charge, which varies from month-to-month depending on the amount of gas used.

The filing does not affect the larger portion of a customer's bill, the natural gas "commodity" component, which is based on market prices and accounts for 60-65% of the total bill. Through the Choice Gas program, customers will continue to have the opportunity of locking in a price option for 12 months.

Additionally, SourceGas is proposing to extend its space heating rebate program by adding rebates for customers who purchase and install a high-efficiency water heater.

SourceGas is also proposing rate adjustment mechanisms for revenue impacts such as weather, customer loss, and load loss per customer. These mechanisms would allow SourceGas to reconcile revenues up or down on an annual basis helping to stabilize rates and limit volatility to a customer's bill.

The Company expects that the filed rates will become effective on an interim basis and subject to refund, on October 1, 2009. SourceGas hopes to complete the PSC review process and have final rates in effect by the end of 2009.

Additional information will be available online at http://www.sourcegas.com/about-rate_cases_tariffs_filings.aspx

SourceGas is a natural gas local distribution utility headquartered in Lakewood, Colorado, with operations in Arkansas, Colorado, Nebraska, Wyoming and Hermosillo, Mexico. SourceGas serves nearly 420,000 customers and operates 17,700 miles of distribution, gathering and transmission pipeline, as well as storage facilities. SourceGas and its subsidiaries also provide gas transportation, in-home HVAC and appliance service and sales, as well as gas commodity sales services to its natural gas customers.