October 29, 2003

The Michigan Public Service Commission (MPSC) today issued an order approving Aquila Networks-MGU’s 2003 gas cost recovery plan, as amended, and authorizing it to charge a gas cost recovery (GCR) factor of up to $6.17 per thousand cubic feet (Mcf) for the remainder of its 2003 monthly billings.  Aquila had requested approval of a GCR factor of at least $6.8567 per Mcf.

The Commission found that a GCR factor of $6.17 is prudent and reasonable.

The Commission also approved a number of items as part of Aquila’s 2003 GCR plan, including: requiring the company to increase its contracted storage level; changing the company’s calendar year to an April through March year; implementing a GCR ceiling price adjustment contingency mechanism to adjust its GCR factor quarterly; providing a more complete discussion of the status of its Federal Energy Regulatory Commission filings; implementing a colder-than-normal winter storage plan; and maintaining a daily operational log.

In addition, today’s order directs Aquila to use cost averaging of the NYMEX figures for the last three trading days of the month for all future GCR plan filings, and the Commission directs the company to implement a fixed-price quartile purchasing strategy methodology.

Most recently, the MPSC issued an order authorizing Aquila to implement a temporary GCR factor of up to $6.08 per Mcf on June 27, 2003.

The GCR process was created by the legislature over 20 years ago to protect ratepayers from automatic adjustment clauses and to enable utilities to recover their gas costs, albeit without a markup or a profit of any kind.  The Commission is required to annually review a utility’s GCR plan and to conduct  a second review after conclusion of each plan year to verify the utility’s entitlement to recovery of such costs.  In so doing, the burden is on the utility to demonstrate that its GCR costs are attributable to reasonable and prudent management decisions.

MPSC Chair J. Peter Lark notes that today’s order comes as the MPSC kicked off its Be WinterWise campaign to highlight the increase in natural gas prices, what customers can do to lower their bills, and financial assistance available to those who qualify.  Information

on natural gas prices, conservation tips and financial assistance programs is available on the MPSC Web site: www.michigan.gov/mpsc.

Aquila Networks-MGU is headquartered in Monroe.

The MPSC is an agency within the Department of Consumer and Industry Services.

Case No. U-13550

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