A $10.1 million pass-through rate increase for Mountain Fuel Supply Co. was given final approval Thursday by the Utah Public Service Commission.
The pass-through means an annual $14.55 increase for the average residential gas customer. Mountain Fuel implemented the increase on an interim basis Aug. 1.During Thursday's 2 1/2-hour hearing, the Utah Division of Public Utilities questioned Mountain Fuel's decision not to oppose the drilling of 23 new gas wells in southwestern Wyoming by Wexpro Oil & Gas. Department witnesses contended that the current gas market, which has been relatively stable for the past five years, does not justify drilling new wells that will force Mountain Fuel to seek additional rate increases in the near future.
Mountain Fuel is affected by the new well field because under its operating agreement with Wexpro, it must purchase all gas produced in fields operated by Wexpro, whose activities are not regulated by the PSC.
Mountain Fuel witnesses admitted that the company was reluctant to enter into the new field. They said Mountain Fuel was forced to participate when Union Pacific Resources, which owns 49 percent of the field, forced development. Failure to participate would have forced Mountain Fuel to pay penalties for not taking the gas produced.
Mountain Fuel officials say tests indicate that the cost of gas from the wells will be less than originally thought and will prove beneficial over the long term.
Traditionally, Mountain Fuel has owned about 30- to 33-percent of the gas it uses to service its customers. The rest is bought from pipeline companies. The new wells will increase Mountain fuel-owned gas to about 36 percent of deliveries.