Jun. 27--Oklahoma Natural Gas Co. is seeking a $66.08 million annual increase in base rates despite a steep decline in natural gas prices during the past year.

ONG announced Friday that it filed the rate application with the Oklahoma Corporation Commission, which has 180 days to consider the request.

"We're trying to keep that balance of honoring our service to customers at a reasonable rate and yet get a reasonable return on our investment," ONG spokesman Don Sherry said. "It's a balancing act and something we try to do very carefully."

If approved in full, the rate increase would raise monthly bills by $5 for the average residential customer using about 78 dekatherms annually, Sherry said. A dekatherm is equal to 1 million British thermal units.

Utility officials said it was ONG's first proposed rate increase in four years.

A subsidiary of Tulsa-based ONEOK Inc., ONG serves about 800,000 customers statewide. About 265,000 of its customers are in the greater Tulsa area, according to reports.

ONG President Roger Mitchell estimated that the utility has spent more than $162 million in unrecovered infrastructure investments since the last rate increase in 2005. Those improvements included work on pipelines, compressors and valves.

"We have been able to do this through our commitment to maintaining, improving and expanding the extensive infrastructure that makes Oklahoma Natural's utility service accessible to Oklahomans," Mitchell said in a statement.

The rate

request, however, comes at a time when natural gas prices are less than a third of historic highs reached last summer. Natural gas at the Henry Hub in Louisiana closed Friday at $3.81 per million Btus in trading on the New York Mercantile Exchange.

Those prices may not increase dramatically anytime soon if supply is any indication. The nonprofit Potential Gas Committee, which is supported by the Colorado School of Mines, reported earlier this month that the U.S. reserve base, including unconventional natural gas plays, totaled 1,836 trillion cubic feet, the most in the group's 44-year history.

ONG's fuel cost charged to customers has reflected the falling prices, Sherry said. The highest fuel-cost charge for customers was the $11.05 per dekatherm on October 2008 bills, he noted.

The utility charged $7.67 per dekatherm for June bills. ONG's fuel-cost calculus is a weighted average because the company buys natural gas from current spot markets, futures contracts and seasonal rates.

ONG also has delivery costs such as manpower and maintenance figured into its rate structure, Sherry said. The utility's distribution system includes 17,000 miles of pipeline.

"It is confusing to customers," Sherry said.

ONG customers seeking price stability can secure locked-in rates at the beginning of each winter if they want, although they take the chance that those advance rates are sometimes higher than the eventual fuel costs charged.

In fact, if natural gas prices continue to decline, the utility's future fuel costs could drop as well. These cuts could even offset the requested rate increase, Sherry noted.

"There's a potential silver lining if the trend continues," he said. "We can't predict what's going to happen, but there is that potential."

The last ONG rate hike was a $57.7 million annual jump approved by the Corporation Commission in October 2005. The utility had asked for a $99 million increase in its application.

Shares of ONEOK fell 1 percent Friday to close at $29.01 on the New York Stock Exchange.

What it will cost you: if approved in full, the rate increase would raise monthly bills by $5 for the average residential home.

Rod Walton 581-8457 rod.walton@tulsaworld.com

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