Hughes Natural Gas (HNG), a local gas company servicing the City of Magnolia and other unincorporated rural areas, recently announced that residents could see a rate increase of up to 33 percent.

HNG released a letter of intent to the residents that it serves stating that residential properties in the unincorporated areas could see an increase of 33.1 percent and residential properties in the City of Magnolia would see a 26.8 percent increase. Commercial properties in the unincorporated areas which HNG serves would see a 28.4 percent increase and commercial properties in the City of Magnolia would see a 20.1 percent increase.

Unincorporated areas include Austin, Colorado, Grimes, Harris, Montgomery and Waller counties. The increase would affect approximately 3,501 residential and commercial properties.

HNG President and Director Real Provencher said the Railroad Commission of Texas oversees rate increases. The Railroad Commission looks at all expenses, such as installing pipes and meters among others. Provencher said they attempt to get a return on HNG’s investments.

After analyzing expenses the Rail Commission calculates the information and what they gather is the maximum allowable rate increase.

The current rate increase is based on expenses from March through April 2011, according to Provencher.

Provencher said municipalities such as Magnolia have the authority to deny the rate increase and enter into a rate case with the Railroad Commission at no cost to the city.

The City of Magnolia passed an ordinance at its meeting held June 14 which denies the proposed rate change. Provencher explained that once the City of Magnolia denies the rate increase, the city is combined with other municipalities that have denied the changes and they enter into a rate case.

The Railroad Commission of Texas will then reanalyze the rate information and attempt to find a reasonable increase, Provencher explained.

The last rate case was in 2006. Provencher said the Railroad Commission of Texas attempted to increase the rates by the maximum allowable and after the city did not accept the increase the Railroad Commission recalculated the increases.

“I don’t think, ever in history, has a maximum rate increase been approved,” he said.

If the maximum increase were to occur, HNG would gain $1,170,332 on its annual revenues, according to the letter of intent.

Provencher said there will still be an increase, but because of the rate case, the increase will not go into effect until November. He also predicted the rate increase will be much lower.

He added that if the maximum allowable increase were to occur, the cost for gas would still be “half the cost of electricity.”

Any affected persons within the City of Magnolia served by HNG may file written comments or protest concerning the proposed change in rates with the Magnolia City Secretary. Any affected persons located in the unincorporated rural areas may file written comments or protest with the Docket Services Section, Railroad Commission of Texas, P.O. Box 12967, Austin, TX 78701-2967.

Provencher said those served by HNG have until Aug. 8 to file a letter of protest.

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