News Release

March 23, 2007

KCC sets Public Hearings and Comment Period in Aquila's $7.2 million Gas Service Rate Case

Aquila Inc. d.b.a. Aquila Networks - KGO (Aquila) filed an application with the Kansas Corporation Commission (KCC) requesting a $7.2 million increase in rates for natural gas service, representing an overall annual rate increase of approximately 13 percent.

The requested rate increase would affect only the portions of a customer's bill that relate to Aquila's gas delivery costs - the fixed monthly "Customer Charge" and the per therm (unit of gas consumption) "Commodity Charge." The rate case does NOT involve the cost of gas collected from customers through the Purchased Gas Adjustment (PGA). The cost of gas is not regulated and is subject to market forces such as supply and demand, storage volumes, and weather.

On November 1, 2006, Aquila filed its application stating the $7.2 million rate increase is necessary to recover investments made to help maintain system reliability and safety. The company is also seeking to recover increases in wages, employee medical expenses, and cost of materials and supplies. Aquila's last rate increase of $2.7 million was approved in 2005.

Aquila's Proposal

In its application, Aquila stated that since its last rate case, the company has looked at various alternatives to designing its rates in order to combat the recent pressure on natural gas prices and promote or encourage the efficient and responsible use of energy by customers. Aquila contends that there is a disincentive built into the traditional rate design, which closely ties utilities' earnings to the amount of natural gas delivered to customers. Aquila's costs are fixed and not related to the volume of gas delivered. Aquila believes its cost recovery should not be tied (coupled with) to the volume of gas sold. Therefore, Aquila proposed two alternative rate designs, which decouple utility earnings from volumes delivered. The two rate design proposals are as follows:

*Average Annual Bill: Residential annual usage of 735 therms, plus 8 demand units; Small Commercial annual usage of 1558 therms, plus 14 demand units. An average cost of gas of $0.8804 was used. Figures will vary for different levels of use.

*Average Annual Bill: Residential annual usage of 735 therms; Small Commercial annual usage of 1558 therms. An average cost of gas of $0.8804 was used. Figures will vary for different levels of use.

Aquila also proposed a Low Income Weatherization Program to be funded by all sales customers through an additional cost of $0.0071 per therm in rates. For an average residential customer, the additional cost would be approximately $5.25 per year.

KCC Staff Recommendation

Following a comprehensive investigation, KCC Staff has recommended a revenue increase of $4.2 million, a reduction of $3 million from Aquila's request.

Staff did not recommend the company's rate design proposals with the demand rate charge or the flat charge rate design. Staff's recommendation is a traditional rate design that includes a fixed monthly customer charge and a commodity charge, the same rate design Aquila currently uses to bill its customers.

Public Hearings

The Commission has scheduled three public hearings concerning Aquila's natural gas service rate increase request. The hearings provide an opportunity for customers to testify before the Commission. The first part of the hearing will be a question and answer period to allow customers to ask Commission staff and company representatives questions about the request. In the second part of the hearing, customers will have the opportunity to make their statements to the Commissioners. The public hearings are scheduled as follows:

The Commission will accept comments from Aquila customers through April 20, 2007. Comments regarding the case should reference Docket No. 07-AQLG-431-RTS and e-mailed to . or mailed to the Kansas Corporation Commission, Office of Public Affairs and Consumer Protection, 1500 S.W. Arrowhead Road, Topeka, Kansas 66604. Customers may also call the Commission at 1.800.662.0027.

Evidentiary Hearing

The Commission will conduct an evidentiary hearing on the Aquila rate increase request beginning April 23, 2007, at 10:00 a.m. in the first floor hearing room at its Topeka office. At this hearing, KCC Staff, Aquila representatives, and interveners such as CURB (Citizens' Utility Ratepayer Board), will present their case to the Commission, which must issue a decision by June 29, 2007.

About Aquila

Aquila provides retail natural gas service to approximately 105,000 customers throughout Kansas, including natural gas service to approximately 54 communities and other areas throughout 35 Kansas counties.

Additional Information

For more information about the rate increase request or hearings, contact the KCC Office of Public Affairs and Consumer Protection at 1.800.662.0027, or in Topeka call 271.3140. Any person requiring special accommodations at the hearing site under The Americans With Disabilities Act must give notice to the Commission at least 10 days prior to the scheduled hearing date.

Docket No. 07-AQLG-431-RTS