Aquila Files Gas Rate Case for St. Joseph Region to Recover System Improvement, Operating Costs; Proposes to Share 25 Percent of Merger Savings Through Energy Assistance.

Business Editors/Energy Editors

KANSAS CITY, Mo.--(BUSINESS WIRE)--Aug. 1, 2003

Aquila, Inc. (NYSE: ILA) today filed a request for a natural gas rate increase with the Missouri Public Service Commission to recover system improvement and operating costs incurred in its former St. Joseph Light & Power gas service area.

In its filing, Aquila proposes to share with low-income energy users the savings that resulted from the merger of Aquila and St. Joseph Light & Power in 2000.

The total proposed rate change equates to a 13.5 percent, or $810,000, increase in annual revenue that covers system investment and operating costs for Aquila's gas networks in its former St. Joseph service territory. This is the first natural gas rate distribution charge increase since 1993 for the 6,000 customers in the service area.

"Although we would prefer not to file for a rate increase, we must seek to recover the costs associated with maintaining safe, reliable gas service for our customers," said Jon Empson, senior vice president of regulatory, legislative and gas supply services for Aquila. "The increase request is unrelated to the actual cost of the gas commodity, which the company provides to its customers at the same price it is able to obtain gas supplies."

Under the proposal, a typical residential customer using 863 Ccf (one Ccf equals 100 cubic feet) of natural gas a year would have an increase of $8.33 per month or $99.96 annually. A typical commercial customer using 1,164 Ccf of natural gas a year would have an increase of $14.13 a month or $169.56 annually.

The proposed new residential and commercial customer rates include an increase in the monthly customer charge, which is used to pay a portion of the operation and maintenance costs for the gas distribution system. These expenses include items such as billing, meter reading, equipment and labor, which are incurred regardless of the amount of energy consumed.

"During the past four years, we've made investments to improve the reliability and safety of our gas distribution system while enhancing customer service," Empson said.

Empson added that under the oversight of the Missouri Public Service Commission, Aquila has been careful to segregate the operations of its non-regulated business from its Missouri utility operations. As a result, the company's recent financial difficulties and exit from the energy marketing and trading business are unrelated to the rate increase request.

To help reduce the impact of the rate increase on low-income customers, the company proposes to share 25 percent of the savings achieved through the merger of Aquila and St. Joseph Light & Power in 2000 with persons who cannot afford to pay for energy. Aquila envisions that this fund, estimated at around $115,000 a year, would be handled by a state or local charity organization.

In July, Aquila filed a rate increase request with the Commission for the electric operations of its former Missouri Public Service and St. Joseph Light & Power service areas.

Aquila serves 338,000 electric and natural gas customers in Missouri. Based in Kansas City, Mo., Aquila operates electricity and natural gas distribution networks serving customers in the United States, Canada and the United Kingdom.

In the United States, the company provides energy service to 1.3 million customers in Missouri, Kansas, Colorado, Michigan, Minnesota, Iowa and Nebraska. More information is available at www.aquila.com.