Aquila Files for Natural Gas Rate Increase in Nebraska to Recover Costs of System Improvements--Rate Area III.

Energy Editors/Business Editors

LINCOLN, Neb.--(BUSINESS WIRE)--June 30, 2003

Aquila, Inc. (NYSE:ILA) today filed with the Nebraska Public Service Commission requesting an increase in natural gas rates in Nebraska.

This would be the first rate increase for Rate Area III since 1999. Rate Area III includes 96 communities in the eastern third of the state with the exception of Lincoln and the Omaha metro area. The increase is needed to recover the cost of system improvements made since 1999. Aquila also is filing requests for rate increases in all its gas operations in Nebraska.

If approved by the Commission, the request will raise the typical Rate Area III residential customer's bill approximately $5 per month. Commercial customers will not receive an increase since state law requires utility rates to be allocated based on the cost of service by class of customer, and the cost to serve commercial customers has not risen substantially since the last rate case.

According to Steve Pella, vice president of Aquila Networks in Nebraska, the primary reason for the rate request is to recover the cost of investments, totaling more than $11 million in Rate Area III, that have been made in the distribution system as well as increases in operating costs. The request will be a $3.2 million, or a 7.14 percent increase in annual revenue.

"We've invested significant capital dollars in our distribution system including expansion and improvement of our delivery system to increase safety and reliability," said Pella. "We would have preferred to avoid raising our customers' rates. However, despite strong efforts to control costs, our operational expenses have risen and investments in our systems have grown as we serve our communities."

Pella said the company has made expenditures to replace natural gas pipe and upgrade outdated equipment to improve the quality of service.

"Our goal is to provide safe, reliable, cost-effective energy, and the investments made in our distribution system reflect that commitment," Pella said. "Even with the increase, Aquila's natural gas rates remain competitive with other regional suppliers."

Aquila requested the Commission complete the review process within six months.

Aquila provides service to 63,000 customers in Rate Area III and 188,000 customers in Nebraska and has its operational headquarters in Lincoln. Based in Kansas City, Missouri, Aquila operates electricity and natural gas distribution networks serving customers in the U.S., Canada, the United Kingdom and Australia.

In the U.S., 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