The City of Magnolia plans to counter the proposed rate increase from Hughes Natural Gas of $8.80 per 1,000 cubic feet used (MCF).
The city is proposing an increase of $1.75, based on the recommendation of the Lawton Law Firm, which would put the rate at $16/MCF. A 2010 report from the Texas Railroad Commission found the average annual natural gas consumption in Houston was 39 MCF.
"There is a legitimate reason to raise the rate, but the proposals from Hughes have been unreasonable," said City Attorney Leonard Schneider.
Schneider said the city's proposal was based on existing economic factors, including the cost to relocate pipes along FM 1774.
The Lawton Law Firm defended the city from Hughes' previous proposed rate increase of $10, which was rejected by the Texas Railroad Commission earlier this year. In addition to the $1.75 increase, the firm is also proposing a cost of service analysis agreement, which would be used to determine future increases. The COSA would set a limit on Hughes' ability to raise tariffs and sets rates for various service fees, such as reconnection fees and cancellation fees.
"The COSA makes it so, if [Hughes] wants to raise the rate, it has to be done according to a mathematical formula based on certain economic factors," Schneider said. "It's more cost-efficient than us having to hire a law firm, file an objection and fight at the state level for six to eight months."
The proposal was approved by City Council at its July 10 meeting and will be delivered to Hughes Natural Gas for review.