FRANKFORT — The state Public Service Commission has scheduled a hearing to consider a proposal by Kentucky Frontier Gas Company that would result in higher bills for its customers.

The hearing will be held at 10 a.m., Feb. 14, at the PSC’s office in Frankfort, at 211 Sower Blvd., and can be viewed live at psc.ky.gov. The hearing is open to the public.

Kentucky Frontier provides gas service to 3,400 customers in Floyd, Magoffin and Pike counties. The company purchased 10 smaller gas companies beginning in 2008 and has continued to operate with the same rates that were in place in each of the systems when acquired.

The companies operated by Kentucky Frontier include Auxier Road Gas, Belfry Gas, Blaine Gas, BTU Gas, Cow Creek/Sigma Gas, Cow Creek Gas, Dema Gas, East Kentucky Utilities, Mike Little Gas and Peoples Gas.

Now, Kentucky Frontier is seeking to equalize its rate structure across the entire company, though the new rate will result in higher bills for every customer. In its application, the company says equalizing its rates will put all customers on an equal footing, while providing sufficient revenue to improve operations. The adjusted rates reflect the current cost to operate the combined system, according to Kentucky Frontier.

In addition, Kentucky Frontier also is proposing a monthly $1 per customer surcharge to pay for upgrading meters and a $1.25 per customer per month surcharge to fund a program to replace gas lines.

Customers of East Kentucky Utilities would see the smallest increase, at roughly $17 a year, while Dema Gas customers would see the sharpest increase, at $390 a year.

The rate changes apply only to the amount Kentucky Frontier charges for delivering natural gas. The commodity cost of the gas itself is separate and fluctuates with conditions in the natural gas market. Distribution companies such as Kentucky Frontier are required to pass through the gas commodity cost on a dollar-for-dollar basis and cannot add a profit margin to the cost of gas.

Kentucky Frontier also operates five “farm tap” systems that are not included in this rate case. Farm tap systems provide gas from lines that collect gas from production wells. They are regulated differently than distribution systems.

At the proposed rates, an average residential customer using 60 thousand cubic feet of gas per year would pay about $370.80 annually in distribution charges after the rates are adjusted, not including the proposed new surcharges. The current annual average distribution charges, not including gas cost, over Kentucky Frontier’s 10 systems range from $181.80 to $390.30.

At Kentucky Frontier’s $5.25 per thousand cubic feet (mcf) system average natural gas costs at the time of the rate application, the company’s typical residential customer pays about $315 per year for the gas itself. Average annual bills including gas cost over the 10 systems currently range from about $497 to about $705.

If the proposed rates and surcharges are approved, the average annual residential bill over the entire system would be about $713 based on a gas cost of $5.25 per mcf.

Written comments regarding the Kentucky Frontier application may be mailed to the PSC at P.O. Box 615, Frankfort, KY 40602, faxed to 502-564-9625 or e-mailed from the PSC website.

The Kentucky Frontier application and related documents are available on the PSC website. The case number is 2011-00443.