An $11.9 million rate increase for Mountain Fuel Supply Co. is likely to remain in effect although the Utah Division of Public Utilities wants the increase reduced by $316,000.

The $316,000 represents fines and penalties the company assessed against customers with interruptible contracts.Those customers failed to reduce usage by prescribed amounts when notified by the company during peak demand periods. Regulators believe the money should be used to lower rates for all customers, but Mountain Fuel believes the money belongs to the company outright.

The Utah Public Service Commission, which heard arguments in the case earlier this week, is expected to rule on the issue by the end of April.

The $11.9 million rate increase, which won tentative approval from the commission in January, is a pass-through increase based on the company's projected cost to purchase gas. The company makes such pass-through adjustments, either up or down, every six months.

During the hearing, company officials indicated they may have overestimated the cost of gas by about $4 million. No motion was made to reduce the $11.9 million figure. Instead, officials will likely seek to recover the $4 million, if it accrues, during the next rate adjustment this fall.

Customers with interruptible contracts receive a lower rate than most customers who have firm contracts. In return, they agree to allow interruptions to supplies above the firm level by Mountain Fuel when demand warrants. Once notified, the company has a specified time to reduce usage. Mountain Fuel assesses a penalty to those companies that fail to comply.