December 22, 2005

The Michigan Public Service Commission (MPSC) today issued three orders that affect Consumers Energy electric rates.

In Consumers Energy’s first base electric rate case (U-14347) since 1996, the MPSC authorized a rate increase of $86 million. Michigan law requires that the current electric rate cap come off on Jan. 1, 2006. 

In a case involving recovery of certain Clean Air costs mandated by federal and state law (known as Section 10d(4) costs) (U-14148), the MPSC today authorized Consumers Energy to gradually recover over the next five years $333,395,000 in electric costs via a surcharge, effective Jan. 1, 2006. 

The third case (U-14701) implements a temporary power supply cost recovery factor for 2006.  The PSCR costs reflect the rising cost of electric generation fuel prices (coal, natural gas, and uranium) and purchased power.

As a result of all three of these cases, the average residential electric Consumers Energy customer will see a rate increase of $4 per month, beginning in January.

The rate increases announced today are 71 percent lower than the utility requested,” said MPSC Chairman J. Peter Lark.  “My fellow Commissioners and I are mindful of the high energy costs ratepayers face and took a vigilant approach to safeguard ratepayers’ interests by not approving the company’s executive bonuses, stock options, lobbying expenses or blackout expenses.

“Eighty-eight percent of the increases cover Clean Air Act plant additions mandated by federal law and the creation of a low income and energy efficiency fund.” 

The company’s $86 million revenue deficiency is composed of the following items:

Clean Air Act Plant Additions    $49 million     57 percent

Low Income Fund                          $27 million     31 percent

Other                                              $10 million     12 percent

“Today’s order addresses a number of important issues that are aimed at keeping rates as low as possible, while keeping the utility’s financial health in mind,” noted Commissioner Laura Chappelle. 

“I am pleased with the focus on improved electric reliability and increased access to energy assistance,” added Commissioner Monica Martinez.  “Today’s order requires the utility to significantly improve its tree-trimming activities, and the $27 million provided by the Low Income and Energy Efficiency Fund will assist the customers who need the most help.”

For more details, see the fact sheet below.

The MPSC is an agency within the Department of Labor & Economic Growth.

U-14347, U-14148, and U-14701

Consumers Energy Company

Case No. U-14347

Commission Order Fact Sheet

1.         Revenue Deficiency - $86,149,000.

2.         The revenue deficiency is composed of the following items:

            Clean Air Act Plant Additions       $49 million        57%

            Low Income Fund                        $27 million        31%

            Other                                           $10 million        12%

            Total Revenue Deficiency             $86 million    100%

3.         Rate of Return on Common Equity – 11.15%.

4.         Debt to Equity Ratio – 55% Debt, 45% Equity

5.         Overall Rate of Return – 6.78%

6.         Transmission expenses have been removed from the revenue deficiency calculation in this case.  In the future, transmission expenses will be recovered in power supply cost recovery (PSCR) cases.

7.         A Pension Equalization Mechanism (PEM) and an Other Post Employment Benefit Equalization Mechanism (OEM) are implemented, providing assurance that Consumers’ customers will not overpay for pensions and OPEB costs between rate cases.

8.         A Low Income Energy Efficiency Fund allowance is approved, in the amount of $27 million.  This $27 million, along with other amounts provided by The Detroit Edison Company and Michigan Consolidated Gas Company, will provide funding for energy efficiency projects, and will provide bill paying assistance to low income customers in Michigan.