November 21, 2006

The Michigan Public Service Commission (MPSC) today issued an order authorizing Consumers Energy to increase its annual natural gas revenues by $62,370,000, significantly below what the utility requested.

As a result of today's action, the average monthly bill of a typical Consumers Energy residential natural gas customer will increase approximately $2.52 per month.

"The rate increase approved today reflects the rising cost of natural gas operations," noted MPSC Chairman J. Peter Lark. "My fellow Commissioners and I kept increases to a minimum - significantly below what the utility requested -- in this time of rising energy costs. In addition, low-income customers will benefit from the $17 million designated for the Low-Income Energy Efficiency Fund."

The utility on July 1, 2005 filed an application seeking approval from the MPSC to increase its rates for the distribution of natural gas in the annual amount of $132,400,000. The company also sought partial and immediate rate relief of $75,068,000. The MPSC on May 10 issued an order approving an interim rate increase of $18.4 million. The total rate increase approved since the initial filing of this case comes to $80,804,000 (interim amount plus final amount).

The MPSC in today's order granted the company the authority to increase its natural gas utility rates for the increase in the cost of natural gas operations, pensions and retiree health care, and the Low Income Energy Efficiency Fund (see fact sheet below).

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

Case No. U-14547

Commission Order Fact Sheet

1. Revenue Deficiency - $80,804,000, or an additional $62,370,000 above the interim rate relief of $18,434,000 granted on May 10, 2006.
2. The revenue deficiency is composed of the following items:
   

3. Rate of Return on Common Equity - 11%.
4. Debt to Equity Ratio - 57% Debt, 43% Equity
5. Overall Rate of Return - 6.69%
6. Consumers will contribute $17 million to the Low Income Energy Efficiency Fund, which will assist low income customers by financing energy efficiency measures, and providing assistance in paying utility bills.
7. A Pension Equalization Mechanism and an OPEB Equalization Mechanism are implemented. These mechanisms allow Consumers to recover actual pension and retiree health care expenses, eliminating overcollections and undercollections of costs between rate cases.
8. As a result of today's order the average residential customer with an annual usage of 1,200 Ccf (hundred cubic feet) per year will see a rate increase of approximately $2.52 per month or about $30.18 per year.