October 29, 2003

The Michigan Public Service Commission (MPSC) today issued an order approving SEMCO Energy Gas Company’s 2003-2004 gas cost recovery plan, as amended, and authorizing it to charge a gas cost recovery (GCR) factor of up to $6.7933 per thousand cubic feet (Mcf) for the remainder of its 2003-2004 monthly billings.  SEMCO had requested approval of a GCR factor of $6.8141 Mcf.

The Commission found SEMCO’s proposed peak day demand forecast and its contract with ANR to be reasonable.  In addition, the Commission approved SEMCO’s use of dollar cost averaging in its summer purchases, noting that the company is authorized to use a fixed price quartile methodology as an alternative to dollar cost averaging, if financial conditions allow.  The MPSC also authorized SEMCO to implement a monthly contingency mechanism to adjust the GCR factor based on New York Mercantile Exchange (NYMEX) prices for the last three trading days of the month, and the company is authorized to continue to roll over-recoveries and under-recoveries into its GCR factor calculations.

Most recently, the MPSC issued an order authorizing SEMCO to charge a temporary GCR factor of $6.0350 per Mcf on June 27, 2003.

The GCR process was created by the legislature over 20 years ago to protect ratepayers from automatic adjustment clauses and to enable utilities to recover their gas costs, albeit without a markup or a profit of any kind.  The Commission is required to annually review a utility’s GCR plan and to conduct  a second review after conclusion of each plan year to verify the utility’s entitlement to recovery of such costs.  In so doing, the burden is on the utility to demonstrate that its GCR costs are attributable to reasonable and prudent management decisions.

MPSC Chair J. Peter Lark notes that today’s order comes as the MPSC kicked off its Be WinterWise campaign to highlight the increase in natural gas prices, what customers can do to lower their bills, and financial assistance available to those who qualify.  Information

on natural gas prices, conservation tips and financial assistance programs is available on the MPSC Web site: www.michigan.gov/mpsc.

SEMCO is headquartered in Port Huron.

The MPSC is an agency within the Department of Consumer and Industry Services.

Case No. U-13622

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