MPSC approves rate increase for Consumers Energy gas customers; utility to increase infrastructure upgrades, enhance technologies

FOR IMMEDIATE RELEASE   September 26, 2019

Media Contact: Matt Helms 517-284-8300
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LANSING, Mich. – The Michigan Public Service Commission today approved a rate increase of $143,531,000 for Consumers Energy Co. gas customers.

Consumers Energy is expected to increase gas transmission and distribution infrastructure investments, accelerate the removal of at-risk lines made of vintage materials and enhance technology capabilities through metering and customer-facing applications for improved customer service.

The rate increase will cost a residential customer using a monthly average of 10,000 cubic feet of natural gas $5.48 per month, beginning with the October bill.

When it filed its request in November 2018 (Case No. U-20322), Consumers sought an increase of about $229 million in its retail rates for natural gas distribution over rates that were approved in August 2018 (Case No. U-18424), when the Commission approved a Consumers gas rate increase of $10.6 million.

Consumers later reduced the request to $204 million in response to issues raised by MPSC Staff and other intervenors in the case, including the Association of Businesses Advocating Tariff Equity; Energy Michigan; Lansing Board of Water & Light; Michigan Department of the Attorney General; Michigan State University; the Residential Customer Group, and Retail Energy Supply Association. Today’s order approves approximately 63 percent of the company’s initial request.

The $143.5 million amount also factors in a refund issued in Case No. U-20309 related to lower corporate tax rates under the Tax Cuts and Jobs Act of 2017.

The Commission approved $159 million in capital expenditures for the test year associated with the Saginaw Trail Pipeline approved in Case No. U-18166, on March 28, 2017.  The Saginaw Trail Pipeline is in its final phase of construction and is currently slated to finish construction by the end of 2020.  

The Commission approved spending $100 million starting in 2020 to replace high-risk cast iron or bare steel underground lines that deliver natural gas to customers through its Enhanced Infrastructure Replacement Program (EIRP). Under the Commission’s order, Consumers is expected to lower unit costs in its pipeline replacement program and meet annual performance goals based upon these lower unit costs. 

Consumers will align its Vintage Service Replacement Program (VSRP) with the timeline for the EIRP. As of year-end 2017, approximately 172,000 vintage services remain on the Consumers Energy gas system. Today’s order adjusted projected spending in rates to reflect more efficient replacement of vintage service lines; the Commission found Consumers failed to justify its spending, which was not comparable to peers. The company is expected to remove all remaining vintage service lines by 2036.

The Commission directs Consumers to develop a strategic plan addressing the long-term operational and investment needs for the supply and delivery of natural gas that includes comprehensive treatment of the company’s storage, transmission, compression and distribution systems. 

Finally, the Commission expects Consumers to develop and implement a Pipeline Safety Management System in accordance with American Petroleum Institute Recommended Practice 1173 and provide an update in its next general rate case. A Pipeline Safety Management System is intended to establish conformity across all a pipeline operator’s processes, procedures and standards.

Consumers Energy Co. Case No. U-20322 Fact Sheet

  • Revenue increase granted: $143,531,000
  • Return on common equity (ROE): 9.9 percent
  • Capital mix: 52.05 percent equity
  • Overall rate of return: 5.84 percent
  • Rate base: Approximately $6,428,656,000
  • The Commission disallowed $92.4 in proposed capital expenditures, including expenditures associated with the Mid-Michigan Pipeline project, well rehabilitation and fleet purchases.
  • Consumers is currently investing in the gas-only service territory Automated Meter Reading Program for approximately 1.1 million gas-only customers. Deployment is expected to be completed by the end of 2019. Advanced Metering Infrastructure has already been installed for customers with both gas and electric service from Consumers.
  • The monthly service charges for residential customers ($11.75) will remain the same.
  • Consumers withdrew its request for continuation of the Investment Recovery Mechanism surcharge.

To look up cases from today’s meeting, access the E-Dockets filing system here.

To watch a livestream of the MPSC’s meetings, click here.

For information about the MPSC, visit www.Michigan.gov/MPSC, sign up for one of its listservs, or follow the Commission on Twitter.

DISCLAIMER: This document was prepared to aid the public’s understanding of certain matters before the Commission and is not intended to modify, supplement, or be a substitute for the Commission’s orders. The Commission’s orders are the official action of the Commission.

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