MPSC authorizes Consumers Energy Company to increase its electric rates

November 19, 2015

Contact: Judy Palnau, 517-284-8300
Agency: Michigan Public Service Commission

LANSING, Mich. – The Michigan Public Service Commission today authorized Consumers Energy Company to increase its electric rates by $130 million annually, effective Dec. 1.

“With a focus on reliability, affordability and environmental protection, today’s order lays a solid foundation from which customers will benefit,” MPSC Chairman John D. Quackenbush said. “Soon, the utility will close on the purchase of an existing natural gas plant and will retire seven coal units across the state. Significant investments will also be made to improve safe and reliable service and technology. At the same time, the Commission rejected $72.2 million and denied the request to implement an investment recovery mechanism that would have increased rates by another $242 million.”

As a result of today’s order (Case No. U-17735), residential customers using 500 kilowatt-hours of electricity a month will see an increase of $1.28 on their monthly bill, or 0.5 percent (over self-implemented rates), effective Dec. 1.

Customers will see a credit on their bills until the utility purchases the Jackson plant. When the purchase is complete, the credit will cease. At that time, residential customers will see a $1.88 increase on their monthly bills.

On April 15, 2016, the rate increase will be reduced to $126 million when the utility retires its “Classic Seven” coal plants. At that time, the rate increase will be reduced to $1.25 for residential customers on their monthly bills, or 0.4 percent.

The “Classic Seven” are two units at the B.C. Cobb plant in Muskegon County; two units at the J.C. Weadock plant in Bay County; and three units at the J.R. Whiting plant in Monroe County.

Commercial and industrial customers will see rate increases of 4.4 percent and 0.1 percent, respectively.

Consumers Energy sought a rate increase of $199 million including the purchase of the Jackson natural gas plant, new depreciation rates and the retirement of the seven coal plants. The amount approved is 36.4 percent below what the utility requested.

The total amount approved today represents an increase of 4.5 percent over the rates set in its previous electric rate case (Case No. U-17087), effective Dec. 1. In April, the increase over previous rates will be 3.2 percent.

Commissioner Sally Talberg concurred in part and dissented in part.

A fact sheet with details is below.

Additional MPSC actions today include:

  • Case No. U-17951: MPSC approved a settlement agreement dismissing this proceeding and finding that Clear Rate Communications, Inc. is providing telecommunications relay service in compliance with state law and MPSC regulations that require telecommunications companies to provide telephone service to the deaf and hard-of-hearing residents.

     

  • Case No. U-14725: MPSC designated Michigan 2-1-1 as the statewide 2-1-1 coordinating agency until March 31, 2018, under certain conditions.

Consumers Energy

Case No. U-17735

Commission Order Fact Sheet

 

  1. Revenue increase granted: $130,127,000 (effective Dec. 1); an additional $34.7 million (effective with acquisition of the Jackson plant); and a decrease, effective April 15, 2016, that results in a net rate increase of $126,356,000.

  2. Rate of return on common equity: 10.3 percent

  3. Debt to equity ratio: 47.52 percent debt; 52.48 common equity

  4. Overall rate of return: 6.18 percent

  5. Denies the utility’s request to establish a revenue adjustment mechanism (RAM) and an investment recovery mechanism (IRM) in 2017 and 2018.

  6. Approves $44.55 million for tree trimming/vegetation management, and $3.95 million for hazardous tree removal outside the right of way

  7. Establishes an off-setting credit equal to the costs associated with the Jackson Plant until the utility closes on the plant, at which time the credit will cease

  8. Upon retirement of the utility’s Classic 7 plants, the utility will reduce its rates by approximately $38.5 million for operations and maintenance associated with those plants

  9. Approves $25.3 million for uncollectibles

  10. Denies utility’s request to increase the monthly residential customer charge, keeping it at $7. The customer charge is a fixed monthly charge that covers certain costs such as equipment and maintenance.

  11. Approves an Energy Intensive Primary (EIP) rate that would be limited to existing metal melting customers and 200 megawatts of new load not previously served by the utility. The new load must be associated with a customer whose electric costs represent a large portion of total production costs and who has viable options to locate out of state

  12. Establishes a stand-by rate working group to study various issues concerning stand-by service and rates. These rates are intended to recover the utility’s costs for providing back-up service in cases when the customer’s distributed generator is not generating at full capacity. The MPSC staff will schedule an initial meeting of the workgroup within 90 days and will file a report on processes and recommendations within nine months.

Case Nos. U-17735, U-17951 and U-14725

For more information on these and other orders issued by the MPSC, please visit www.michigan.gov/mpsc.

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