MPSC reduces Consumers Energy electric rate increase

LANSING, Mich. – The Michigan Public Service Commission (MPSC) today approved a nearly $65.8 million electric rate increase for Consumers Energy Co. that will be effective April 1.

The rate increase is roughly 38 percent of the original $173 million increase the Jackson-based utility sought on March 31, 2017 (Case No. U-18322). Consumers later lowered its request to $148 million and on Oct. 1, 2017, self-implemented a $130 million rate increase, which it was legally allowed to do while awaiting an MPSC decision.

The approval of a lower total means a residential customer using 500 kilowatt hours (kWh) of electricity a month will see their monthly bills increase by $1.87 compared to previously approved rates. But since the utility self-implemented a higher monthly amount in October ($2.46), customers will actually see their bills decrease by 59 cents.

“The order reflects the Commission’s commitment to system improvements through increased utility investment in tree trimming and grid reliability,” said Sally Talberg, chairman of the Michigan Public Service Commission.

The Commission order approved the utility to spend roughly $22.2 million on system reliability, enhanced technology, and environmental compliance. Grid modernization efforts include system communications, substation automation, and distribution management programs to improve reliability, power quality, and service to customers, the company said.

The MPSC’s decision allows for increased investment of $51.8 million in its line-clearing vegetation management program to try to keep trees and other vegetation from causing power outages during weather events.   

The company’s most recent rate increase of nearly $113.3 million was approved Feb. 28, 2017 (Case No. U-17990). Today’s approval is 1.6 percent higher than rates set in that case.

The Commission decided to address the impact of the federal tax law changes in a separate proceeding (Case No. U-18494), which will begin in 30 days.

Consumers Energy Co. Case No. U18322 Fact Sheet

  • Revenue increase granted: $65,760,000
  • Return on common equity (ROE): 10 percent
  • Capital mix: 52.64 percent equity to 47.36 percent debt
  • Overall rate of return: 5.89 percent
  • Rate base: $10,202,174,000
  • The flat monthly residential customer charge is unchanged at $7 per month.
  • In its integrated resource plan proceeding, Consumers was ordered to provide a standalone analysis evaluating various retirement scenarios for D.E. Karn Units 1 and 2 and J. H. Campbell Units 1 and 2.
  • The utility projected total electric sales of 37,133 gigawatt-hours (GWhs) with total sales forecast at $4.214 billion. Nearly $2 billion of total sales are from residential customers.
  • The Commission committed to changes in rate design by affirming solar customers will remain eligible for time-of-use rates as a pilot program; requiring Consumers, after its next rate case, to transition residential rates from the traditional inverted block scheme to summer on- and off-peak rates to better reflect costs customers cause the utility to incur on their behalf; and rejecting the utility’s request to increase standby rates and directing it to provide billing data for further study of the rate design, including the different characteristics of maintenance and backup power.
  • The MPSC disallowed contingency costs totaling $23.5 million for capital expense items. 
  • The Commission said an ROE of 10 percent will best achieve the goals of providing appropriate compensation for risk, ensuring the financial soundness of the business, and maintaining a strong ability to attract capital, especially in the face of financial market uncertainty. Consumers requested an ROE of 10.5 percent.
  • A 4.68 percent long-term debt cost rate was approved. The company also proposed a short-term debt balance of $161 million at a cost rate of 3.55 percent. 
  • The case record consists of 2,846 pages of transcript and 448 exhibits received into evidence.

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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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