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MPSC approves $84M rate increase for DTE Gas Co., 57% lower than company sought
December 09, 2021
FOR IMMEDIATE RELEASE Dec. 9, 2021
The Michigan Public Service Commission today approved an $84,173,000 rate increase for DTE Gas Co. (Case No. U-20940). The rates approved today include $38 million for an infrastructure surcharge previously approved by the Commission.
The new rates take effect Jan. 1, 2022. An average residential customer using 100 cubic feet of natural gas a month will see an increase of $3.18, or 3.69%, on their monthly bill.
DTE Gas sought a rate increase of $195 million, which included $38 million for the infrastructure surcharge, leading to a net requested increase of $157 million. The rate increase approved today is about 57% lower than the company sought.
Today's order approves a return on common equity of 9.9%, with a capital structure of 51% equity to 49% debt and an average cost of capital of 5.41%. DTE Gas requested the rate increase to fund infrastructure expenses, operations and maintenance, information technology investments, make up for the termination of accelerated deferred tax amortization, and compensate for lower forecasted sales.
Among the factors reducing the amount of the originally requested rate increase are:
- The Commission's decision to approve DTE Gas to recover 20% of financial incentive compensation related to operational metrics and not the full 100% compensation the company had sought, owing to concerns raised about the company not meeting target level performance for the incentive. The Commission adopted a $17.1 million disallowance for employee incentive compensation. The Commission approved DTE Gas to implement a tracking mechanism through which the Commission can more closely monitor the company's progress in meeting incentive requirements; if the 20% target is not achieved, funds will be refunded to customers, but the company will be allowed to recover additional funds if it exceeds the 20% target level up to a maximum of 100%. The Commission said operational metrics would be scrutinized more critically going forward.
- The Commission's disallowance of $13 million in speculative contingency costs associated with projections for multiple capital projects including the utility's Traverse City/Alpena Reinforcement Project to build a new 22-mile natural gas pipeline to add redundancy and improve service reliability for customers in northern Michigan. The Commission noted that it has repeatedly found it unjust and unreasonable to include such uncertain costs in customer rates.
- The Commission's disallowance as premature of $22 million in costs associated with DTE Gas's Van Born Project to install a new pipeline and regulating equipment to boost natural gas reliability for about 120,000 customers in southeast Michigan.
- The Commission's approval of a lower rate of inflation than the company had sought, authorizing the use of actual 2020 inflation of 1.24% and updated projections of 2.47% for 2021 and 1.93% for 2022, a downward adjustment of nearly $8.8 million.
- The Commission's rejection of $1.24 million in costs related to replacement of a distribution main under the Detroit River impacting customers on Belle Isle, caused by a contractor working for DTE Electric Co., an affiliated company under parent DTE Energy. The Commission found that the cost of the repairs shouldn't be borne by ratepayers and that in the future, the company is encouraged to thoroughly explore alternatives and nontraditional solutions when confronted with similar service restoration projects.
The Commission directed DTE Gas to file additional information in its next rate case, including:
- Documentation tracking information technology costs and associated savings, beginning with technology costs authorized in the current rate case.
- An alternative methodology for determining end use transportation deliveries if the amount is again underestimated for 2022.
- Detailed information on actual benefits to all customers from the inclusion of merchant fees in rates - including but not limited to the reduction of uncollectibles attributed to payments by credit card.
- An alternative cost of service study consistent with the Commission Staff's proposal regarding end use transportation customers.
The Association of Businesses Advocating Tariff Equity; Detroit Thermal LLC; the Michigan Department of the Attorney General; Citizens Utility Board of Michigan; Michigan Power Limited Partnership; the Residential Customer Group (RCG); Retail Energy Supply Association; Energy Michigan; Dearborn Industrial Generation LLC, and Verso Corp. intervened in the case. MPSC Staff also participated.
To look up cases from today's meeting, access the?MPSC's?E-Dockets filing system.?????
Watch?recordings?of the MPSC's meetings?on the?MPSC's YouTube channel.???
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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