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Michigan Attorney General Blasts Regulators for Approving Utility Gas Cost Hikes

Michigan Attorney General Mike Cox lambasted state regulators Thursday for approving substantial increases in Consumers Energy and Aquila's utility gas cost recovery mechanisms for the winter heating season. Heating bills this winter for Consumers Energy and Aquila residential ratepayers will rise 38% and 47%, respectively.

"I am disappointed that the [Michigan Public Service Commission] (MPSC) has imposed these increases on working families in Michigan this winter," said Cox. "Unfortunately, the MPSC is putting the utility's financial interests above those of hardworking families.

"I disagree with the commission's sentiments that it is essential to charge ratepayers higher gas prices in order to send 'the most accurate pricing signals to customers' particularly when Michigan has the highest electric rates in the Midwest," he said.

The MPSC last week authorized (case No. U-14400) Aquila Networks -- MGU to charge customers no more than $11.30/Mcf of gas for the remainder of its 2005-2006 gas cost recovery (GCR) plan. And in case No. U-14403, the commission authorized Consumers Energy to charge a new gas cost recovery factor of no more than $10.10/Mcf for the December through March billing period.

The PSC cited increased gas prices due to hurricanes Katrina and Rita, which have placed the utilities "at risk to experience significant under-recoveries." Furthermore, the commission noted that any delays in recovering the large increases would "economically burden customers by requiring them to pay additional costs, plus interest, in the future."

"My fellow commissioners and I are mindful that ratepayers face significant bill increases due to the spike in natural gas prices," said MPSC Chairman J. Peter Lark. "Therefore, the commission staff has been directed to closely monitor gas prices for the remainder of the 2005-2006 GCR plan year and provide monthly reports to the commissioners and notify us if it appears that the GCR factor has been set at an unreasonable level."

The attorney general participated in the proceedings at the MPSC, as did the Residential Ratepayer Consortium (RRC), the Michigan Community Action Agency Association, the utilities in the GCR case and the MPSC staff.

The MPSC rejected Cox's plan to recover the increased costs over a 17-month period beginning after the winter heating season in April 2006. That plan would have reduced monthly winter heating bills.

The attorney general said the decision will cause ratepayers to bear the full cost burden over the next four months rather than spreading the costs over the next 17 months to lessen the rate shock.

In October, Cox was able to reach settlements with two other state utilities, SEMCO and MichCon, in GCR cases. In those settlements, Cox negotiated smaller GCR increases of $25.90/month for average MichCon residential customers and $33.04/month for average SEMCO residential customers. MichCon and SEMCO had sought monthly increases of $102.20 and $76.40, respectively (see NGI, Oct. 31).

"It is unfortunate that Consumers Energy and Aquila did not have the mindset to lessen the rate shock as much as we would have liked for ratepayers this winter," said Cox. "I applaud MichCon and SEMCO for seeking ways to lessen the rate shock in this winter's heating bills for Michigan families. I will continue to do whatever I can to ensure ratepayers pay the lowest rates possible and have the least amount of rate shock this winter and would hope the Commission, Consumers Energy and Aquila would join me in that endeavor."

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