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Michigan Attorney General Continues to Battle Against Utility Rate Increases

Michigan Attorney General Mike Cox went after state gas utility Consumers Energy again last Thursday for a proposed interim rate increase that would further boost utility customer bills in January. Consumers Energy recently won state regulatory approval to raise the gas commodity rates of its average residential customers by 38% this winter.

The attorney general filed a brief this week opposing a $75.1 million per year "emergency" natural gas rate increase that Consumers Energy requested in July to cover a variety of "working capital" costs, including the impact of sharply higher gas prices on compressor fuel costs and higher storage costs. The total rate request in July would amount to about $132 million, but the utility has asked for an interim rate him of $75.1 million starting in January 2006. The requested interim increase would average about $3-5 per residential customer bill.

"This office is committed to fighting unfair utility rates, and protecting Michigan families from excessively high energy rates," Cox said. "Consumers Energy's request is not justified." Cox said that Consumers Energy requested the higher rates despite earning profits above the level authorized by the Michigan Public Service Commission (MPSC). Consumers disputes that charge. Utility spokesman Jeff Holyfield said the company's third quarter earnings filing with the Securities and Exchange Commission show a return on equity of 9.2% compared to an authorized rate of return of 11.4%. Nevertheless, Cox noted that the $75.1 million requested would increase the "huge burden on customers when added to a Nov. 30 gas cost increase approved by the commission, which will total at least $150 million this winter," Cox said. "The commission should wait until all the evidence is in for this case and should not approve Consumers Energy's request for any emergency increase."

Cox said the rate request does not quality for "emergency" relief under the standards established by the MPSC. He also suggested that the commission limit any increase to "no more than $13 to $18 million per year." The MPSC staff has recommended that the commission approve a $37 million interim rate increase, which would amount to an additional $1.50-2.00 on the average customer's January heating bill.

The attorney general has taken an aggressive approach in opposing any and all rate increases proposed by state utilities. Cox won a settlement agreement in October with SEMCO Energy and Michigan Consolidated Gas (MichCon) essentially delaying and spreading out gas cost increases over succeeding months for 1.5 million natural gas customers. Cox said it would cut customers winter bills by 75% (see NGI, Oct. 31).

He challenged Consumers Energy and Aquila's proposed winter heating cost hikes but was unsuccessful in getting those two utilities to agree to defer their gas cost recovery. Late last month, the MPSC approved gas cost increases averaging 38% and 47% for Consumers Energy and Aquila residential ratepayers, respectively (see NGI, Dec. 5).

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