Michigan Consolidated Gas (MichCon), DTE Energy’s natural gas utility, will ring in the New Year with a 6.7% rate reduction for 1.2 million customers in Michigan, the company said Thursday.

MichCon said it will drop the price of natural gas from $7.50/Mcf to $7.00/Mcf effective Jan. 1. Typical residential customers will save about $35 over the remainder of the heating season. MichCon CEO Jerry Norcia said the company was able to reduce its rates due to falling wholesale gas prices and a significant supply of gas the company had in storage as it entered the heating season.

“Because we’re able to store large quantities of natural gas, we can take advantage of seasonal pricing and acquire gas when demand is down and prices are lower,” Norcia said.

In August the Michigan Public Service Commission approved MichCon’s request to sell 3.6 Bcf of natural gas in 2008 and 2009 at an average price of $9/Mcf — nearly a 92% markup from its $4.70/Mcf book value — in a settlement that allowed MichCon to earn its authorized 11% return on equity without raising customer rates (see Daily GPI, Aug. 23). MichCon said it would keep as profit about half of the $32.4 million gross generated by the gas sales. The company said selling some of its gas reserves would save customers approximately $45 on their utility bills — a total of $40 million — over a 12 month period.

The native base gas was being held in the Belle River Mills Storage field and became available for sale as a result of a planned permanent gas storage decrement made possible through the addition of new gas storage facilities at Belle River Mills and the company’s West Columbus storage field. MichCon said it intended to invest $76.4 million in new facilities at the two storage fields, and expected previously inaccessible gas to become available for cycling as a result. Improvements at the Belle River Mills facility will allow deeper cycling, providing MichCon access to 4 Bcf of native base gas. MichCon will make, in total, a 17 Bcf decrement to its systemwide gas storage accounts.

In the August settlement, MichCon agreed to not file a base rate case before Jan. 1, 2009. The company had been planning to file a rate hike proposal at the end of 2008.

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