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Michigan Attorney General Wants Utilities to Delay Winter Gas Cost Increases

Michigan Attorney General Mike Cox filed testimony last week in the gas cost recovery (GCR) cases of Michigan's four major gas utilities, challenging the gas cost increases proposed for this winter. Cox told the Michigan Public Service Commission (MPSC) that Consumers Energy, Michigan Consolidated Gas, Aquila and Semco Energy should delay their commodity cost increases until after the winter heating season and spread them over 12 months rather than only four.

Cox said that as a result of increased natural gas costs resulting partly from Hurricanes Katrina and Rita, the utilities propose to increase monthly winter heating bills by $42 to $102 per month.

"To impose this high monthly rate increase on the working people of this state is appalling and to assess such a dramatic increase during the expensive winter heating season is unacceptable," said Cox. "That is why I have proposed a plan that would significantly cut the expected monthly rate increase."

His plan for the four utilities would delay their commodity cost increases until April 1, 2006, when the higher usage winter heating period is over. Under Cox's proposed plan (filed in case Nos. U-14400, 14401, 14402, 14403), monthly gas bills would only increase by $10 to $25, as opposed to the $42 to $102 proposed by the four utilities.

Cox said the plan would continue his "aggressive approach of challenging utility rate increases on behalf of Michigan consumers and businesses." In 2004, Cox said his consumer protection division helped stop more than $400 million in utility rate increases.

However, utilities said Cox's plan violates existing law and basically requires them to provide gas for less than what they are paying to procure it in the marketplace. Consumers Energy spokesman Dan Bishop noted that under state law utilities are allowed full recovery of commodity costs. "This just came across our desk so we're taking a look at it," Bishop added.

Michigan Consolidated spokesman John Austerberry noted that the utilities have not proposed a "rate increase." This is a "GCR increase. For us that's a very significant point because GCR is a pass through of costs. Rates are for distribution and customer charges. So [if the attorney general's plan is accepted] basically we'll be supplying gas at below cost.

"We are aware that this is going to be a challenging winter for our customers, and in particular those who are on fixed or limited incomes," Austerberry added. "We share [the attorney general's] concerns regarding the cost of heating. However, we do question whether extending the recovery period is in the best interests of our customers because ultimately they could be faced with even larger bills when the heating season ends. Merely delaying the impact of rising natural gas costs is not necessarily a solution."

Scana subsidiary South Carolina Electric & Gas agreed to a similar delay of up to $21 million in under recovered gas commodity costs in a settlement reached last week with regulators and industrial customers (see related story).

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