Dual proposals by Michigan Consolidated Gas (MichCon) to lower commodity costs and raise distribution charges will in the long run increase monthly gas bills for the typical residential customer by 7% on an annualized basis.

The company filed both proposals with the Michigan Public Service Commission (MPSC). One would lower natural gas commodity charges beginning in January 2004 and the other would increase gas service and distribution costs starting in April 2004.

MichCon’s first proposal will reduce the Gas Cost Recovery rate from the current price of $5.75/Mcf to $5.36/Mcf — a decrease of 7%. For the typical MichCon residential customer, the proposal would decrease gas bills in January, February and March — the coldest months of the year — by an average of $8 per month.

MichCon said its second filing requests the first increase in service and distribution charges in more than a decade. These charges include the costs for delivering gas to customers, maintaining the distribution system and providing customer service and repairs. The proposal asks for an increase in the residential monthly service charge from $7.50 to $11.50, and an increase in the distribution charge from $1.45 to $2.02/Mcf of gas. The typical residential customer, using 125 Mcf of gas per year, would see an average monthly increase of $10.

As a final order on the proposal isn’t expected until late 2004, MichCon has asked the MPSC to approve a portion of the increase on an interim basis beginning April 1, 2004.

“We understand that increases are never welcome, but it has been a decade since we have changed our service and distribution rates,” said Steven E. Ewing, president and chief operating officer of DTE Energy Gas Group. “While all other Michigan gas utilities have filed for or been granted rate increases in the past two years, MichCon has not asked for an increase in these rates since 1992.

“But the cost pressures we are facing are beyond our control, and an increase is necessary to cover federally-mandated safety and security programs, continued investment in MichCon’s infrastructure and to meet rising healthcare and benefit costs.”

MichCon said the company has been experiencing rising costs over the past few years related to safety and security compliance. Ewing highlighted the Pipeline Safety Act, which was implemented after the Sept. 11 terrorist attacks and requires heightened inspections and upgrades of equipment. He also noted that the company has made substantial capital investments to improve the integrity of the utility’s infrastructure and the company’s overall level of service quality.

As the gas utility subsidiary of DTE Energy, MichCon serves 1.2 million customers in Michigan.

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