Michigan Attorney General Mike Cox announced Tuesday he has filed testimony with state regulators prepared by three expert witnesses who together recommend cutting $68.7 million from a $132.4 million natural gas rate increase proposed by Consumers Energy Co.
Cox said “Consumers Energy has requested the Michigan Public Service Commission (MPSC) to authorize the company to earn a 12% profit on its common stock. In Michigan, where major manufacturers are experiencing or potentially facing bankruptcy and where individual citizens are barely able to make ends meet, I believe Consumers Energy’s proposed profit level is unreasonably high.” Cox, who is running for reelection, said his experts have recommended limiting the authorized profit level to 9.62%.
The company had requested a 12% return on equity in its rate case filing last July. Utility spokesman Jeff Holyfield noted the authorized return is no guarantee and pointed to the company’s third quarter earnings filing with the Securities and Exchange Commission which showed a return on equity of 9.2% compared to an authorized rate of return of 11.4%.
The attorney general’s experts also testified that Consumers Energy overestimated the value of its investments by $43 million and overestimated its expenses for 2006 by $17.4 million.
The MPSC staff has recommended cutting the Consumers Energy rate increase to $62 million which is about the same amount that the attorney general’s proposed reductions would leave. Consumers says the increased costs include higher carrying costs on higher priced gas, which the company must pay until it recovers the gas costs from customers. It also must comply with new federal pipeline safety standards on 25,000 miles of pipe and is paying more for maintenance, health care and pensions.
Consumers Energy has said its rate increase would result in an average increase of about 5% or $5 a month for residential customers. The company had requested a $78 million interim rate increase, but has not received it. “Our expectation is there will be no interim rate order,” Holyfield said. He pointed out the Consumers Energy rates are among the lowest in the nation, registering in the bottom 10% of companies.
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