Consumers Energy Sets Stage for Gas Rate Increase After $139.2 Million Approval

Key Facts

Consumers Energy filed a notice of intent to seek another natural gas rate increase in Michigan, 4 days after a previous increase was approved, according to the state attorney general's office. In a statement issued on October 20, the office said the company had begun with a notice of intent, while a formal rate application remained a future step. The company serves about 1.8 million natural gas customers in Michigan, where the latest move follows regulatory approval allowing it to collect additional revenue from customers. The earlier approval allows about $139.2 million in additional annual revenue, according to the attorney general's statement on that decision. That case followed another approval for a $157.5 million gas rate increase, according to the same office.

In the previous case, Consumers Energy sought to increase its annual revenue by $240 million before the Michigan Public Service Commission approved a smaller amount. The commission said the increase it approved was more than 42% below the company's original request, in a decision addressing investments in natural gas system safety. The decision approved spending on pipe replacement and leak detection and repair, work related to the safety of the network the company operates in the state. The commission rejected some costs the company submitted for transmission pipeline safety work, citing its record of estimates and actual spending. The commission also set the allowed return on common equity at 9.8% as part of the regulatory terms approved in the previous case.

For household bills, the commission said a typical residential customer using 75 hundred cubic feet of gas a month would see a $3.92 increase in their monthly bill. That represents a 4.33% increase for the typical usage level the commission used to illustrate the approved rates' impact on residential customers. Attorney General Dana Nessel had called during the previous case for the rate increase to be capped at 3.5%, according to her office's statement on the regulatory approval. Nessel said utility customers continually ask "when energy bills will stop rising," commenting on the increase approved for the company. She also opposed a mechanism Consumers Energy sought to recover revenue lost during warmer months and as sales declined, according to her office.

Among its network investments, the company requested $234.2 million for a program to replace gas pipes most prone to leaks, according to the Public Service Commission's statement. The commission approved $207 million for the program, keeping authorized spending on replacing those pipes below the amount the company sought. In the same decision, the commission approved $66.3 million for a leak detection and repair program in Consumers Energy's natural gas system. The approval also covered replacing aging service lines made from materials more susceptible to corrosion-related leaks, according to the commission's description of the approved work. The safety work covered by the approval thus spanned replacing leak-prone pipes, detecting and repairing leaks, and replacing aging service lines whose materials are affected by corrosion.

For transmission pipeline safety work, the commission rejected the inclusion in rates of more than $7.9 million in costs the company had submitted for that work. The commission based its rejection on a pattern of overstating projected spending and then spending less than those estimates. The rejection specifically concerned transmission pipeline safety work, within a decision that also authorized other investments in gas system safety. The attorney general's opposition to the lost-revenue recovery mechanism in the previous case related to warmer months and declining natural gas sales at the company. The mechanism the company sought was intended to recover that revenue, while Nessel's office announced its opposition during the dispute over the previous rates.

The rates approved by the commission take effect on November 1, putting the previous increase into effect before the likely filing date for the new formal application. According to the attorney general's office, Consumers Energy is likely to submit that application in December, following the notice of intent that preceded the rate filing. The size of the new increase the company would seek was unknown when the office issued its statement, with the formal application awaiting its likely filing date. Nessel said her office would seek to intervene in the new case on behalf of state residents to scrutinize the company's request before the regulator. The attorney general's office is thus moving to participate in the review of the next increase, following its stance on the size of the increase and the revenue recovery mechanism in the previous case.