MPSC Okays $2M Rate Hike Ahead of Cloverland Coop’s Return to Member Regulation Status

by | Jan 15, 2016

The Michigan Public Service Commission (MPSC) has approved a settlement agreement authorizing Cloverland Electric Cooperative to increase its rates by $1.9 million – or 3 percent– beginning in mid-January, the utility announced on January 6.

Cloverland serves 42,000 accounts in Chippewa, Delta, Mackinac, Luce, and Schoolcraft counties in the Wolverine State. This change is part of an MPSC rate process that started last April, the utility noted. It is not associated with the MPSC’s approval (Case 1791) for Cloverland to return to member regulation, which will be effective on January 19.

From its founding in 1938 until 1965, Cloverland was member-regulated. At that time, Cloverland said, aggressive utilities were attempting to take control of cooperative service areas. Therefore, the state’s electric cooperatives requested that the MPSC provide them with territory protection. The MPSC agreed – but regulated other business decisions, as well as rates. In 2008, Act 167 was adopted by the Michigan Legislature, providing electric coops with a process to return to member regulation.

Now, Cloverland said, returning to member regulation status will save the electric cooperative about $140,000 annually by reducing MPSC assessments and legal fees related to hearings in Lansing. In addition, Cloverland’s board will have the flexibility to establish policies, procedures, and rates much more quickly than they do by filing with the MPSC – where hearings and decisions typically take a year or more to be finalized.

Indeed, even under member regulation – which will allow the Cloverland Board of Directors to establish its own rates, billing practices, and conditions of service –  the MPSC will retain jurisdiction and control over the cooperative in matters related to the ability of customers to elect service from an alternative electric supplier; as well as rates, terms, and conditions for customers electing service from an alternative supplier.

Prior to the December 22 order, the most recently MPSC approved rate change occurred in 2013, and established a 10-year rate realignment tariff that increases the facility charge and reduces the energy charge on a revenue-neutral basis. This rate realignment was based on an MPSC-approved cost of service study.

“Cloverland Electric was ordered to implement this realignment process in 2013 by the MPSC,” explained Cloverland CEO Dan Dasho. “We are now in year three of the MPSC-ordered 10-year process. This rate realignment plan ensures [that] the fixed costs associated with providing electricity from the substation to the meter are more appropriately recovered through the monthly facility charge and not the energy charge. This rate-design approach will enable the co-op to continue to make system reliability improvements regardless of fluctuations in kilowatt-hour sales.”

As a result of the MPSC latest rate approval, and in conjunction with the 2013 MPSC order that established the 10-year rate realignment, a residential member using 700 kilowatt-hours (kWh) per month will see an increase on his or her bill ranging from $2.45 to $3.94, depending on the residential rate schedule.

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