MPSC Spurns Consumers Energy on Investment Recovery Mechanism, Cuts Rate Hike by 36.4%

The Michigan Public Service Commission (MPSC) authorized (Case No. U-17735) Consumers Energy on November 19 to increase its electric rates by $130 million annually, effective December 1. As a result, residential customers using 500 kilowatt-hours (kWh) of electricity a month will see an increase of $1.28 on their bills, or 0.5 percent.

On April 15, 2016, that rate increase will be reduced to $126 million, when the utility retires its “Classic Seven” coal plants. At that time, the rate increase will be cut to $1.25 for residential customers on their monthly bills, or 0.4 percent. Commercial and industrial customers will see rate increases of 4.4 percent and 0.1 percent, respectively.

Consumers Energy originally had sought a rate increase of $199 million – to cover the purchase of the Jackson natural gas plant, new depreciation rates, and the retirement of the seven coal plants. The amount approved is 36.4 percent below what the utility requested.

What’s more, in this case, the PSC rejected another $72.2 million in operation and maintenance (O&M) costs, as well as “revenue deficiency” allotments; and denied the request to implement an investment recovery mechanism that would have increased rates by another $242 million.

The “Classic Seven” coal plants that Consumers plans to retire are two units at the B.C. Cobb plant in Muskegon County; two units at the D.E. Karn-J.C. Weadock plant in Bay County; and three units at the J.R. Whiting plant in Monroe County. The utility currently operates a total of 12 coal-fired and two oil-fired generating plants, 13 hydroelectric plants, a pumped storage generating plant, and several combustion-turbine plants that produce electricity when needed during peak demand periods.

Recapping the aggregate authorized rate hike:

• A revenue increase of $130 million has been granted effective December 1;
• An additional $34.7 million will become effective with acquisition of the Jackson plant; and
• A decrease, effective April 2016, will bring the net rate increase to $126 million.

To make things even more complicated, according to the Associated Press, because Consumers self-implemented a $2.02 residential rate hike while awaiting the ruling, the total increase is 4.5 percent over rates approved in 2013 – or a 3.2 percent hike once coal plants close.

 Commissioner Sally Talberg concurred in part and dissented in part.