The Michigan Public Service Commission (MPSC) today authorized Consumers Energy Company to raise electric rates by $27,468,600.  The utility had requested $68,869,000.  The average residential Consumers Energy electric customer will see a rate increase of less than 2 percent per month, effective in July.  The MPSC today also reduced the subsidy paid by commercial and industrial customers by nearly $20 million.

"The rate increase approved today reflects federal environmental mandates and the purchase of the Zeeland Generating Station, which benefits customers by improving electric reliability," said MPSC Chairman Orjiakor Isiogu.  "Aware of the effect of rising energy costs on customers, my fellow Commissioners and I approved a new $6 per month credit for low-income customers and a $3 credit for senior citizen customers who currently receive a senior discount.  These credits will help mitigate the increase for these customers."

"In addition, the Commission today is taking the important step to make Michigan more attractive to new employers or existing employers that want to expand their operations by reducing the subsidy that full service commercial and industrial electric customers pay by nearly $20 million.  This rate alignment sends the message that Michigan is a good place to do business, where electric rates are just and equitable and economic development is valued."

A fact sheet with details on the case follows.

The MPSC is an agency within the Department of Labor & Economic Growth.

Case No. U-15245

Consumers Energy Company

Case No. U-15245

Commission Order Fact Sheet

1.         Revenue Deficiency - $27,468,600

2.         The revenue deficiency is composed of the following items:

            Base Revenue Excess for the 2008 test year:  ($46.2) million

            Zeeland Plant Revenue Requirement:  $73.67 million

3.         Rate of Return on Common Equity - 10.70%

4.         Debt to Equity Ratio - 50% Debt, 50% Equity

5.         Overall Rate of Return - 6.93%

6.         Zeeland Generating Station - terminates the $69.5 million surcharge authorized by the December 18, 2007 interim order for costs associated with the purchase of the Zeeland Generating Station concurrent with the incorporation of Zeeland-related revenue requirements into Consumers' base rates.

7.         The revenue deficiency of $27.4 million reflects the removal of all costs associated with owning and operating Palisades Nuclear Power Plant from base rates.

8.         Consumers is required to file a final Palisades Nuclear Power Plant reconciliation within 30 days.

9.         Transaction costs associated with the sale of the Palisades Nuclear Power Plant in the amount of $26,497,319 were found to be reasonably and prudently incurred.

10.       Consumers is required to file an application for a reconciliation of all Big Rock Point related transactions by Oct. 1, 2008.

11.       The Pension Equalization Mechanism (PEM) and the Other Post Employment Benefit Equalization Mechanism (OEM) are terminated.

12.       Economic Development Rate - Replaces the existing Economic Development Rate with a general economic development rate that would be available to all business customers. Under this rate, any customer that adds at least one megawatt of new demand and maintains at least 75% of that new demand over a five year period would receive a credit to its base rates in diminishing percentages over the following five years.

13.       General educational credit - Adopts a per kilowatt-hour general educational credit for all electricity consumed by an educational institution in the utility's service territory, defined as any public or private building or facilities used for the sole purpose of educating children in grades K-12 and adults at the community college or university level.  

14.       Electric choice incentive mechanism  -  Approves an electric choice incentive mechanism that would apply a charge or credit if retail open access (ROA) sales increase or decrease more than 5% from the amount set in rates, providing an incentive for the company to further reduce costs in the event of ROA sales changes.

15.       Updated Cost of service - Directs the utility to redesign rates based on a version of Staff's filed Cost of Service Study revised to reflect decisions made in the Order.

16.       Rate Realignment - Directs that the subsidy paid by full service C&I customers shall be reduced by approximately $19.9 million of the current residential subsidy with implementation of rates resulting from this order. The effect on residential rates will be $0.00153 per kWh, or approximately 1.5 mills. This amount is in addition to the $27,468,600 revenue deficiency, that corresponds to a $0.00211 per kWh (2.11 mills) increase for residential customers, which is offset by the elimination of the surcharge for the utility's Zeeland Power Plant purchase granted in the interim order.  

17.       Rate Consolidation- Approves Consumers proposed comprehensive redesign of rates that is intended to simplify the rate structure and move as many rate classes as possible to paying rates based on the cost to serve each class.

18.       Residential Income Assistance Credit  - Establishes a  Residential Income Assistance Credit of $6.00 a month for customers currently under  the Home Heating Credit provisions and others earning under the income levels specified in the tariff.

19.       Senior Citizen Credit - Modifies a current rate to provide currently eligible senior citizens with a $3.00 monthly credit.

20.       System Access Charge- Establishes a fixed monthly system access charge of $6.00 into the utility's basic rate structure for residential customers, that would replace the current minimum charge based on energy usage for a minimum of 2 kWh per day.