Consumers Energy’s offices at One Energy Plaza, Jackson. Licensed Under Creative Commons License CC BY-SA 4.0.
On Tuesday, Sep 30, the Michigan Public Service Commission (MPSC) approved a $157.5 million increase in Consumers Energy gas rates under docket U-21806. This will equate to an 8% increase in residential rates, down from the 12% increase the utility requested. While the MPSC made the right choice in reducing the utility’s requested rate increase totaling $248 million, the Citizens Utility Board of Michigan (CUB) argued in this case that the reduction should have been much larger. Our testimony identified at least $190 million in recommended reductions, which would have cut the rate increase to at most $58 million instead of the $157.5 million approved by the MPSC.
As CUB pointed out in its 2025 report on investor-owned utility gas system costs, there are exorbitant costs associated with the ongoing expansion and modernization of gas systems. These costs will be felt more acutely by ratepayers because so many of their neighbors are transitioning to electrification, leaving fewer existing gas customers to foot the bill for increasing infrastructure costs. Despite the inherent contradiction of building new gas infrastructure on the cusp of a global movement toward decarbonization, long-term gas system investments accounted for a large share of the costs Consumers used to justify its requested rate increase.
Consumers Energy is highly incentivized to continue developing gas infrastructure, as the utility has been granted an above-average return on equity (ROE) by the MPSC. A utility’s ROE is the percentage of its shareholder equity in infrastructure it can legally build into its rates as profit. In its rate increase request, Consumers Energy asked the MPSC for an ROE of 10.25%.
During case proceedings, CUB argued that based on comparisons to investments of similar risk, the utility’s ROE should be reduced from 9.9% to 9.24%. Setting the ROE at 9.24% would have saved customers about $50 million relative to setting the ROE at 10.25% as the utility requested. Despite Consumers Energy declining to present arguments rebutting our testimony, the MPSC chose to reduce the Consumers ROE only by .1%, to 9.8%. This modest reduction still keeps the Consumers Energy gas ROE in excess of national averages.
Additionally, the MPSC approved an increase to the utility’s fixed residential customer charge. This charge covers metering, billing and other customer-related costs. Consumers Energy asked the MPSC for permission to increase this recurring monthly fee from $15 to $20. CUB argued that the proposed increase would hurt low-income and low-usage customers and dilute financial incentives for energy efficiency. The MPSC ultimately authorized a more modest increase to $17, acknowledging affordability concerns.
The MPSC also directed Consumers Energy to revise its Contribution in Aid of Construction (CIAC) policies to ensure existing gas customers do not subsidize new customers. CIAC policies determine the amounts new customers are required to pay for new construction needed to bring their service online. As Consumers’ gas system continues expanding, CUB agrees that CIAC policies are an important consideration. The fair application of these charges to new customers will prevent rates from needlessly inflating.
CUB also argued that because Consumers Energy requests gas rate increases on an annual basis—sometimes filing new requests before the conclusion of previous rate cases—the utility frequently cites projections that are untested or otherwise poorly supported. The MPSC agreed, disallowing certain costs associated with largely speculative projections. CUB will continue advocating for the use of historical spending data to examine the validity of utility projections in rate cases.