Approved return on equity: 9.9% (requested by utility: 10.5%)
Approved overall rate of return: 5.67% (requested by utility: 5.9%)
Approved revenue requirement increase: $100 million (requested by utility: $244 million)
Approved residential class rate increase: 8.3% (requested by utility: 14%)
Events:
The Citizens Utility Board (CUB) of Michigan is an intervenor in this case. In its initial brief, CUB argued that Consumers Energy’s requested capital spending is overstated by $140 million and its requested operations & maintenance spending is overstated by $33 million, and asked the MPSC to cut those amounts from the proposed rate increase.
On Dec. 17, the MPSC approved the rate case with an order that largely accepted many of the recommendations from the administrative law judge. The total revenue increase Consumers Energy may recover through rates in 2021 is only about 40% of what the utility initially requested when it filed the rate case.
On Oct. 22, Administrative Law Judge (ALJ) Sally Wallace released her recommendations for the case. Consumers Energy’s revenue increase should be decreased by 56%, from $244 million as proposed by the utility, down to $105.6 million, according to Wallace. The ALJ came to this recommendation by agreeing with intervening groups like CUB that some of the utility’s spending proposals are not properly balanced against the burdens that the resulting rate increases would place onto customers during this time of economic stress caused by the pandemic. The ALJ’s recommendations are not legally-binding, but they do become part of the order concluding the case unless parties involved file exceptions to the ALJ’s proposal, or the commissioners themselves depart from the recommendations.
Here are a few things we think are important for you to know about this case if you are a Consumers Energy customer:
- Most of the requested rate increase came from $181 million in costs related to infrastructure investment. Much of that investment is for operations and maintenance of the distribution grid. For example, the utility proposed to spend more on its programs to clear lines of trees and other potential hazards and restore service to customers after outages.
- The order included a provision that the utility “shall include a performance-based regulation proposal …in its upcoming distribution investment and maintenance plan to be filed no later than September 30, 2021, and shall share a draft of the plan with stakeholders and the Commission Staff by August 1, 2021.” For more information about performance-based regulation, read CUB’s report as well as this blog post.
- The average rate for a Consumers Energy residential customer using 500 kWh per month is $0.16 per kWh, according to MPSC data, or $80 per month. The final order, after including the effect of tax accounting changes, increases residential rates by 11.93%, or an additional $9.17 per month for a customer using 500 kWh per month.
- In the utility’s last rate case, decided January 2019, Consumers Energy requested an increase of $57.9 million and ultimately received a decrease of $24 million. Residential customer rates decreased by 1.1%, as a result. But Consumers Energy also received approval to pass $123 million onto ratepayers from expiring federal tax credits, so the actual rate effect was an increase of about $1.62 for a residential customer using 500 kWh per month, as estimated by the MPSC.
- The utility requested to increase the fixed “system access fee” from $7.50 per month to $8.50 per month. This is the charge that all customers must pay each month, regardless of their level of electricity use. During the course of the rate case, based on a staff proposal Consumers Energy agreed that the fee should instead increase to $8.00 per month, which the MPSC ultimately approved.
- Consumers Energy proposed an increase in its critical peak price charge from $0.95 per kWh to $1 per kWh, and the MPSC accepted this request. The critical peak price charge only affects customers enrolled in a “Peak Power Savers” plan designed to shift electricity demand away from peak times by charging a much higher rate at certain times in the summer but lower rates the rest of the time. Consumers Energy can call a “critical peak” during afternoon hours on no more than fourteen days between June 1 and September 30.
- Consumers Energy also wanted to add a Low-Income Assistance Credit of $30 per month for 4,600 residential customers, a proposal that the MPSC approved.