Michigan Sets Expedited Review of Polar Vortex-Driven Hike
As anticipated the costs associated with this winter’s weather is starting to be tabulated and will be passed through to customers who receive their gas service from Consumers.
DTE, SEMCO and MGU are all following suit. The same reason will be cited;
“Significant, unanticipated increases in the market price for natural gas as a result of the Polar Vortex phenomena, extended periods of colder-than-normal weather occurring in Michigan and elsewhere in the United States and associated significant increases in demand for natural gas and natural gas send-out.”
Realgy has already passed through the costs required by us to deliver the extra gas demanded by each utility. We will return to our low costs which historically are below each of the utilities. At the same time, the utilities will begin passing through these costs and the cost will stay in place until it’s all collected.
Read the whole Energy Choice Matters Article, Michigan Sets Expedited Review of Polar Vortex-Driven Hike in Consumers
MI Cost Recovery is coming April 2014
MI natural gas utilities have requested approval to pass-thru the costs of procuring natural gas during this winter. This winter’s extraordinary weather is creating as you can imagine an extraordinary cost increase.
The above link is to the regulatory filings detailing how MI utilities want to recover winter costs by increasing their ceiling rates starting April 2014 which would last 12 months as follows;
Consumers: $5.575
SEMCO: $5.31
MGU: $5.22
Consumers is making an extraordinary request to recover: $90,000,000 in winter related costs.
In Dec 2013 they filed their normal rate case of $704,024,000 which was revised to $793,346,000 or about $90,000,000 due to winter related costs.
Consumers would increase their ceiling price from $4.3962 to $5.5750 (about $1.20 / MCF just for winter). This was intended to start April 2014.
The MPSC (MI public service commission) is recommending approval the MI AG (attorney general) opposes it. If these costs are delayed in getting passed-thru then the carrying cost (interest) on $90 million will cause a larger increase later on!
The other MI gas utilities have filed extraordinary cost increases as well, which include;
SEMCO would increase their ceiling price from $4.73 to $5.31
MGU would increase their ceiling price from $4.77 to $5.22
The only gas utility that did not submit an extraordinary cost increase to start April 2014 was:
MICHCON has not submitted an extraordinary rate increase at this time (perhaps waiting for the ruling on the AG appeal). At present their ceiling will be $4.47.
Realgy has passed along all costs from this winter in the month the costs were incurred. While our cost were above each of utilities, with the release of winter are costs, they are falling sharply and Realgy will be below the utilities starting in May 2014 and continuing for the foreseeable future.
In summary:
MI utility gas prices are going up due to NYMEX price increases starting April 2014.
All but MichCon has requested to recover the costs associated with winter. This increase is being delayed from an appeal by the AG.
The impact of the delay will cause the eventual cost pass-thru to be higher due to the interest charges on the extraordinary costs from this winter.
Illinois has $400 million in rate-hikes coming
Citizens Utility Board is a public advocates’ group for Illinois rate payers. Their interest is to hold utilities accountable and help oversee the costs they charge are fair, reasonable and necessary for public service.
Realgy supports CUB in holding utilities accountable that their rates increase only to cover the costs of this winter’s prices.
Realgy, unlike the utilities, has already accounted for this winter’s costs. Realgy’s prices are historically below the utilities.
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Breaking news:
*In the wake of one of Illinois’ worst winters ever, CUB is now juggling more than $400 million in rate-hike appeals: $340 million for ComEd, $57 million for Peoples Gas, $6.6 million for North Shore Gas.
*If that weren’t enough, Peoples and North Shore Gas just announced $136 million in NEW rate hikes.
Chicago electric bills to rise up to 18% in June
Municipalization will not lower prices for consumers.
We have posted numerous articles about how municipalities are offering their residents electricity or natural gas collectively to energy marketers. The idea is that “aggregation” of the residents will provide the marketer the ability to deliver a lower price. If that were the case, no one could beat the utility because the question is who would be a bigger aggregator than a utility? The utility AGGREGATES everyone in the state. Yet, Realgy beats ComEd and Ameren consistently. So why can’t municipalities come in lower?
The difference is cost of service and overhead.
Municipalities require energy marketers to deliver savings compared to the utility, take on billing and collections, and pay the municipality a portion of the margin. The simple fact remains; the cost municipalities want to collect makes them higher than the utility.
So Chicago’s latest deal is a fixed 5.3 cents (however, the ComEd rate hasn’t been posted yet) and the terms won’t include the cost during the highest-demand periods of the year nor the cost of transporting the juice over high-voltage lines from the power plants to ComEd’s local distribution grid. These costs are variable and will add considerably to the fixed price.
The potential upside is $34 per household per year. Homeowners will be looking closely at this offer.
Energy purchasers will start to focus not just on the price but also on the terms. When they do, they will move to be more transparent.
Realgy has a history of offering its MangedPriceTM (which includes variable and fixed prices) that beat ComEd with all costs included.
Find the whole Crain’s Chicago Business article “Chicago electric bills to rise up to 18% in June under new Integrys deal”
PJM Statement on Winter 2014 Cold Weather Events
The following is a press release from the Pennsylvania-New Jersey-Maryland (PJM) power pool. You question; what does it mean to me? In a word; a law suit!
As the press release explains; winter caused price spikes for marketers and power plant operators which was passed through to our customers. Energy marketers (Realgy) and power plant operators had to buy natural gas at the settlement and spot prices imposed by utility and pipeline operators. In many, many cases the utility settlement procedures imposed record setting prices.
This communication is a warning; the costs that Realgy incurred and passed through as a result of this winter’s weather will be with us a long time as they get examined. FERC may get involved to understand how the prices got so high and if they were appropriate.
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PJM Statement on Winter 2014 Cold Weather Events
Due to unprecedented cold weather conditions during the winter of 2014, PJM has been apprised of specific operational and gas procurement challenges which certain members faced during the extreme cold weather. The information gleaned from members’ operational experiences as well as PJM’s own examination of system conditions will enable PJM to share with stakeholders lessons learned from these events and allow for stakeholder review of possible improvements to PJM’s processes and market rules in this area.
Specifically, PJM has learned that several members may have incurred significant gas balancing losses in the course of operations during these unprecedented cold conditions.
Where appropriate, PJM credits members for costs incurred and allocates the associated costs according to the terms and conditions of its governing documents, as augmented via recent FERC approval of the waivers filed in dockets ER14-1144 and ER14-1145. That being said, PJM is aware that some members incurred losses for which they cannot be compensated under the current terms of PJM’s governing documents. As a result, PJM expects that some of these members may elect to make filings with the FERC in order to seek compensation for losses they incurred.
PJM plans to intervene in some or all of these proceedings. Although the burden of proof to establish the just and reasonable nature of the specific cost levels rests with the petitioning member, PJM is prepared to provide detail to FERC regarding the extraordinary conditions which caused an individual member’s cost incurrence, including the underlying conditions that gave rise to the need for a particular unit to be available to run during portions of the cold weather conditions on certain days during the winter of 2014.
Ask FERC to investigate winter price spike
As contained in previous post Realgy Supports a Review of the January 2014 Energy Price Spikes, Realgy is joining CUB and all public advocates in asking FERC to investigate market manipulation of energy prices during the winter of 2014.
Please Ask the FERC to investigate and complete the petition at the bottom of the page; its intention is to ask FERC to investigate as we all have a complaint in common as seen below.
As has been noted in Realgy’s blog, the extreme cold winter weather has driven demand to levels not seen in 20 years. See “Polar Vortex created record demand for natural gas” and “In Response to “Hedge funds bet on US gas shortage as cold boosts demand”. If energy traders, pipeline companies, utilities, or power plant operators manipulated supply so as to cause us to buy the higher price energy it’s against the law. These actions need to be exposed in order to recover any monies already paid.
Realgy promises to keep you informed of this effort.