Michigan Cost Recovery is approved
Michigan Cost Recovery is approved; June billing is approved up to $5.8092 /Mcf
In a contested case, Consumers Energy Company (Consumers) has been approved to recover the costs associated with this winter’s extreme cold including the effect of the polar vortex.
Starting in June 2014, Consumers, will be allowed to recover their winter costs, which exceed $185,000,000.
The cost recovery was contested because Michigan utilities are, under normal conditions, required to submit their costs only once a year each December to cover their costs for the coming year. However, the winter costs accelerated sharply in January, February, and March 2014. Instead of sitting on these costs and paying interest, Consumers requested the Michigan Public Utility Commission (MPSC) to approve the recovery of these costs due to the extraordinary amount that would have to be carried for 12 months. Consumers, like all Michigan utilities, borrows money and repays it, thereby paying interest until the loan is repaid.
With this decision settled, it is expected that the other Michigan utilities will submit their winter costs and begin recovering them rather than waiting until next year and thereby increasing the cost to be recovered.
The Commission decision in whole is below;
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.