Heating cost may double 2 utilities plan major rate hikes for natural gas effective April 1 January 24, 2001 BY ALEJANDRO BODIPO-MEMBA FREE PRESS BUSINESS WRITER Michigan's two largest natural-gas providers plan rate increases of up to 100 percent. Consumers Energy Co. intends to double its rates April 1. Michigan Consolidated Gas Co. seeks state approval to raise its rates by about 75 percent on the same day, but proposes credits which a spokesman said would soften the blow. RELATED CONTENT How proposed increases in natural gas rates would affect residential customers MichCon, a unit of Detroit-based MCN Energy Group, wants the state Public Service Commission to approve a rate increase to $5.17 per thousand cubic feet. That's an increase of more than 75 percent over the current price of $2.95, which has been frozen since 1998 as part of the company's customer choice program. The average MichCon residential gas bill, not including fees, taxes or charges, would go from $398.25 a year to $697.95. The utility also is seeking to terminate its customer choice program nine months early. MichCon's program -- and rate freeze -- would otherwise not end until Dec. 31. But a MichCon spokesman said the rate increase may be partly offset if the company cashes out contracts for natural gas distribution. That, said Michael Kidd, gas division director for the commission, could generate up to $180 million -- which would be returned to customers on their monthly bills as a credit. MichCon spokeswoman Cheryl Conway said customers would still see an overall increase in their bills, but it would be closer to 10 percent to 15 percent with the credit. But Consumers Energy, a unit of Dearborn-based CMS Energy Corp., does not plan to offset its 100-percent rate increase. It plans to raise its rates from $2.84 per thousand cubic feet to $5.69. WHAT RESIDENTIAL RATES ARE NOW, AND WHAT'S PROPOSED (Figures reflect only the gas cost, not fees and taxes) Consumers Energy Average annual bill excluding fees and taxes $346.48 Average annual bill under increase $694.18 MichCon Average annual bill excluding fees and taxes $398.25 Average annual bill if rate increase approved $697.95 Consumers does not need state approval, because its 3-year customer choice program will end March 31, along with the rate freeze. The average annual bill for Consumers' residential customers, not including taxes, fees or charges, would go from $346.48 to $694.18. Companies losing money Executives at MichCon and Consumers Energy say the customer choice program has been a losing proposition since gas rates began to rise two years ago. "We're losing money right now," said Jeff Holyfield, spokesman for Jackson-based Consumers Energy. In Michigan, customers have been paying fixed prices for their natural gas since 1998 under the customer choice program approved by the Public Service Commission as part of utility deregulation. It was designed to introduce competition into the Michigan natural gas market. A few MichCon and Consumers Energy customers were initially given a choice of alternate suppliers. Customers who stayed with the utilities were promised the locked-in rates for the life of the 3-year program. At the time, the program seemed like a good deal for the utilities, because the price of natural gas was relatively stable. "The current pricing process isn't working because of the soaring prices of natural gas on the open market," said Conway. "The new recommended price change will better reflect the market." More than 70 percent of Michigan homes are heated with natural gas, and about 90 percent of the 3.1 million gas customers in the state have been participating in the customer choice programs. Notice of the rate increases were filed in December. The commission started the application hearing process for MichCon on Monday. It expects to make a decision by April _______________________________________________ Crashlist website: http://website.lineone.net/~resource_base
