Gas Utility Drops Rate, May Do It Again

March 19, 2002
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Michigan Gas Utilities customers are paying more than one-third less for natural gas under a new rate the utility implemented with the new year.

MGU’s natural gas rate decreased from $6.85 per thousand cubic feet (Mcf) to $4.45 per Mcf as of Jan. 1, a 35 percent drop. The Monroe-based MGU hopes to edge its rate down even further during 2002, as wholesale prices return to levels seen prior to an unprecedented period of volatility and price spikes that began in the fall of 2000.

The new rate for 2002 represents a “return to normal” for MGU, which raised its rates three times between September 2000 and May 2001 — from $3.81 per Mcf to $6.85 per Mcf — in the wake of escalating wholesale prices that have since stabilized and come back down, said Paul Livernois, community relations director for MGU.

“It’s putting us in the ballpark of where we were,” Livernois said. “We’re hoping to see it continue to decline slightly. With the market being the way it is right now, we’re anticipating going down throughout the year.”

MGU has more than 154,000 natural gas customers in Michigan, about 37,500 of them in northwest Ottawa County around the Grand Haven-Spring Lake area, as well as in Allegan County and a small portion of southern Muskegon County.

Unlike other natural gas suppliers in Michigan, MGU did not enact a rate freeze in recent years. As a result, MGU was able to adjust rates as wholesale prices rose and is now in a position to lower rates as gas utilities elsewhere raise theirs.

Residential, commercial and industrial customers of MGU may see another reduction as soon as March or April, as the utility tries to bring its rate closer to where it was prior to the wholesale price spikes of last winter, Livernois said.

“That’s where we’d like to see it,” he said.

MGU put the lower rate into effect even as it awaits formal action on its 2002 rate plan from the Michigan Public Service Commission. State law allows utilities to lower rates without approval. Rate increases need the OK of the MPSC.

Customers of other natural gas suppliers in the region face higher bills in the months ahead as their utilities end rate freezes of recent years.

The Michigan Public Service Commission late last month approved a temporary rate plan for Michigan Consolidated Gas Co. The plan allowed MichCon, which serves about 285,000 customers in eastern Ottawa County and most of Kent and Muskegon counties, to raise its rates as of Jan. 1 from $2.95 per Mcf to $3.62 per Mcf for January bills, and then to $4.38 for the rest of 2002.

SEMCO Energy Gas Co., which has about 40,000 customers in the Holland-Zeeland area, is seeking MPSC approval to raise its gas rate in April from the current $3.24 per Mcf to $3.82 per Mcf, a 17.9 percent increase, through March 31, 2003.

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