MichCon Aquila Seek Rate Changes

October 3, 2003
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Two natural gas utilities that serve much of West Michigan are seeking rate adjustments for the coming year, albeit in differing fashions.

Aquila Networks, citing higher wholesale prices, wants to raise its natural gas rate by 9.2 percent and is asking state regulators for permission to implement, if needed, an additional 22 percent increase, or an overall 33.5 percent hike from the current rate, should wholesale prices become volatile and spike this winter.

Michigan Consolidated Gas Co., with 210,000 residential and business customers in Kent and Muskegon counties and eastern Ottawa County, would lower its natural gas rate but raise charges for transmitting the gas to customers, under proposals filed Sept. 30 with the Michigan Public Service Commission. The net result would push monthly gas bills higher.

If approved, the increase would represent the first in 11 years in MichCon’s service and distribution charges. The Detroit-based utility, a unit of DTE Energy Co., says the charge increases are needed to offset rising operating costs and pay for federally mandated safety and security measures and infrastructure investments.

“With the cost pressures we’ve been having, it’s something that’s just necessary,” MichCon spokesman Len Singer said.

The utility is asking the MPSC for approval to raise the monthly service charge from $7.50 to $11.50 and increase the distribution charge 39 percent, from $1.45 per thousand cubic feet (Mcf) to $2.02 per Mcf. The charges cover MichCon’s cost to deliver natural gas, maintain the transmission system and provide customer service and repairs.

In a separate rate proposal filed with state regulators, MichCon wants to lower what customers pay for the natural gas by 6.7 percent, from the current rate of $5.75 per Mcf to $5.36, beginning in January.

MichCon’s ability to lower its natural gas rate, at a time when wholesale prices are higher than a year ago and are forecast to stay that way into 2004, stems from its massive storage capacity in Michigan, Singer said.

Natural gas utilities typically buy and store large quantities of gas during the summer months, when it’s cheapest. That prevents them from having to go to the spot market during the winter heating months, when demand peaks and wholesale prices are at their highest and most volatile.

MichCon, which has 1.2 million customers in Michigan, believes it has adequate gas in storage to avoid spot market purchases this winter and can pass the savings along to customers, Singer said.

“We feel comfortable in those regards,” Singer said.

Under state law, gas utilities cannot profit on the actual sale of the natural gas and can charge customers no more than what they pay on the wholesale market.

In the other rate case filed Sept. 30, Aquila Networks is asking the Michigan Public Service Commission for permission to raise its natural gas rate from the current $6.08 per thousand cubic feet (Mcf) to an interim rate of $6.64 per Mcf effective Jan. 1.

Anticipating a possible spike this winter in wholesale natural gas prices, Aquila also is asking regulators for authority to adjust rates quarterly as the wholesale market fluctuates, for a retail price cap of $8.12 per Mcf.

Aquila would only adjust customer rates to that $8.12 per Mcf level if the wholesale market experiences the kind of price volatility in past years that was the result of low supply and storage coupled with higher demand brought on by colder than normal winters.

“Let’s hope that doesn’t happen,” Paul Livernois, Aquila’s community relations director, said of the interim rate request. “It’d be nice to have a nice winter without the extreme cold.”

In West Michigan, the Monroe-based Aquila primarily serves northwest Ottawa County, all of Allegan County and a small portion of Muskegon County, and has about 37,500 customers.

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