Trying To Pull Plug

October 5, 2007
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GRAND RAPIDS — If the Michigan Public Service Commission approves a rate-hike request from Consumers Energy for 2008, the city said water and sewer charges will likely go up for residents and businesses on top of the larger electricity bill both will face.

And the increase wouldn’t only be for businesses within the city, as Grand Rapids provides water and sewer services to Walker, Kentwood, East Grand Rapids, and a handful of townships such as Ada and Cascade.

Deputy City Manager Eric DeLong said the higher rate could add as much as $670,125 to the city’s operating expenses for its water filtration plant and wastewater treatment plant. According to preliminary estimates, the city said electricity costs would rise by about 21.3 percent at the filtration plant and by nearly 5.4 percent for the treatment plant.

“This just isn’t a simple rate increase,” said City Attorney Philip Balkema.

In an attempt to counter the price hike, city commissioners recently agreed to join other municipalities in opposing the increase that the Michigan Municipal League is coordinating. The MML represents cities and villages in the state, and the agency has agreed to use its legal defense fund to help cities argue against the rate increase before the PSC. The city’s pro-rated cost in the action isn’t expected to exceed $25,000.

“MML has agreed to split the cost with us. The more cities that participate, the less our cost will be,” said Balkema.

So far Wyoming, Muskegon and Cedar Springs have joined the fight, as has the Michigan Township Association. Clark Hill PC is arguing the case for MML.

“They’ve appeared before the PSC to get us entered into the case,” said DeLong of the law firm.

Consumers Energy asked the PSC at the end of March for a 2008 rate increase totaling $143.5 million. Higher operating and maintenance expenses and the need to strengthen its capital structure, as ordered by the PSC, were two reasons the company cited for the increase. The company said a third reason was the ongoing investments it needs to make to comply with the Clean Air Act and in other assets to “provide safe and reliable service” to customers.

Consumers Energy also asked the PSC for authority to recover the costs associated with its sale of the Palisades Nuclear Power Plant and Big Rock fuel storage installation.

DeLong, though, said the city has also invested a “significant” amount of money in its peak-load management system to help meet the utility’s energy demand and to keep municipal costs down, meaning the city does most of its pumping when the utility has the most electricity available. But DeLong said the value of the city’s investment and equipment wasn’t identified by Consumers Energy in the rate request.

DeLong also said it wasn’t clear to the city if the filing was based on the actual cost of electricity or simply represented a change in the Consumers Energy rate structure. Balkema said the rate-hike request was actually a realignment of the utility’s 30 different schedules into seven pricing categories, and a change would make the city a business-class customer.

Balkema added that an increase Consumers Energy received last year raised the city’s electric bill by $640,000, and another hike of $670,000 next year would be too much.

“Another increase for local government,” said a disappointed Roy Schmidt, 1st Ward Commissioner.

Should the Public Service Commission OK the increase and recovery costs, Consumers Energy estimates it will earn $3.02 billion in revenue next year. The utility said the average residential user would pay $37 more next year. Consumers Energy has 1.8 million retail customers in Michigan.

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