SEMCO Seeks Gas Rate Hike

February 3, 2003
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SEMCO Energy Gas Co. is asking state regulators for a 23 percent increase in its natural gas rate.

The Port Huron-based utility wants to raise the rate it charges for natural gas from $4.21 per thousand cubic feet (Mcf) to $5.18 per Mcf for the 12-month period from April 2003 to March 2004.

SEMCO’s proposed gas cost recovery plan reflects the rising price of natural gas at the wholesale level, spokesman Francis Leider said.

“The cost of gas has gone up to us,” Leider said. “We have to pay what’s out there.”

SEMCO Energy Gas Co., which has a separate case pending before regulators for increases in its distribution and transportation charges, has about 270,000 residential and commercial natural gas customers in Michigan, with 40,000 of them in the Holland-Zeeland area.

The request to the Michigan Public Service Commission, filed Dec. 23, comes four months after the Public Service Commission approved a $3.82 per Mcf rate, up from $3.24 per Mcf, for SEMCO. That approval, which expires March 31, included a mechanism for SEMCO to adjust rates further upward if wholesale natural gas prices rose.

They did, leading SEMCO to increase its gas rate to the present $4.21 per Mcf.

Under state law, natural gas companies can only charge customers what they pay on the wholesale market, where prices have been on the upswing in recent months. Wholesale prices are forecast to go higher in the months ahead.

The latest short-term energy outlook issued in December by the U.S. Department of Energy states that wholesale prices “are poised to rise beyond already high levels through January and February.” Assuming normal winter weather patterns, the department’s Energy Information Agency forecasts wholesale prices this winter to average 60 percent higher, or $1.40 more per Mcf, than last winter’s $3.90 per Mcf average cost nationwide.

The SEMCO rate request is in contrast to a proposal this past fall from Michigan Consolidated Gas Co., the primary provider of natural gas in Kent and Muskegon counties that earlier planned a 5 percent rate cut. Changes wholesale market since the rate request was filed in September negated the reduction.

MichCon, in the Sept. 27 filing with the state, sought approval for a gas cost recovery plan that would decrease its rates from $4.38 per Mcf to $4.14 per Mcf, for 2003.

The state Public Service Commission on Jan. 21 approved a rate of up to $4.575 per Mcf for MichCon, which beginning with its February bills will charge $4.35 per Mcf and has the ability to adjust rates according to the wholesale market.

SEMCO, in a separate case filed in November with the Public Service Commission, is also seeking a $10.9 million increase in what customers pay annually to receive natural gas. That request seeks to restructure rate classes and increase natural gas transportation and distribution charges.

SEMCO contends the present transportation and distribution rates, established five years ago, are insufficient to cover rising operating costs.

Meanwhile, customers of Aquila Networks in northwestern Ottawa County began paying slightly more for natural gas on Jan. 1. A settlement with the Public Service Commission over a refund of costs for past purchases from 1997 to 2000 — a period when the wholesale natural gas market experienced heavy volatility coupled with a subsequent approval to raise the gas rate — will result in business customers of Aquila paying, on average, $9 more per month for natural gas.           

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