SEMCO Offers To Lower Gas Rate

January 9, 2004
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SEMCO Energy Gas Co. would lower its natural gas rate by 10 percent next spring, under a rate plan pending before state regulators.

After raising the price it charges for natural gas twice since last April, SEMCO Energy is seeking a lower rate for the 12-month period that begins April 1, 2004. The rate plan reflects an easing of the volatility in the wholesale market.

“It’s not accelerating at the rate it was,” SEMCO Energy spokeswoman Roberta Floyd said. “The market isn’t quite as volatile as it has been, but there is still some volatility.”

The Port Huron-based SEMCO Energy serves about 283,000 residential and commercial natural gas customers in Michigan, about 40,000 of them in the Holland-Zeeland area and southwestern Ottawa County.

Under the rate plan filed Dec. 23 with the Michigan Public Service Commission, SEMCO Energy would implement a natural gas rate of $6.07 per thousand cubic feet (Mcf). SEMCO Energy is asking regulators for authority to adjust the rate monthly as needed, should volatility return to the wholesale natural gas market and cause wide month-to-month price fluctuations.

The gas utility is presently allowed to adjust rates, with approval of Public Service Commission staff, on a quarterly basis. Making monthly adjustments, SEMCO Energy stated in the filing, “is absolutely essential in the current natural gas supply environment.”

The filing asks the Public Service Commission to issue an order by March 15 approving an interim rate plan.

SEMCO Energy started the current 12-month rate period last April with a rate of $5.18 per Mcf. Regulators, reacting to higher wholesale prices SEMCO Energy was paying, authorized an interim increase in June to $6.03 per Mcf, and then to the current $6.79 per Mcf in October.

Testimony included with SEMCO Energy’s rate plan filing indicated the utility anticipates no need for additional adjustments to the retail rate through the remainder of its present authorization, which expires at the end of March.

The 2004-05 rate plan is the latest for SEMCO since rate freezes that natural gas utilities instituted with customer-choice programs in the late 1990s ended nearly two years ago. The end of the three-year price freezes has utilities returning to regulators annually with rate plans that reflect what they expect to pay wholesale during the coming period.

Aquila Networks, which serves 37,500 industrial, commercial and residential customers in northwest Ottawa County, all of Allegan County and a small portion of Muskegon County, received state approval in late November for a temporary rate increase pending the final outcome of a rate request filed in September.

The Public Service Commission at the end of November granted Aquila permission to charge customers a maximum of $6.6434 per Mcf of natural gas, up from $6.08 per Mcf, beginning Jan. 1. Anticipating a possible spike this winter in wholesale natural gas prices, Aquila asked state regulators in September for authority to adjust rates quarterly as the wholesale market fluctuates, for a retail price cap of $8.1255 per Mcf for 2004.  

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