Michigan OKs increase in gas, electric rates

12/24/2008

LANSING - Detroit Edison's average residential customer will start paying $2.51 a month more for electricity after state regulators approved a rate increase yesterday.

The average Consumers Energy residential customer will be billed $1.20 more per month for natural gas.

Overall rate increases approved by the Michigan Public Service Commission are less than a third of what the utilities asked. They take effect in January.

Commission Chairman Orjiakor Isiogu said the panel took a cautious approach and is "keenly aware of the economic climate in Michigan and in Detroit Edison's service territory, in particular."

Edison spokesman Scott Simons said Michigan's largest utility is disappointed the rate increase isn't higher but added it will "provide some much-needed revenue to run the business."

In January, Edison's average residential electric bill goes to above $57, a 4.5 percent increase.

The subsidiary of Detroit's DTE Energy Co. sells power to 2.2 million customers in southeastern Michigan and the Thumb region.

It wouldn't be surprising if in 2009 Edison takes advantage of a new state law allowing it to automatically raise rates if regulators don't act on a request within six months.

Consumers Energy, Michigan's second biggest utility, filed for an electric rate increase in November and plans to implement it in May.

The subsidiary of Jackson's CMS Energy Corp. also serves 1.7 million natural gas customers in Michigan.

Regulators yesterday allowed the utility's average residential gas bill to rise to about $112 a month, a 1 percent increase.

Consumers spokesman Dan Bishop said that even with the increase, the company's prices remain among the country's lowest because Michigan can store a lot of cheaper natural gas in underground tanks.

Edison said its electric rate hike is needed so coal-fired power plants can be upgraded to meet environmental requirements. The utility also is spending $350 million on an advanced meter reading system, which will help pinpoint power outages without having to rely on customer phone calls, Mr. Simons said.

As part of the Edison case, the Public Service Commission also will begin monitoring the utility's tree-trimming operations, which came under scrutiny earlier this year when storms caused tens of thousands of people to go without power for days.

Edison's rate increase also includes the beginning of "cost of service" power rates required under the new law approved by legislators and Gov. Jennifer Granholm in the fall.

That means business rates will go down or be held in check while residential rates will go up.

Prices historically have been skewed so residents pay less than the actual cost of electricity, while businesses pay more.

"This will be critical in making southeastern Michigan businesses more competitive," Mr. Simons said.

Over five years, $253 million in Edison electric costs covered by businesses will gradually be shifted to residents.

The original rate skewing appears to have been prompted by the 1970s energy crisis that squeezed people's pocketbooks.