Rate Cases

Electricity metersMichigan’s system for regulating the rates that show up on your energy bills is complex. There are several different types of utilities that you might get your electricity and gas from, but the largest regulated utilities in Michigan are DTE EnergyConsumers Energy and Upper Peninsula Power Company.

The rates that these regulated utilities charge are set by the Michigan Public Service Commission (MPSC) through what are called rate cases.

A rate case begins when utility tells the MPSC how much money they need to be able to provide its services to its customers. Other stakeholders typically weigh in to make sure the utility isn’t asking for more money than it really needs.

The amount of money the utility is allowed to collect is called the revenue requirement.

The company must then explain how it is going to collect its revenue requirement from its customers. For example, it will explain what percentage of the money will come from residential customers and how those costs will be recovered from your bills.

Individual residential customers can and should make their voices heard during the rate case process by contacting the Public Service Commission.  

Active Rate Cases in Michigan 

Previous Rate Cases in Michigan 


Active Rate Cases in Michigan

Consumers Energy Electric Rate Case U-20697

Filed: Feb. 27, 2020

Decided: N/A

Requested return on equity: 10.5%

Requested overall rate of return: 5.9%

Requested revenue requirement: $244 million

Requested Residential Class Rate Increase: 14%

Events:

The Citizens Utility Board (CUB) of Michigan is an intervenor in this case. In its initial brief, CUB argued that Consumers Energy’s requested capital spending is overstated by $140 million and its requested operations & maintenance spending is overstated by $33 million, and asked the Michigan Public Service Commission to cut those amounts from the proposed rate increase.

On Oct. 22, Administrative Law Judge (ALJ) Sally Wallace released her recommendations for the case. Consumers Energy’s revenue increase should be decreased by 56%, from $244 million as proposed by the utility, down to $105.6 million, according to Wallace. The ALJ came to this recommendation by agreeing with intervening groups like CUB that some of the utility’s spending proposals are not properly balanced against the burdens that the resulting rate increases would place onto customers during this time of economic stress caused by the pandemic. The ALJ’s recommendations are not legally-binding, but they do become part of the order concluding the case unless parties involved file exceptions to the ALJ’s proposal, or the commissioners themselves depart from the recommendations. (Read this blog post from CUB for more about the ALJ’s proposal.)

Here are a few things we think are important for you to know about this case if you are a Consumers Energy customer:

  • Most of the requested rate increase comes from $181 million in costs related to infrastructure investment. Much of that investment is for operations and maintenance of the distribution grid. For example, the utility is proposing to spend more on its programs to clear lines of trees and other potential hazards and restore service to customers after outages.
  • The average rate for a Consumers Energy residential customer using 500 kWh per month is $0.16 per kWh, according to Michigan Public Service Commission data, or $80 per month. Consumers Energy’s rate request would increase residential rates by 14%.
  • In the utility’s last rate case, decided January 2019, Consumers Energy requested an increase of $57.9 million and ultimately received a decrease of $24 million. Residential customer rates decreased by 1.1%, as a result. But Consumers Energy also received approval to pass $123 million onto ratepayers from expiring federal tax credits, so the actual rate effect was an increase of about $1.62 for a residential customer using 500 kWh per month, as estimated by the Michigan Public Service Commission.
  • The utility is requesting to increase the fixed “system access fee” from $7.50 per month to $8.50 per month. This is the charge that all customers must pay each month, regardless of their level of electricity use.
  • Consumers Energy is proposing an increase in its critical peak price charge from $0.95 per kWh to $1 per kWh. The critical peak price charge only affects customers enrolled in a “Peak Power Savers” plan designed to shift electricity demand away from peak times by charging a much higher rate at certain times in the summer but lower rates the rest of the time. Consumers Energy can call a “critical peak” during afternoon hours on no more than fourteen days between June 1 and September 30.
  • -Consumers Energy also wants to add a Low-Income Assistance Credit of $30 per month for 4,600 residential customers.

Consumers Energy Gas Rate Case U-20650

Filed: December 16, 2019

Decided: September 10, 2020

Approved return on equity: 9.9% (10.5% originally requested by the utility)

Approved residential rate increase: 9% (18.5% requested)

Approved revenue requirement increase: $144.5 million for the period Oct. 1, 2020 to September 30, 2021 ($245 million requested). Part of the decline from $245 million is due to $84.5 million in accelerated amortization of deferred liabilities related to tax cuts for the period October 1, 2021 to September 30, 2022.

On Aug. 20, a settlement agreement was reached between Consumers Energy and several parties to this case including the Citizens Utility Board of Michigan, and the Michigan Public Service Commission approved the settlement on Sept. 10. Besides the significant reductions to the rate increase and other elements of the rate case as mentioned above, other provisions of the settlement include:

  • The utility will contribute $2 million to The Heat and Warmth Fund and other nonprofits that provide energy assistance to utility customers, and this amount will be borne by Consumers Energy shareholders, not ratepayers.
  • Consumers Gas will explore a pilot program to provide more assistance to low-income customers, particularly those at or below 150% of the federal poverty level.
  • Consumers Gas’s fixed, monthly customer charge will be increased from $11.75 to $12.60, instead of increasing to $13.75 as the utility had initially requested.
  • The parties to the settlement agreement are Consumers Energy, the staff of the Michigan Public Service Commission, the Attorney General of Michigan, the Association of Businesses Advocating Tariff Equity, the Retail Energy Supply Association, Michigan State University, the Lansing Board of Water and Light, Energy Michigan, Inc., the Residential Customer Group, the Midland Cogeneration Venture Limited Partnership and CUB. Michigan State University and the Lansing Board of Water and Light were not signers of the agreement but made statements of non-objection.

Here are a few things we think are important for you to know about this case if you are a Consumers Gas customer:

  • Consumers Gas originally requested an 18.5% average increase in residential rates, and ultimately received 9%. In its last rate case, U-20322 (decided in September 2019), the utility requested a 16.7% increase but only received 7.6%.
  • The biggest piece of the $245 million in requested additional revenue (ultimately reduced to $144.5 million) was $124 million from infrastructure investment.
  • Consumers Gas proposed to increase its fixed monthly customer charge from $11.75 to $13.75. That increase would have made Consumers Gas’s monthly charge the highest of any gas utility in Michigan, based on December 2019 data from the Michigan Public Service Commission.
  • The 10.5% requested return on equity is up from 9.9% approved in the previous rate case. The utility had requested 10.75%, but received 9.9%.

DTE Gas Rate Case U-20642

Filed: November 26, 2019

Decided: August 20, 2020

Approved return on equity: 9.9% (10.5% requested by DTE in its original filing)

Approved revenue requirement increase: $110 million ($203.8 million requested)

Approved residential rate increase: 3.9% (8.3% requested) 

Events

  • On Aug. 20 the Michigan Public Service Commission approved a settlement agreement reached the previous month between DTE Gas and the following parties: the staff of the Michigan Public Service Commission, Attorney General Dana Nessel, the Association of Businesses Advocating Tariff Equity (ABATE), Detroit Thermal LLC, Citizens Utility Board of Michigan, Michigan Power Limited Partnership (MPLP), Verso Corporation, and the Retail Energy Supply Association.

Major elements of the settlement agreement include: a reduction in the revenue requirement increase to $110 million from $203.8 million and a reduction in the return on equity to 9.9% to 10.5%. Also, DTE Gas will no longer seek a $13.9 fixed monthly customer charge, and instead will charge $12.25, an increase from the current charge of $11.25.

  • CUB submitted that DTE uses inconsistent time periods as the bases for its forecasts of gas volume. The result is that DTE tends to pick the timeframe that supports a larger rate increase. We call for a consistent timeframe to be used to support forecasts. CUB also opposed changes to rates that would shift additional burden from larger customers onto residential and small business customers. Those changes, proposed by ABATE, MPLP and Verso, were not included in the settlement.
  • The office of the attorney general (AG) had argued that DTE’s revenue deficiency is no more than $65.5 million, rather than the over $200 million DTE was claiming. The AG’s initial brief reviewed how DTE Gas’s capital expenditures have been rising swiftly over the past several years, and how this spending places a “burden” on ratepayers. While admitting that that some of these capital expenditures are necessary to replace aging infrastructure, the “Company has intensified the pace of replacement of pipelines and other facilities without sufficient engineering analysis to support the increase in capital expenditures,” the AG argued. If these expenditures continue and customers keep paying for them in their rates the way they have been, the average total annual residential bill will double over the next ten years, from $691 in 2020 to $1,492 in 2030, according to the AG.
  • The AG also asked that the return on equity be reduced to 9.5%.
  • On May 27, 2020, the Citizens Utility Board of Michigan filed its initial brief in this case. CUB argued against the Association of Businesses Advocating Tariff Equity (ABATE), which represents large industrial customers, and ABATE’s proposal to allocate costs in a way that would decrease the share of costs carried by industrial customers, but increase the burden for residential and small business customers. In testimony CUB showed that Michigan is already similar to neighboring states in the Midwest in terms of industrial rates, so there is not a gas rate problem for Michigan’s ability to competitively attract or retain industrial customers.

Here are a few things we think are important for you to know about this case if you are a DTE Gas customer:

  • DTE Gas is requesting an 8.3% average increase in residential rates, compared to 11.1% in its last rate case U-18999 in 2017. The Michigan Public Service Commission, however, ultimately approved DTE Gas for just a 0.2% average residential rate increase in U-18999.
  • DTE Gas had also requested a 10.5% return on equity in the last rate case, but only received 10%.
  • The utility says that much of the additional revenue is related to upgrades in its natural gas distribution system, including those made toward DTE’s goal of reducing methane emissions by 80% by 2040.
  • DTE Gas proposes increasing its fixed monthly customer charge for residential customers from $11.25 to $13.90. 

Previous Rate Cases in Michigan   

DTE Electric Rate Case U-20561

Filed: July 8, 2019

Decided: May 8, 2020

Approved return on equity: 9.9%

Approved overall rate of return: 5.46%

Approved revenue requirement: $188.285 million

Requested return on equity: 10.5%

Requested overall rate of return: 5.73%

Requested revenue requirement: $351 million

Latest News

The Michigan Public Service Commission (MPSC) approved DTE’s rate increase on May 8, 2020, but with major revisions of DTE’s original request:

  • The revenue to be collected from customers was cut from $351 million to $188.3 million.
  • DTE must perform a new cost-benefit analysis of the date to retire the Belle River coal-fired plant.
  • The MPSC required DTE to draft a proposal for new regulations that would tie at least some of the utility’s financial return to performance metrics. Read our blog post for more information.

On March 5, an administrative law judge argued the commission should modify the rate case from DTE’s original request in several ways, including:

  • reduce the return on equity to 9.8%.
  • require DTE to perform a new analysis of the costs of retiring the Belle River coal-fired power plant.
  • do not charge ratepayers for costs from running River Rouge unit 3 (a coal-fired unit) after May 2020 because DTE has not provided justification for extending the plant’s retirement.
  • reject DTE’s proposed pilot for fixed billing. This pilot would allow “up to 5,000 residential customers to pay a prespecified fixed monthly amount for a period of one year that is not subject to any adjustments for actual usage or price,” according to DTE. But the administrative law judge concluded that this pilot would likely hurt energy conservation goals in Michigan because it would encourage consumers on fixed billing to waste more energy.
  • also reject DTE’s proposed pilot for a “low-income renewable energy program.” This program would be an expansion of the utility’s existing MIGreenPower program (in which customers can pay an additional amount on their bills to “subscribe” to a certain amount of energy produced by DTE renewable power facilities). But this new program would be marketed specifically to low-income customers. The administrative law judge found that the program should be rejected because, among other reasons, it does not help low-income customers lower their electric bills.

Elements of the rate case that the judge agreed should be unchanged include DTE’s pilot for time-of-use rates for residential customers.

Here are a few things we think are important for you to know about this case if you are a DTE customer:

  • DTE is requesting a 9.1% increase in rates for most residential customers, a 7.3% increase in rates for most commercial customers and a 2.9% increase in rates for most industrial customers.
  • According to DTE’s application, “A TYPICAL RESIDENTIAL CUSTOMER'S AVERAGE ELECTRIC BILL MAY BE INCREASED BY UP TO $9.84 PER MONTH, IF THE MICHIGAN PUBLIC SERVICE COMMISSION APPROVES THE REQUEST.” Michigan ratepayers already pay the highest rates in the Midwest before this rate increase.

Since DTE and other Michigan utilities have higher costs of electricity, lower reliability and higher emissions rates than their peers across the country, DTE should not be piling more costs onto residential customers. Customers should not be paying higher rates than their fellow Americans for worse service.

  • Over the past decade, Michigan’s industrial energy customer rates have remained about the same, but residential rates have been increasing rapidly. This rate case would continue the trend of putting on unfair burden on residential ratepayers.                                                                                                                                                                                                  
  • In 2017, DTE’s customers experienced more minutes of interruption in their service than the customers of any other Michigan electric utility. Its customers experienced about an average number of interruptions, but they experienced a much longer average time to restore their power.                                                                                                                                                                                                                                                                                                 
  • Overall, Michigan’s 2017 performance on emissions rates was somewhat worse than in most states, with high sulfur oxide emissions standing out (7th highest in the country).

DTE Rate Case U-20162

Filed: July 6, 2018

Decided: May 2, 2019

Revenue increase granted: $273.33 million (DTE had originally requested $476.6 million, including the effects of ending a rate reduction from the federal Tax Cuts and Jobs Act)

Return on equity: 10% (DTE had originally requested 10.5%)

Authorized overall rate of return: 5.48% (DTE had originally requested 5.76%)

Here are a few things we think are important for you to know about this case if you are a DTE customer:

  • The PSC approved an increase of $6.19, or 8.69%, for the typical residential customer using an average of 500 kWh a month. For commercial customers the increase is 4.34%, and for industrial customers it is 2.5%. After adjusting for the end of federal tax rebates, the increase in residential rates was 4.8%. This is a large decrease from DTE’s original request of 14.4%.
  • On their monthly bill, residential customers have a fixed charge (a set amount that every customer pays) and variable charges that are proportionate to how much energy a customer uses. In this rate case, DTE also proposed an increase in the fixed charge on consumers from $7.50 to $9.00. But the PSC ultimately kept this charge at $7.50.
  • In this rate case, DTE revealed the intention to gradually increase fixed charges on consumers to eventually reach $45 per customer per month.
  • Since low-income customers tend to use less power than high-income customers, higher fixed charges increase electric bills for lower-income customers and decrease bills for high-income customers. Fixed rate increases drive the percentage increase higher for low-income ratepayers. An increase in the fixed charge affects low-income customers’ ability to regulate their energy use to fit their budgets.

Indiana Michigan Power Rate Case U-20359

Filed: June 24, 2019

Decided: January 23, 2020

Return on equity: 9.86%

Overall rate of return: 6.08%

Revenue requirement: $36.4 million

Requested return on equity: 10.5%

Requested overall rate of return: 6.34%

Requested revenue requirement: $58.5 million

Here are a few things we think are important for you to know about this case if you are an Indiana Michigan Power (I&M) customer:

In January 2020, I&M reached a settlement with parties involved in the case that allows the rate increase to go forward, but at a level significantly reduced from what I&M initially requested.

The revenue I&M is authorized to raise through rate increases is $36.4 million, down from $58.5 million originally proposed by I&M, as a result of the settlement.

A residential customer using 500 kWh of electricity a month is expected to pay about 15.03% more as a result of this rate increase, according to the Michigan Public Service Commission (MPSC).

The monthly service charge for residential customers, a fixed fee, stays at $7.25, instead of increasing to $10.

Here are the major elements of the rate increase as originally proposed by IMP (but not approved):

  • IMP requested to increase rates on residential customers by 24.48%, commercial customers by 14.91%, large commercial customers by 14.25% and industrial customers by 9.73%. In its previous rate case from 2017, the requested residential rate increase was 19.36%, and in the rate case before that, it was 12.14%.
  • In addition to the above increases in the per kWh volumetric rate, IMP also proposed to increase the monthly service charge, a fixed fee, from $7.25 to $10.
  • The biggest driver of the higher revenue requirement (and thus, the higher rates) identified by IMP is $19 million for new depreciation expense. In turn, much of that new expense stems from the costs of a project to upgrade equipment at the Cook nuclear plant in order to extend the plant’s life. IMP also asked for more depreciation expense due to the costs of projects to install environmental controls at the Rockport coal-fired power plant. IMP intends to operate Rockport unit 1 through the end of its useful life in 2028, but Rockport unit 2’s lease expires at the end of 2022.
  • In its last rate case, filed in May 2017, IMP requested $51.7 million and an ROE of 10.6%. The MPSC approved a revenue requirement of $49.895 million, which IMP challenged in court, but the MPSC decision was upheld by the Michigan Court of Appeals.
  • IMP’s current return on equity is 9.9%. Of the $58.5 million revenue requirement, $4 million comes from increasing the return on equity to 10.5%.

SEMCO Gas Rate Case U-20479

Filed: May 31, 2019

Decided: Settlement approved by commission on Dec. 6, 2019

Approved return on equity: 9.87%

Requested return on equity: 10.5%

Approved revenue requirement increase: $19.9 million

Requested revenue requirement increase: $38.1 million

Here are a few things we think are important for you to know about this case if you are a SEMCO customer:

  • SEMCO had requested a 14% increase in residential rates, but residential rates will instead increase 8% as the result of the settlement with Attorney General Dana Nessel, the MPSC staff, CUB of Michigan and the Retail Energy Supply Association.
  • SEMCO had also proposed an increase in fixed charges, including increasing the monthly customer charge on each residential customer by $2.40 to $17.40. But per the terms of the settlement, the charge will instead go up by just $0.75. SEMCO described the proposed increase as an “alternative revenue decoupling mechanism” – meaning that, because energy waste reduction measures mean the utility may not get as much revenue from selling gas as they expect, SEMCO proposed getting more of its revenue from a fixed charge rather than revenue that is “coupled” to the amount of gas sold.
  • SEMCO will implement a Low-Income Assistance Credit program in which the utility will provide a $30 credit to customers whose household income does not exceed 150% of the Federal Poverty Level. Enrollment is limited to 2,000 customers. SEMCO also agreed to implement a Residential Income Assistance program, in which up to 10,500 customers will receive a monthly credit equal to the customer charge.
  • Previously, SEMCO had requested a Low-Income Assistance Credit program with enrollment limited to 3,200 participants, but with no accompanying Residential Income Assistance program.
  • SEMCO’s 9.87% approved return on common equity is a decrease from the 10.35% approved in its last rate case (Case No. U-16169, decided by the Commission on Jan. 6, 2011). 
  • SEMCO agreed to not seek another general rate case before Jan. 1, 2023.

(page last updated: May 18, 2020)