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 


DTE Rate Case U-20561

Filed: July 8, 2019

Decided: TBD

Requested return on equity: 10.5%

Requested overall rate of return: 5.73%

Requested revenue requirement: $351 million

 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 residential 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).

Indiana Michigan Power Rate Case U-20359

Filed: June 24, 2019

Decided: TBD

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 customer:

  • IMP is requesting 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 is also proposing 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 is also asking 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: TBD

Requested return on equity: 10.5%

Requested overall rate of return: 7.04%

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 is requesting a 14% increase in residential rates.
  • SEMCO also is proposing an increase in fixed charges, including increasing the monthly customer charge on each residential customer by $2.40 to $17.40. SEMCO describes this 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 is proposing getting more of its revenue from a fixed charge rather than revenue that is “coupled” to the amount of gas sold.
  • The utility also proposes a new Low-Income Assistance Credit program. SEMCO would provide a $30 credit to customers whose household income does not exceed 150% of the Federal Poverty Level. Enrollment is limited to 3,200 participants.
  • SEMCO’s 10.5% requested return on common equity is an increase from the 10.35% approved in its last rate case (Case No. U-16169, decided by the Commission on Jan. 6, 2011). 

 

 

Previous Rate Cases in Michigan  

 

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.

 

 

 

(page last updated: August 6, 2019)