On Aug. 20 the Michigan Public Service Commission approved a settlement agreement that allows DTE’s natural gas utility to increase monthly bills for a typical residential customer by 3.9%, down from the 8.3% originally requested by DTE.
The new rates will come into effect on Oct. 1, 2020. But just a few months later, in January, 2021, an infrastructure recovery mechanism will go into effect that will push rates up by 0.8%, so a typical residential customer using 100 cubic feet of gas per month will see their bills go up by 4.7% overall, according to a statement from the Michigan Public Service Commission.
The rate increase, while lower than what DTE wanted, is still significantly higher than the Michigan Attorney General’s office argued it should be in its filings in this case. Here is CUB’s summary of the events in the case, which you can also find in our entry about the case on the rate case page of the CUB website.
- 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% from the asked for 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 to the commission 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 called 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 should be 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 the AG acknowledged 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 brief said. 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 more than 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 no need to further reduce industrial gas rates in order to attract or retain industrial customers.