State approves 12% electricity rate increase for Consumers Energy customers

Breana Noble
The Detroit News

The state of Michigan approved on Thursday a $134 million increase for electricity usage by Consumers Energy customers in 2021 to remove tree branches from power lines, update infrastructure and move toward eliminating coal-fueled power.

A residential customer using 500 kilowatt-hours of electricity per month would pay approximately $9.17 more per month, an 11.93% increase, according to the Michigan Public Service Commission. That customer's bill for December would be $77.69.

The increase approved by the three-member commission includes $100 million to replace and modernize Consumers' electric distribution system and to fund the Jackson-based utility's work to eliminate coal-fired electricity generation.

The rest of the hike effective Jan. 1 results from the elimination of a rate credit made following passage of the federal Tax Cuts and Jobs Act of 2017 that reduced the corporate income tax rate.

A residential customer using 500 kilowatt-hours of electricity per month would pay approximately $9.17 more per month, an 11.93% increase, according to the Michigan Public Service Commission.

The electric rate increase comes after the state commission in September approved a $144 million natural gas rate increase for Consumers customers. That translates to a 9.1% monthly increase, or $6.72 per 100 cubic feet of gas. The hike, which took effect Oct. 1, was for additional revenue to replace infrastructure and for the rising costs of operations, maintenance, financing and environmental responses.

"We understand there may be some sticker shock when customers see their bill going up," Consumers spokeswoman Katie Carey told The Detroit News. "The (electric) ruling today allows us to continue to strengthen our electric infrastructure system. In the end, our goal is to provide safe and affordable electricity to the 1.8 million households and businesses we serve."

Consumers Energy provides electricity to Michigan's Lower Peninsula, outside of southeast Michigan and the Thumb. Its natural gas and electricity business combined covers 6.7 million of the state's 10 million residents.

In particular, Thursday's rate increase will help to clear tree limbs from power lines and update infrastructure to improve response times to storms, Carey said. Other infrastructure investments would help Consumers toward achieving its goal of net-zero carbon emissions by 2040.

“The order before us would continue to support needed investment in Consumers’ distribution infrastructure and vegetation management in order to increase reliability and reduce both the number and duration of outages," commission chairman Dan Scripps said during the rate approval meeting on Thursday. 

"Enhancing reliability and reducing outages remain priorities of the Commission, and this order and the work to be included in the next set of distribution plans will help ensure that we continue to make progress on this front.”

Carey encouraged customers who might have trouble paying their bills to contact the utility company for help at (800) 477-5050. Consumers Energy in September pledged $12 million to help Michigan residents and small businesses with energy bills amid the COVID-19 pandemic.

In 2019, the CMS Energy Corp. subsidiary had requested an increase of electric rates of approximately $254 million. Without the rate cut from the federal legislation, the total impact to customers would have been $289 million.

Consumers customers are not the only ones who are facing increased utility rates. In October, DTE Energy Co.'s gas business increased its rates to generate $110 million in revenue. Residential customers using 100 cubic feet of gas a month are paying 3.9% more per month, or $2.97. In January, those same customers will see another 0.8% hike of 63 cents.

Thursday's order also decreased Consumers' authorized profit per investment dollar to 9.9% from 10%, despite the utility requesting it be increased to 10.5%. That puts the company's equity ratio at 51.11%, which is consistent with the commission's previous guidance.

The commission on Thursday also permitted Consumers to issue eight-year, low-interest securitization bonds of up to $677.7 million in costs related to the 2023 retirements of its Karn 1 and 2 coal-powered generation units in Hampton Township. The company expects its customers will save about $126 million through the bonding from a bill credit once the bonds are issued.

The rate increase comes just after CMS and Consumers CEO Patti Poppe left the company to lead Pacific Gas & Electric Co. in California. Garrick Rochow, previously CMS's executive vice president of operations, succeeded her earlier this month.

Consumers was thrown into the spotlight last winter when a fire at a key natural gas plant in Macomb County crippled production. The facility supplied 64% of the natural gas in Michigan. The company asked customers to curtail their usage in January and continuing the rest of the winter while repairs were made.

Additionally, as a result of the state commission's latest order, Consumers will double its distributed generation cap to allow customers who install solar panels to receive payment for excess power. The company also will study over the next three years the impact of increasing electrification of business vehicle fleets on the power grid.

With the public service commission staff and other stakeholders, the company also will work to update the methodology for determining payments for new customers connecting to the grid.

Twitter: @BreanaCNoble