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Gas Companies Seek to Pass on Rising Cost to Customers

Posted on: Monday, 3 October 2005, 21:00 CDT

By Alejandro Bodipo-Memba, Detroit Free Press

Oct. 4--Southeastern Michigan consumers, already socked by high summer and fall gasoline prices, can expect to get hit for another $40-$60 a month on their heating bills this winter.

MichCon and Consumers Energy filed proposals with the Michigan Public Service Commission late Friday that would result in bills averaging at least $180 a month, starting Jan. 1.

The proposed $40 to $60 increases are the companies' estimates on what natural gas prices will be for the winter on average. The increases are not in addition to the projections in an MPSC report estimate reported last week by the Free Press.

Under Michigan law, the utilities are allowed to recoup the costs they pay for natural gas on the wholesale market every year. Unlike a rate-increase request, Michigan utilities do not profit from the higher charges to customers.

The MPSC is required to conduct an annual review of each utility's gas cost- recovery plan and then do a follow- up after the completion of each year to verify that the costs match.

Consumers Energy, a Jackson-based unit of CMS Energy Corp., provides natural gas to about 1.7 million customers, mostly in the Detroit area. DTE Energy Corp.'s MichCon serves 1.2 million customers.

The requests follow the damaging of several gas-production operations in the gulf coast region following hurricanes Katrina and Rita. Nearly a quarter of the nation's natural gas comes from platforms in the Gulf of Mexico. As a result, the price of natural gas has jumped more than 40 percent on the commodities market since August.

Wholesale natural gas prices have nearly tripled since 2001, as supplies have gotten tighter because of rising global demand. In addition, supply stoppages like those during the last two months have put a severe strain on the nation's energy infrastructure, according to industry observers.

November delivery of natural gas rose 9.6 cents to close Monday at $14.02 per million British thermal units (Btu) on the New York Mercantile Exchange. The record high is $14.20 per million Btu, set last week.

"Utility companies, unfortunately, don't have any choice in the matter," said Kathleen Walgren, executive director of the Heat and Warmth Fund (THAW), a Detroit-based nonprofit. "As the price goes up, they have to estimate what they are going to charge customers. The MPSC mandated all of them to file."

Consumers are increasingly angry heading into the winter.

Shelby Township resident Gerry Hallahan said he is skeptical about the excuses being given for why he'll be paying about 40 percent more to heat his home this winter.

"Obviously, I think we're being abused," said Hallahan, 69, a retired engineer who lives with his wife on a fixed income. "It seems like the Wall Street speculators are driving the price of oil and natural gas up at the same time they are driving down the price of the dollar. We need to be sure that the regulators are regulating these utilities and we have a system of checks and balances."

Groups such as THAW and the Customer Choice Coalition don't blame the utilities for the proposed increase. They point out that the commodity price of natural gas and other energy sources is what is culprit.

Officials at the MPSC said they are reviewing the requests. There is no deadline for the commission to make a determination, but officials at the Consumers Energy and MichCon expect to have an answer within 60 days.

"It boils down to the damage to the gulf coast energy infrastructure," said Jeff Holyfield, a spokesman for Consumers Energy. "We expected prices to be higher prior to the hurricanes, but the damage was even greater than expected. Supplies could be tight and prices high for the next year or two."

Consumers Energy said it has in storage about 75 percent of the natural gas that it estimates it will need to heat homes this winter under fixed contract. The price for the remaining 25 percent is being affected by the utilities request.

"The increased prices for natural gas isn't just a Michigan issue, it's a national issue," said Scott Simmons, an official with MichCon.

Stan Donaldson contributed to this report.

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CMS, DTE,

Source: Detroit Free Press

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