Consumers Energy accepts lower gas price cap

Consumers Energy, Jackson, Mich., Thursday said it agreed to a $4.69/Mcf ceiling through March 2002 on the price of natural gas passed through to its 1.6 million Michigan customers, reflecting the price decline from winter highs. In December, Consumers Energy requested a ceiling price of $5.69/Mcf.


By the OGJ Online

HOUSTON, July 12 -- Consumers Energy, Jackson, Mich., Thursday said it agreed to a $4.69/Mcf ceiling through March 2002 on the price of natural gas passed through to its 1.6 million Michigan customers, reflecting the price decline from winter highs.

In a Dec. 15, 2000 filing, Consumers Energy requested a ceiling price of $5.69/Mcf. The gas and electric distribution company, a unit of CMS Energy Corp., said it reached an agreement in negotiations with the staff of Michigan Public Service Commission (MPSC), the Michigan attorney general's office, the Residential Ratepayer Consortium, and the Association of Business Advocating Tariff Equity.

The utility's purchased natural gas cost is recovered from its customers and is not part of the company's base rates for natural gas distribution service. If approved by the MPSC, the settlement would lower the ceiling price to $4.69/Mcf.

Under the settlement and interim rules, the utility may charge a market-based rate that's less than the ceiling price. If gas market prices cause costs to rise above the ceiling price, the cost can be recovered by the utility through an annual reconciliation process. The utility said the gas price for July bills is $4.32/Mcf.

Carl L. English, the utility's president and chief executive officer, gas, said the settlement reflects the decreasing prices in the natural gas market.

Shortly before the initial request, English said gas prices peaked at more than $10/Mcf. Since then, they have fallen sharply from that record high. The $4.69 ceiling price in the settlement agreement recognizes that market conditions have changed dramatically over the past 6 months, he said.

English said the settlement won't affect Consumers Energy's earnings outlook, because the utility charges customers what it pays for gas. And, he said, it doesn't affect the utility's June 29 request to the PSC for its first gas service rate increase since 1984.

If approved, the request would add about $6.50/ month, or about 10%, to the typical residential customer's average monthly bill. The request would increase the utility's gas service revenue by about $140 million/year.

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