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Natural gas rates to increase

February 8, 2001

LANSING - Michigan consumers can expect an increased natural gas bill in upcoming months.

The state House Energy and Technology Committee met Wednesday to discuss natural gas issues. State lawmakers heard testimony from representatives from Consumers Energy Co., MichCon and Semco Energy Gas Co. during the committee’s first meeting.

The companies said customer rates will increase as early as April due to increases in wholesale prices.

“The overall question is what can customers in Michigan do?” said Laura Chapelle, chairwoman of the Michigan Public Service Commission. “Customers in Michigan need to know that we have some higher rates coming, so they need to be wise about their energy uses, and conserve where possible.

“We will continue to make a competitive market in Michigan, so hopefully these big utilities will be fighting for customers, and giving us the best rates that they can.”

The wholesale price of natural gas, which represents the price of newly-produced gas, increased by more than 227 percent between December 1999 and November 2000.

However, the gas companies agreed to choice-based programs that allow customers to choose gas providers and the utilities agreed to fix their rates for three years.

“MichCon and Semco are asking to get out of their pilots early,” Chapelle said. “They’d like to continue the pilots, but they’d like to get out of the rate freezes early. That has not been decided.”

The fixed rates for all three companies are between $2.83 and $2.99 per 1,000 cubic feet. Consumers Energy began its program on April 1, 1998, and MichCon and Semco started a year later.

Carl L. English, president and CEO of Consumers Energy, said customers will see increases after their April 1 fix is removed.

“What’s going to happen to the typical Consumers Energy gas bill when the price freeze ends?” said English in his statement to the committee. “Our rates will reflect what’s going on in the marketplace. That means an increase of $20-$30 a month, on average for the typical residential customer using about 120,000 cubic feet of gas a year.”

The company will not try to recoup losses incurred recently. English said new rates will still be below market rates due to underground storage and long-term supply contracts.

“This increase includes no surcharge or profit,” he said. “We will not try to make up for our losses under the frozen price with this increase. We will charge our customers no more than absolutely necessary.”

House Energy and Technology Chairman Ken Bradstreet, R-Gaylord, said the companies are correct in raising rates.

“They have to be able to recover what they are paying for gas,” he said.

Bradstreet said consumers can confront price increases through different measures, even though there are some people who the companies “are probably going to have to help out.”

“Consumers can adopt personal measures to conserve,” he said. “They can look at whether their residence needs better insulation or windows.”

Finance junior Dan Weeks, who lives in an East Lansing house, said the increase natural gas prices will add an additional hardship for students.

“I can understand why a lot of people would be frustrated about the bills,” he said. “They are not only at the gas pump, but at home too. It is hard enough being a student and trying to get through college.

“With the bills increasing more, it’ll make it a little more difficult.”

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