Summary
CMS Energy Corporation (CMS), through its subsidiary Consumers Energy Company, reported on December 22, 2005, via an 8-K filing, significant developments from the Michigan Public Service Commission (MPSC) concerning rate-related matters. The MPSC issued three key orders that will impact the company's financial performance and regulatory landscape. Most notably, the MPSC authorized an $86 million annual increase in base electric rates for Consumers Energy, a figure lower than the initially requested $112 million, and set a return on equity at 11.15%. The commission also approved the recovery of approximately $333 million in regulatory assets through a five-year surcharge plan. However, a temporary order reduced Consumers' power supply cost recovery (PSCR) factors for 2006, which is expected to negatively affect cash flow pending a final order and reconciliation.
Key Highlights
- 1MPSC authorized an $86 million annual increase in base electric rates for Consumers Energy, falling short of the $112 million requested.
- 2The authorized return on equity for Consumers Energy was set at 11.15%.
- 3Consumers Energy is permitted to recover $333,395,000 in regulatory assets through surcharges over a 5-year phase-in plan.
- 4A temporary order from the MPSC reduced Consumers' 2006 Power Supply Cost Recovery (PSCR) factors, which is expected to negatively impact cash flow.
- 5The MPSC mandated that generation-related costs be allocated to full service customers, effectively ceasing to be stranded costs.
- 6Consumers Energy must file redesigned electric rates by January 10, 2006, and is ordered to file a new rate case no later than July 1, 2008.
- 7The company is required to contribute $27 million to the Low Income and Energy Efficiency Fund.