8-KOther Events

CMS ENERGY CORP 8-K Report, Corporate Update (May 19, 2010)

Filed May 19, 2010For Securities:CMSCMS-PCCMSACMSCCMSD

Summary

CMS Energy Corporation, through its subsidiary Consumers Energy Company, announced on May 17, 2010, that the Michigan Public Service Commission (MPSC) issued an order authorizing an increase in retail gas rates. This authorization will allow Consumers Energy to collect an additional $65.9 million in annual revenue, based on a projected test year and a 10.55% rate of return on common equity. The new rates were expected to become effective by May 18, 2010. However, the MPSC order also requires Consumers Energy to reduce previously self-implemented gas rates from November 2009 by approximately $23.1 million annually. Furthermore, the company is directed to issue refunds, with interest, for the difference between the self-implemented rates and the newly authorized final rates for the period the self-implemented rates were in effect. An important operational change included in the order is the adoption of a pilot decoupling mechanism, effective June 1, 2010, designed to adjust rates based on actual weather-adjusted sales versus projected sales, mitigating revenue volatility.

Key Highlights

  • 1MPSC authorizes Consumers Energy to increase annual retail gas revenues by $65.9 million.
  • 2Authorized rate of return on common equity set at 10.55%.
  • 3Consumers Energy must reduce previously self-implemented gas rates by $23.1 million annually.
  • 4Company required to issue refunds with interest for the period between self-implemented and final authorized rates.
  • 5Pilot decoupling mechanism to be implemented starting June 1, 2010, to adjust rates based on weather-adjusted sales.
  • 6The filing includes standard forward-looking statements disclaimers, referencing risk factors in prior 10-K and 10-Q filings.

Frequently Asked Questions

The MPSC order allows for an increase in annual retail gas revenues of $65.9 million, but also requires a reduction of $23.1 million from previously self-implemented rates. Therefore, the net authorized increase in annual revenue is approximately $42.8 million ($65.9 million - $23.1 million).

Yes, customers are expected to receive a refund, with interest, for the difference between the higher rates Consumers Energy had self-implemented starting in November 2009 and the lower rates ultimately authorized by the MPSC in May 2010, for the period those higher rates were in effect.

The pilot decoupling mechanism, effective June 1, 2010, is a regulatory tool designed to separate the company's revenue from the actual volume of gas sold. It adjusts rates to account for differences between weather-adjusted actual sales and projected sales, aiming to reduce revenue volatility for the company and provide more stable rates for customers.

The MPSC's order authorizing the new rates was issued on May 17, 2010, and the new rates were expected to go into effect no later than May 18, 2010. The decoupling mechanism was scheduled to start on June 1, 2010.