Detroit Edison Gets OK To Raise Electric Rates

LANSING – Detroit Edison will be able to raise its rates by about 3 percent for commercial customers in 2005, but not at all for residential customers under an order adopted Tuesday by the Michigan Public Service Commission.

Under the order (case No. U-138081), Edison will be able to increase its rates $335.81 million. Much of that, $129 million, will go to cover increases in employee health and pension costs. Another $77 million covers power plant enhancements required under the federal Clean Air Act. The order also makes the Low Income and Energy Efficiency Fund a permanent structure and provides $40 million a year from Edison ratepayers to fund it. And customers choosing a competitor would be able to return to regulated service with sufficient notice to the utility.

For large commercial and industrial customers staying with Edison, the order means about a 3 percent rate increase. Small commercial customers will see a 7 percent increase when the rate caps are lifted for them January 1.

Residential customers, because their rates are capped until January 1, 2006, will see no change in their bills. The rate increase applied to them is being offset by a reduction in the power supply cost recovery fee. But their rates will increase 7 percent once the cap is lifted.

For those using a competitive provider, the order allows an additional 0.1 cent charge for primary choice customers and 0.3 cent charge for secondary customers to cover stranded costs generated through the first part of 2004. Additional stranded costs for 2004 are to be determined in a future rate case.

“My fellow commissioners and I believe that the order allows Detroit Edison to enhance Michigan’s electric reliability and make prudent decisions about future electric demand,” said PSC Chair Peter Lark. “In addition, it solves the return-to-service issue in a fair manner to both the utility and those customers desiring to exercise their option of choice. It also guarantees that people who opt for the competitive market may return, for whatever reason, to the utility at regulated rates.”

Those who had chosen service from a competitor and want to return to the utility would only be able to do so after two years with the competitor, and would have to notify the utility by December 1 that they intended to return to regulated service in the coming year. For those looking to return to regulated service in 2005, the deadline has been extended to December 31 to give customers time to decide and provide the notice.

“I am pleased that this order advances the Legislature’s and the Commission’s goals of promoting renewable energy,” said Commissioner Robert Nelson. “We are establishing reasonable goals for Detroit Edison to include renewable energy generation in its portfolio.”

David Waymire, spokesperson for competitive power suppliers, said the order continues to make Michigan less competitive for business, at least from a power cost standpoint. “This allows DTE to charge rates that are even more in excess of the regional average,” he said.

But Waymire said the order still allows room for competitors to provide service and be profitable. “It looks like there is enough room to keep some amount of competition alive and it looks like the commission is finally striving to eliminate stranded costs charges within a couple of years,” he said.

The challenge for competitors will be making the limits on return to regulated service into a marketing advantage. “It depends on how you sell it,” he said of the two-year service requirement. “To a certain extent once you get a customer you’re going to lock them in now, but it’s going to be harder to get a customer.”

The question remaining from the order is how it will affect efforts to push through legislative changes to the state’s electric regulations. “The commission has given DTE virtually all they wanted in their legislative efforts,” Waymire said.

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