SEMCO ENERGY, City of Battle Creek Reach Agreement on Gas Rate Proposal
01 Février 2005 - 3:58PM
PR Newswire (US)
SEMCO ENERGY, City of Battle Creek Reach Agreement on Gas Rate
Proposal PORT HURON, Mich., Feb. 1 /PRNewswire-FirstCall/ -- After
several weeks of reviewing a rate case submitted by SEMCO ENERGY
GAS COMPANY, City Manager Wayne Wiley says new rates will be
proposed to the City Commission during its regular meeting on
February 1. Commission action isn't expected until the following
meeting on February 15. "The City has taken a thorough and
comprehensive approach to its job in regulating rates. SEMCO
ENERGY's original request would have generated an additional $5
million for the company. During intensive meetings and review of
the information provided by the company, we were able to negotiate
a more reasonable increase," said Wiley. Eugene N. Dubay, SEMCO
ENERGY Senior Vice President and Gas Company Chief Operating
Officer, said the agreement is the result of the willingness of
both sides to compromise to the benefit of the community. "As with
any negotiated compromise, neither side came away with exactly what
they wanted, but I think we have achieved an equitable settlement
that saves both the citizens of Battle Creek and SEMCO ENERGY the
costs of time- consuming litigation. I appreciate the willingness
of the Battle Creek leadership to work with us on this matter." The
base rate proposal will generate an additional $3.55 million, $3.7
million and $3.85 million respectively over the three years of the
agreement. This rate proposal recoups costs incurred by the company
to maintain its infrastructure and cover the cost of serving
customers, such as employee health care, property insurance and
regulatory compliance. Base rates reflect SEMCO ENERGY's costs,
while energy charges reflect the cost of gas on the open market
that is passed on to customers. Base rates and energy rates combine
to create a total monthly bill for customers. Residents will see a
$4 per month increase to the customer charge, a flat charge
assessed to all customers, to a total of $11. SEMCO ENERGY's
original request was to raise this fee by $8 to total $15. SEMCO
ENERGY also requested an increase to the distribution charge, which
is based on usage. Under the new proposal, there will be no
increase in residential distribution charges. The new rates go into
effect with the April billing cycle. Fees will increase, including
turn on, shut off and non-payment fees. Commercial, industrial and
transport customers will also see increases in base rates totaling
$1.07 million, $1.22 million and $1.37 million over the three
years. In addition to the increases in base rates charged by SEMCO
ENERGY, Battle Creek area customers will also be facing an increase
in the commodity price of gas after April 1, 2005. That's because a
frozen rate agreement, designed by the City and SEMCO ENERGY in
2002 when rates were low, is ending. Gas is a commodity and its
price goes up and down based on market prices. This cost is passed
on directly to consumers with no markup. Both the City and SEMCO
ENERGY have agreed to monitor the market and to again enter into a
frozen rate agreement if market conditions improve. This approach
has benefited Battle Creek area customers by saving an average of
$544 per household since 2002. In the meantime, however, Battle
Creek residents will pay market prices after enjoying three years
of rates averaging half what other communities pay. "We took a risk
in 2002, but our assessment of the market turned out to be right.
We locked in prices when they were slightly higher than the market,
but it paid off when market prices soared late in the first year of
the agreement," said Mayor John Godfrey. "Right now prices are high
and expecting to drop, so it isn't a good time for a fixed rate
agreement." Both the City and SEMCO ENERGY recognize that
increasing rates will affect low-income residents the most. The
United Way of Greater Battle Creek recently identified an unmet
need in the area of utility assistance, which is one of the top
three reasons residents call 211 for help. Contributions to Battle
Creek community heating assistance programs are built into the
rate. Low-income assistance from SEMCO ENERGY will be $150,000 in
year one, and $100,000 in years two and three for a total of
$350,000 donated. "SEMCO ENERGY believes we have an obligation to
contribute to the communities we serve and in which we live.
Contributing towards a community heating assistance program, and
encouraging others to join us, is not just a strategic objective
from a business perspective, but it is the right thing to do as a
corporate neighbor," said SEMCO ENERGY City President Colleen
Starring. "We can't prevent the cost of natural gas from going up,
but we've worked hard to serve the best interests of the community
and to protect the most vulnerable. SEMCO ENERGY has been a strong
corporate citizen and their willingness to partner on this issue
continues that tradition," said Wiley. "The City has been a very
responsive regulator and I believe this new proposal will give the
commission a very good option for proceeding." Rate regulation is
complex and is not the same as contracting for service, although
the similar terminology may confuse residents, said City Attorney
Clyde Robinson. "SEMCO ENERGY GAS COMPANY is a regulated business
that, like any private business, needs to make a profit, defined as
a reasonable rate of return, on its investment. The City's role in
this case is to set just and reasonable rates that protect both the
rights of the company and the public," said Robinson. "We can't
control competition, nor can the City be unreasonable in its
regulation. Private business has rights, but we also have the right
to regulate protections for residents. These competing rights
create both the tension and the room for compromise between private
business and government." Process summary: The new rate proposal
will be presented during the February 1 meeting in a public hearing
continued from January 18. Action on the rate proposal is expected
at the February 15 meeting. Media Note: New rates will go into
effect with the April billing cycle, which will apply new rates to
gas consumed in March for some customers. This overlap is caused by
the timing of billing cycles and ensures equity across all
customers when rates change. All customers received the benefit of
fixed rates for 36 months, as the same overlap occurred in 2002.
SEMCO ENERGY, Inc. distributes natural gas to more than 392,000
customers combined in Michigan, as SEMCO ENERGY GAS COMPANY, and in
Alaska, as ENSTAR Natural Gas Company. It also owns and operates
businesses involved in propane distribution, intrastate pipelines
and natural gas storage in various regions of the United States.
The following is a "Safe-Harbor" statement under the Private
Securities Litigation Reform Act of 1995. This release contains
forward-looking statements that involve risks and uncertainties.
Statements that are not historic facts, including statements about
the Company's outlook, beliefs, plans, goals and expectations, are
forward-looking statements. Factors that may impact forward-looking
statements include, but are not limited to, the effects of weather,
the economic climate, competition, commodity prices, changing
conditions in the capital markets, regulatory approval processes,
success in obtaining new business, success in defending claims
against the Company, and other risks detailed from time to time in
the Company's Securities and Exchange Commission filings.
DATASOURCE: SEMCO ENERGY, Inc. CONTACT: Battle Creek Media
Contacts: Michelle Reen, Assistant to the City Manager,
+1-269-966-3373, Wayne Wiley, City Manager, +1-269-966-3378, Mayor
John Godfrey, +1-269-962-7928; SEMCO ENERGY Contacts: Timothy J.
Lubbers, Director of Marketing and Corporate Communications,
+1-810-887-4208, Analysts Contact: Thomas Connelly, Director of
Investor Relations, +1-248-458-6163 Web site:
http://www.semcoenergy.com/
Copyright