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Regulatory Matters | 6 Months Ended
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Jun. 30, 2013
Regulatory Matters | 1:REGULATORY MATTERS Regulatory matters are critical to Consumers. The Michigan Attorney General, ABATE, the MPSC Staff, and certain other parties typically participate in MPSC proceedings concerning Consumers, such as Consumers’ rate cases and PSCR and GCR processes. These parties often challenge various aspects of those proceedings, including the prudence of Consumers’ policies and practices, and seek cost disallowances and other relief. The parties also have appealed significant MPSC orders. Depending upon the specific issues, the outcomes of rate cases and proceedings, including judicial proceedings challenging MPSC orders or other actions, could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. Consumers cannot predict the outcome of these proceedings. There are multiple appeals pending that involve various issues concerning cost allocation among customers, the allocation of refunds among customer groups, the adequacy of the record evidence supporting the recovery of Smart Energy investments, and other matters. Consumers is unable to predict the outcome of these appeals. Consumers Electric Utility Electric Rate Case s: In June 2012, the MPSC authorized an annual rate increase of $118 million, based on a 10.3 percent authorized return on equity. Consumers filed an application in September 2012 requesting that the MPSC find that the total revenues collected during self-implementation did not exceed those that would have been collected under final rates. In March 2013, the MPSC approved a settlement agreement find ing that no refund was required. In September 2012, Consumers filed an application with the MPSC seeking an annual rate increase of $148 million, based on a 10.5 percent authorized return on equity, in order to recover new investment in system reliability, environmental compliance, and technology enhancements. In January 2013, Consumers supplemented its electric rate case application to reflect changes to its environmental compliance and generation outage plans, which reduced its requested annual rate increase to $145 million. In this filing, Consumers also sought approval of several rate adjustment mechanisms. In March 2013, Consumers self-implemented an annual rate increase of $110 million out of its requested $145 million, subject to refund with interest. Consumers’ self-implementation required no order by the MSPC, and no intervenors in Consumers’ electric rate case opposed Consumers’ self-implementation amount. The MPSC approved a partial settlement agreement in May 2013, authorizing an annual rate increase of $89 million, based on a 10.3 percent authorized rate of return on equity. The rate adjustment mechanisms requested by Consumers were not approved. In June 2013, in connection with this electric rate case, the MPSC approved Consumers’ application for authority to continue the advance metering infrastructure program and implement a non‑transmitting meter provision. In July 2013, Consumers filed a reconciliation of total revenues collected during self-implementation to those that would have been collected under final rates. Consumers’ reconciliation indicated that no refund would be required. Electric Revenue Decoupling Mechanism: The MPSC’s 2009 order in Consumers’ electric rate case authorized Consumers to implement an electric revenue decoupling mechanism. This decoupling mechanism allowed Consumers to adjust future electric rates to the degree that actual average sales per customer differed from the rate order. The MPSC extended the electric revenue decoupling mechanism for a second year in its 2010 order in Consumers’ electric rate case. In April 2012, the Michigan Court of Appeals ruled that the MPSC lacks statutory authority to approve or direct the use of a revenue decoupling mechanism for electric providers. Subsequently, in November 2012, the Michigan Court of Appeals ruled in an appeal of the MPSC’s 2010 order in Consumers’ electric rate case. The Court reversed the portion of the 2010 order related to Consumers’ electric revenue decoupling mechanism and remanded the case to the MPSC for further proceedings related to the revenue decoupling mechanism. In March 2013, the MSPC issued an order in the remand proceedings, stating that, with the exception of the authorization of the revenue decoupling mechanism, its 2010 order in Consumers’ electric rate case stands as issued. Big Rock Nuclear Decommissioning: Consumers had recorded an $85 million regulatory asset for $30 million it paid to Entergy to assume ownership responsibility for the Big Rock ISFSI and for $55 million of nuclear fuel storage costs it incurred as a result of the DOE’s failure to accept nuclear fuel. Consumers filed a complaint against the DOE in 2002 for this failure. In 2011, Consumers entered into an agreement with the DOE to settle its claims for $120 million. Consumers subsequently filed an application with the MPSC requesting authority to utilize $85 million of the settlement amount as recovery of its regulatory asset, and to refund to customers $23 million previously collected through rates for spent nuclear fuel costs. In December 2012, the MPSC approved this treatment, and Consumers refunded $23 million to customers over a six-month period that began in January 2013. Consumers recognized the remaining $12 million of the settlement as a reduction of maintenance and other operating expenses. In March 2013, a party filed an appeal with the Michigan Court of Appeals to dispute the MPSC’s December 2012 order. Renewable Energy Plan: In January 2013, Consumers received a $69 million renewable energy grant for Lake Winds® Energy Park, which began operations in November 2012. The grant was received from the U.S. Department of Treasury under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009. As reflected in Consumers’ 2011 biennial renewable energy plan, which the MPSC approved in 2012, this grant reduces Consumers’ cost of complying with the renewable standards prescribed by the 2008 Energy Law and, accordingly, reduces the overall renewable energy surcharge to be collected from customers. At June 30, 2013, Consumers had a $6 8 million regulatory liability recorded for the grant. The regulatory liability will be amortized over the life of Lake Winds® Energy Park. In May 2013, Consumers filed a revised renewable energy p lan t hat reduced the size and cost of the Cross Winds® Energy Park. In June 2013, the MPSC issued an o rder approving Consumers’ 2011 r enewable cost reconciliation filing. In July 2013, Consumers filed its 2012 renewable cost reconciliation and annual r eport. Energy Optimization Plan: In May 2013, Consumers filed its fourth annual report and reconciliation for its energy optimization plan, requesting approval of its energy optimization plan costs for 2012. Consumers also requested approval to collect $17 million from customers as an incentive payment for exceeding statutory targets under both its gas and electric energy optimization plans during 2012. Consumers Gas Utility Gas Revenue Decoupling Mechanism: The MPSC’s 2009 order in Consumers’ gas rate case authorized Consumers to implement a gas revenue decoupling mechanism. This mechanism, which the MPSC extended through April 2012 in its 2010 order in Consumers’ gas rate case, allowed Consumers to adjust future gas rates to the degree that actual average weather-adjusted sales per customer differed from the rate order. This mechanism was not affected by a separate Michigan Court of Appeals decision on electric revenue decoupling. In December 2012, the MPSC approved Consumers’ reconciliation of the gas revenue decoupling mechanism for the period June 2010 through May 2011 and authorized recovery of $16 million over a three-month period that began in February 2013. Due to hig h customer deliveries during this three-month period, Consumers collected more than the amount authorized and, at June 30, 2013, had a regulatory liability of $5 million recorded for the amou nt to be refunded to customers. In January 2013, ABATE filed an appeal with the Michigan Court of Appeals to dispute the MPSC’s conclusion that Consumers is eligible to recover the portion of the authorized recovery amount allocated to transport customers. Consumers filed its final reconciliation of the gas revenue decoupling mechanism in August 2012, requesting recovery of $17 million from customers for the period June 2011 through April 2012. At June 30, 2013, Consumers had a $1 7 million regulatory asset recorded for gas revenue decoupling for that period.
Consumers Energy Company [Member] |
Regulatory Matters | 1:REGULATORY MATTERS Regulatory matters are critical to Consumers. The Michigan Attorney General, ABATE, the MPSC Staff, and certain other parties typically participate in MPSC proceedings concerning Consumers, such as Consumers’ rate cases and PSCR and GCR processes. These parties often challenge various aspects of those proceedings, including the prudence of Consumers’ policies and practices, and seek cost disallowances and other relief. The parties also have appealed significant MPSC orders. Depending upon the specific issues, the outcomes of rate cases and proceedings, including judicial proceedings challenging MPSC orders or other actions, could have a material adverse effect on CMS Energy’s and Consumers’ liquidity, financial condition, and results of operations. Consumers cannot predict the outcome of these proceedings. There are multiple appeals pending that involve various issues concerning cost allocation among customers, the allocation of refunds among customer groups, the adequacy of the record evidence supporting the recovery of Smart Energy investments, and other matters. Consumers is unable to predict the outcome of these appeals. Consumers Electric Utility Electric Rate Case s: In June 2012, the MPSC authorized an annual rate increase of $118 million, based on a 10.3 percent authorized return on equity. Consumers filed an application in September 2012 requesting that the MPSC find that the total revenues collected during self-implementation did not exceed those that would have been collected under final rates. In March 2013, the MPSC approved a settlement agreement find ing that no refund was required. In September 2012, Consumers filed an application with the MPSC seeking an annual rate increase of $148 million, based on a 10.5 percent authorized return on equity, in order to recover new investment in system reliability, environmental compliance, and technology enhancements. In January 2013, Consumers supplemented its electric rate case application to reflect changes to its environmental compliance and generation outage plans, which reduced its requested annual rate increase to $145 million. In this filing, Consumers also sought approval of several rate adjustment mechanisms. In March 2013, Consumers self-implemented an annual rate increase of $110 million out of its requested $145 million, subject to refund with interest. Consumers’ self-implementation required no order by the MSPC, and no intervenors in Consumers’ electric rate case opposed Consumers’ self-implementation amount. The MPSC approved a partial settlement agreement in May 2013, authorizing an annual rate increase of $89 million, based on a 10.3 percent authorized rate of return on equity. The rate adjustment mechanisms requested by Consumers were not approved. In June 2013, in connection with this electric rate case, the MPSC approved Consumers’ application for authority to continue the advance metering infrastructure program and implement a non‑transmitting meter provision. In July 2013, Consumers filed a reconciliation of total revenues collected during self-implementation to those that would have been collected under final rates. Consumers’ reconciliation indicated that no refund would be required. Electric Revenue Decoupling Mechanism: The MPSC’s 2009 order in Consumers’ electric rate case authorized Consumers to implement an electric revenue decoupling mechanism. This decoupling mechanism allowed Consumers to adjust future electric rates to the degree that actual average sales per customer differed from the rate order. The MPSC extended the electric revenue decoupling mechanism for a second year in its 2010 order in Consumers’ electric rate case. In April 2012, the Michigan Court of Appeals ruled that the MPSC lacks statutory authority to approve or direct the use of a revenue decoupling mechanism for electric providers. Subsequently, in November 2012, the Michigan Court of Appeals ruled in an appeal of the MPSC’s 2010 order in Consumers’ electric rate case. The Court reversed the portion of the 2010 order related to Consumers’ electric revenue decoupling mechanism and remanded the case to the MPSC for further proceedings related to the revenue decoupling mechanism. In March 2013, the MSPC issued an order in the remand proceedings, stating that, with the exception of the authorization of the revenue decoupling mechanism, its 2010 order in Consumers’ electric rate case stands as issued. Big Rock Nuclear Decommissioning: Consumers had recorded an $85 million regulatory asset for $30 million it paid to Entergy to assume ownership responsibility for the Big Rock ISFSI and for $55 million of nuclear fuel storage costs it incurred as a result of the DOE’s failure to accept nuclear fuel. Consumers filed a complaint against the DOE in 2002 for this failure. In 2011, Consumers entered into an agreement with the DOE to settle its claims for $120 million. Consumers subsequently filed an application with the MPSC requesting authority to utilize $85 million of the settlement amount as recovery of its regulatory asset, and to refund to customers $23 million previously collected through rates for spent nuclear fuel costs. In December 2012, the MPSC approved this treatment, and Consumers refunded $23 million to customers over a six-month period that began in January 2013. Consumers recognized the remaining $12 million of the settlement as a reduction of maintenance and other operating expenses. In March 2013, a party filed an appeal with the Michigan Court of Appeals to dispute the MPSC’s December 2012 order. Renewable Energy Plan: In January 2013, Consumers received a $69 million renewable energy grant for Lake Winds® Energy Park, which began operations in November 2012. The grant was received from the U.S. Department of Treasury under Section 1603 of the American Recovery and Reinvestment Tax Act of 2009. As reflected in Consumers’ 2011 biennial renewable energy plan, which the MPSC approved in 2012, this grant reduces Consumers’ cost of complying with the renewable standards prescribed by the 2008 Energy Law and, accordingly, reduces the overall renewable energy surcharge to be collected from customers. At June 30, 2013, Consumers had a $6 8 million regulatory liability recorded for the grant. The regulatory liability will be amortized over the life of Lake Winds® Energy Park. In May 2013, Consumers filed a revised renewable energy p lan t hat reduced the size and cost of the Cross Winds® Energy Park. In June 2013, the MPSC issued an o rder approving Consumers’ 2011 r enewable cost reconciliation filing. In July 2013, Consumers filed its 2012 renewable cost reconciliation and annual r eport. Energy Optimization Plan: In May 2013, Consumers filed its fourth annual report and reconciliation for its energy optimization plan, requesting approval of its energy optimization plan costs for 2012. Consumers also requested approval to collect $17 million from customers as an incentive payment for exceeding statutory targets under both its gas and electric energy optimization plans during 2012. Consumers Gas Utility Gas Revenue Decoupling Mechanism: The MPSC’s 2009 order in Consumers’ gas rate case authorized Consumers to implement a gas revenue decoupling mechanism. This mechanism, which the MPSC extended through April 2012 in its 2010 order in Consumers’ gas rate case, allowed Consumers to adjust future gas rates to the degree that actual average weather-adjusted sales per customer differed from the rate order. This mechanism was not affected by a separate Michigan Court of Appeals decision on electric revenue decoupling. In December 2012, the MPSC approved Consumers’ reconciliation of the gas revenue decoupling mechanism for the period June 2010 through May 2011 and authorized recovery of $16 million over a three-month period that began in February 2013. Due to hig h customer deliveries during this three-month period, Consumers collected more than the amount authorized and, at June 30, 2013, had a regulatory liability of $5 million recorded for the amou nt to be refunded to customers. In January 2013, ABATE filed an appeal with the Michigan Court of Appeals to dispute the MPSC’s conclusion that Consumers is eligible to recover the portion of the authorized recovery amount allocated to transport customers. Consumers filed its final reconciliation of the gas revenue decoupling mechanism in August 2012, requesting recovery of $17 million from customers for the period June 2011 through April 2012. At June 30, 2013, Consumers had a $1 7 million regulatory asset recorded for gas revenue decoupling for that period.

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