PORT HURON, Mich., Sept. 14 /PRNewswire/ -- SEMCO ENERGY GAS COMPANY today
announced it has received approval from the Michigan Public Service Commission
(MPSC) to reduce and freeze gas costs to its 240,000 Michigan customers.
In the same ruling, the MPSC approved a plan to expand the company's
current program allowing customers to select their natural gas supplier.
The Aggregated Transportation Service (ATS) was initiated in October 1997
and followed SEMCO's Option Plus program, which was successfully piloted in
the gas company's Battle Creek Division.
The freeze approved by the MPSC allows the company to reduce the Gas Cost
Recovery (GCR) factor for its natural gas customers by almost 10 percent for
the duration of the program. The plan is effective for the April 1999 billing
cycle and continues through March 2002.
Under this plan, the average gas company customer will save about 5
percent, or $38 a year, on their total gas bill.
"This plan, which won quick approval from the MPSC, includes an incentive
clause to encourage the gas company to be more efficient and share the
efficiency gains with our customers after a certain point," said William L.
Johnson, Chairman, President and Chief Executive Officer of SEMCO ENERGY, Inc.
The gas company, a subsidiary of SEMCO ENERGY, Inc. (Nasdaq: SMGS), has been
granted permission to place a three-year freeze on the GCR factor. The GCR
factor is a regulated charge which allows the gas company to recover the costs
of buying the gas it supplies to its customers.
The plan provides an incentive for SEMCO ENERGY GAS COMPANY to reduce its
purchased gas cost below a prescribed level and, if the company is successful,
to share a portion of the savings with its customers if the company's return
exceeds levels approved by the MPSC.
SEMCO ENERGY GAS COMPANY will reduce the GCR rate to $3.24 per thousand
feet (Mcf) and freeze the rate for three years. The GCR rate currently is
"The decision to freeze the GCR is twofold," said Jon A. Kosht, Vice
President of Rates and Regulatory Affairs.
First, the company is positioning itself for the completion of the shift
of utilities operating from regulated monopolies to competitive status.
As a regulated monopoly, a utility's profitability is determined by the
MPSC. In the approaching deregulated environment, returns on investments will
be increasingly determined by the same market forces that control other
"This is the first time the gas company has been allowed to be a
competitor on the open market," Kosht said. "The company will face risks, but
this also presents new opportunities as well as incentives to operate more
The second factor is the company's stated mission to become the low-cost
natural gas provider in Michigan after deregulation is completed.
The ATS program allows the customer to choose to continue receiving
natural gas supplied by SEMCO ENERGY GAS COMPANY or to select another
supplier. SEMCO will continue to provide gas transportation during the three-
year program, which ends March 31, 2002.
The ATS program will be opened to residential customers on a first-come
first-served basis with enrollment of up to 7,000 each year in the regulated
Neither the GCR freeze nor the ATS program will have an impact on staffing
levels at the gas company.
SEMCO ENERGY GAS COMPANY is one of three subsidiaries of SEMCO ENERGY,
Inc. The energy-focused holding company also owns SEMCO ENERGY SERVICES, an
unregulated division which markets natural gas throughout the United States
and in parts of Canada; and SEMCO ENERGY VENTURES, which operates and acquires
companies involved in natural gas pipeline and distribution system
construction, construction engineering and propane operations.
SOURCE SEMCO ENERGY GAS COMPANY
CONTACT: Roberta S. Floyd of SEMCO, 810-987-2200, ext. 4188, or fax, 810-989-4098