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SEMCO ENERGY Seeks Approval to Continue Customer Choice Program

PORT HURON, Mich., Sept. 7 /PRNewswire/ -- SEMCO ENERGY GAS COMPANY today announced it has applied to the Michigan Public Service Commission (MPSC) for approval to extend its current Customer Choice Program from April 1, 2002 through March 31, 2005, at an estimated fixed cost of $4.99 per thousand cubic feet (Mcf). The actual cost will be determined by the market price on the day SEMCO ENERGY actually locks in its gas supply contracts.

The current Customer Choice Program, which began April 1, 1999, expires March 31, 2002. The current program rate is $3.24 per Mcf.

SEMCO ENERGY is the only natural gas distribution company in Michigan to seek permission to extend a Customer Choice program, which includes fixed rates, for its customers.

"We believe this program, incorporating a fixed rate for three years, is the best way to protect our customers from the volatility of the natural gas market," said Jon A. Kosht, SEMCO ENERGY GAS COMPANY President and Chief Executive Officer. "While this proposed rate includes an increase in the amount customers will pay for natural gas it also provides a shield against the price spikes the market experienced earlier this year. Our current program protected SEMCO ENERGY customers from significant price increases then and we'd like the opportunity to continue to offer this type of price certainty for an additional three years.

"As a result of our current Customer Choice program and fixed rates, the MPSC estimates that our customers have saved $112 million in energy costs in 2000 alone," Kosht said. "If our proposal to the MPSC is approved, SEMCO ENERGY customers may see similar benefits over the next three years in an environment of higher gas prices."

If SEMCO ENERGY is not allowed to extend its fixed rate program, its Gas Cost Recovery (GCR) clause will automatically be reinstated April 1, 2002. The GCR is the regulated amount the utility may charge customers in order to recoup the costs of buying natural gas on the market. The MPSC has the authority to adjust the GCR factor based on the variability in natural gas market prices. The MPSC suspended SEMCO ENERGY's GCR factor in April 1999 when the experimental Customer Choice program went into effect.

As in the current program, SEMCO ENERGY is proposing that the new three- year fixed rate program include an incentive clause for the utility to reduce its costs below a prescribed level and, if successful, to share a portion of the savings with customers when the company's profits exceed levels approved by the MPSC.

SEMCO ENERGY, in its filing, asked the MPSC for a ruling by November 30, 2001, making the new program effective April 1, 2002.

SEMCO ENERGY GAS COMPANY, a division of SEMCO ENERGY, Inc. (NYSE: SEN), distributes natural gas to more than 250,000 residential, commercial and industrial customers in Michigan. The Alaska division, ENSTAR Natural Gas Company, distributes natural gas to more than 100,000 customers in Anchorage and surrounding areas. SEMCO ENERGY, Inc. also owns and operates businesses involved in natural gas engineering and quality assurance services, pipeline construction services, propane distribution, intrastate pipeline and natural gas storage in various regions of the United States. In addition, it provides information technology and outsourcing services, specializing in the mid-range computer market.

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CONTACT: Media: Francis R. Lieder, Manager of Corporate Communications and Media Affairs, +1-810-987-2200, ext. 4186, fax, +1-810-989-4098, email, , or Analysts: Thomas Connelly, Director of Investor Relations, +1-248-702-6240, fax, +1-248-702-6303, email, , both of SEMCO ENERGY, Inc.

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding SEMCO Energy's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.

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