PORT HURON, Mich., May 26 /PRNewswire-FirstCall/ -- SEMCO ENERGY, Inc.
(NYSE: SEN) announced today that its Michigan division, SEMCO ENERGY GAS
COMPANY (SEMCO), filed a request with the Michigan Public Service Commission
(MPSC) on May 25, 2006, seeking an $18.1 million increase in base rates and
MPSC approval of changes in the way the Company charges customers (or "rate
design"). This requested increase in revenues represents a proposed increase
of approximately $3.00 per month for average residential customers compared to
what they paid last year.
Base rates recover all of SEMCO's costs of serving customers, including
investments in gas distribution equipment (such as meters and pressure
regulators, gas mains, and service connections to homes and businesses) and
other business expenses (such as meter reading, customer service, health care,
insurance and regulatory compliance costs). The Company's request to increase
base rates is an attempt to recover the higher costs of service and end a
pattern where SEMCO has earned substantially less than the Commission has
authorized in prior rate case decisions.
As part of this rate filing, the Company also proposes to change the way
residential customers are charged for service. Traditionally, the bills
customers pay are comprised primarily of three components:
* a fixed monthly Customer Charge;
* a consumption-based Service Charge; and
* the Cost of Natural Gas itself, also based on how much a customer
consumes. (The Cost of Natural Gas, which currently makes up approximately 80
percent of a customer's bill, is a pass-through cost that can vary from month
to month, depending on the market price for natural gas and a customer's own
usage patterns. SEMCO does not make a profit on the Cost of Natural Gas.)
Under the Company's current rate design, the consumption-based Service
Charge also varies based on the amount of natural gas a customer uses. As a
result, the Service Charge tends to result in higher customer bills in the
winter heating season when usage is higher.
SEMCO proposes to "decouple" or sever the current connection between how
much gas a customer uses and how much money the utility receives from the
Service Charge. Instead, SEMCO has asked the MPSC to combine the monthly
Customer Charge and the consumption-based Service Charge into one fixed charge
of approximately $25 per month (or less than $1 per day). This billing
component would be "levelized," meaning that it would not vary with how much
natural gas a customer uses each month.
Eugene N. Dubay, SEMCO ENERGY Senior Vice President and Chief Operating
Officer, commented on the reasons for the requested base rate increase: "Our
costs of providing service have gone up, just as customers have seen increases
in the costs of everyday goods and services they buy. In addition, the
Company has been earning only about half what the Commission has authorized in
prior cases. The proposed base rate increases and rate design changes are
necessary to give SEMCO a reasonable opportunity to recoup its costs of
providing service, including the investments it makes to serve customers."
Dubay added: "Customers should know that, even though the Company is seeking
additional revenue in this case, SEMCO is a top-ranked utility in terms of
efficiency and productivity. Our commitment to operating this way shows that
we know that it is important to our customers that we spend money wisely in
order to keep our rates as low as possible. SEMCO's customers actually paid
less last year for our service (excluding the cost of natural gas) than they
did ten years ago."
Dubay also commented on the proposed new residential rate design: "This
approach to billing customers is used elsewhere in the country for natural gas
service and is a familiar way of billing for other kinds of services (such as
cell phones and internet access). I also think that customers will be
surprised to learn that what SEMCO needs to cover its costs of providing
service is about $25 per month. This is a small fraction of their total
monthly bill. A second benefit is that, with this rate design change, the
Company will continue to promote conservation, but without being hurt
financially when customers use less natural gas. To demonstrate that benefit,
this filing includes a proposal that SEMCO take a more active role in
educating customers about how they can use energy more efficiently."
The amount of any increase in SEMCO's base rates will depend on what
action the MPSC takes on the Company's filing, including various rate design
proposals. SEMCO has asked that the MPSC review the Company's proposals to
increase rates and change rate design, hold any necessary hearings, and
conclude the case by no later than March 2007.
SEMCO ENERGY, Inc. distributes natural gas to more than 400,000 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.
SOURCE SEMCO ENERGY, Inc.
CONTACT: Analysts Contact: Thomas Connelly, Director of Treasury &
Investor Relations, +1-248-458-6163, or Media Contact: Timothy Lubbers,
Director of Marketing & Corporate Communications, +1-810-887-4208, both of
SEMCO ENERGY, Inc.
3085 05/26/2006 08:30 EDT http://www.prnewswire.com