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Michigan Approves Foreign Investment Plan

Fortnightly Magazine - May 15 1996

The Michigan Public Service Commission (PSC) has approved a request for certification of plans by CMS Generation Co., a wholly owned subsidiary of CMS Energy Co., to acquire an interest in an electric power supplier in Australia, as part of that country's privatization program.

According to CMS Generation, the project will remain a "totally separate entity" from the corporate parent and its principal subsidiary, Consumers Power Co. Nevertheless, a dissenting Michigan commissioner has raised questions about the effect of the deal on Michigan ratepayers, and the utility's commitment to market reforms in its own stateside service territory.

The state of Victoria, Australia, had called for bids on the proposed sale of Yallourn Energy Limited, as part of a restructuring and privatization plan. CMS Generating estimated that a successful bid would range from $1.5 to $2 billion and that it expected eventually to acquire 40 percent of the Australian utility, with a capital outlay of $250 million. The Michigan PSC granted ex parte approval on the condition that Consumers Power would not seek to recover any direct or indirect costs from its native ratepayers.

However, Commissioner David A. Svanda dissented, stating that, despite claims to the contrary, the "very act of certification" puts Michigan ratepayers at risk for an uncertain amount of investment. He also expressed concern that while CMS Energy was seeking to participate in the restructuring of the electric market in Australia, its affiliate, Consumers Power, had yet to "embark on a meaningful program of customer choice."

"We have yet to see any wheeling in Consumers' service territory even though this Commission authorized a pilot program nearly a year ago," said Svanda. He concluded that any endorsement of the company's global energy ventures should be balanced with initiatives to enhance the competitiveness of Michigan as soon as possible. Re CMS Generation Co., Case No. U-11049, Feb. 22, 1996 (Mi.P.S.C.).

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