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LDC Must Offer Contiguous Billing, Absorb Special Discounts

Fortnightly Magazine - September 1 1996

The Michigan Public Service Commission (PSC) has reaffirmed an earlier decision requiring Consumers Power Co., a natural gas local distribution company (LDC), to absorb revenue losses associated with special discounts granted to large transportation customers under contracts and tariffs approved by the PSC. While directing the LDC to reduce base gas rates by $11.73 million, the PSC ruled that Consumers had failed to prove that the discounts were justified by cost of service or that the load-retention aspects of the discounts conferred a general benefit on ratepayers. (See, Re Consumers Power Co., 167 PUR4th 461 (Mich.P.S.C. 1996).) On rehearing, the PSC rejected allegations by Consumers that the policy on discounts would impede competition and economic development in the state. The PSC also reaffirmed its support for the "reasonable and prudent" use of rate discounts provided that the public interest is protected by adequate safeguards.

In the same case, the PSC upheld a decision requiring the LDC to implement a contiguous billing program. Under this program, the LDC treats as a single customer for billing purposes all commercial and industrial buildings that are 1) located near each other, and 2) operated as a single enterprise under common ownership. The PSC rejected the utility's claims that sales and transportation rates should have been increased to offset revenues lost due to contiguous billing. It also rejected a request to exclude sales customers from the program, arguing that lost revenues could be offset by increased customer charges that the LDC would receive from customers who switch from sales to transportation service. The PSC said that limiting the program to transportation customers would result in a "significantly narrower program" than that previously approved for another LDC, Michigan Consolidated Gas Co. Re Consumers Power Co., Case No. U-10755, June 5, 1996 (Mich.P.S.C.).

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