The Michigan Public Service Commission has authorized Michigan Gas Utilities to increase rates and has ruled that revenues booked by an affiliate that offers administrative, gas brokering and appliance repair services should be included as part of the utility's net income.
The commission said Michigan Gas can increase rates $1.7 million, including an allowance for return on equity of 10.75 percent.
Michigan Gas had excluded from rate calculations revenues found unrelated to utility operations, such as an unregulated affiliate's propane operations. According to the commission, the affiliate has no employees of its own for the services and relied on utility employees to perform the required tasks.
The commission also denied recovery of a portion of the costs allocated to the utility by its corporate parent, UtiliCorp United Inc., for centralized gas supply services as well as appliance repair training. It rejected claims by the utility that increased gas supply costs were attributable to changes in the structure of the gas market initiated by Federal Energy Regulatory Commission in Order No. 636.
The utility had failed to show how ratepayers benefitted from the increased costs associated with the centralized gas supply arrangement, the commission said. It also found that the benefits to the utility from training its employees in gas and electric appliance repair was "incidental at best" and instead was provided primarily so that those employees might be able to perform repair service on behalf of to company's unregulated affiliate. Re Michigan Gas Utils., Case No. U-10960, March 27, 1997 (Mich.P.S.C.). t
Phillip S. Cross is an associate legal editor of PUBLIC UTILITIES FORTNIGHTLY.
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