NEWS RELEASE
ATTORNEY GENERAL DANA NESSEL
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Last Thursday, January 18th, Michigan Attorney General Dana Nessel filed testimony with the Michigan Public Service Commission (MPSC) challenging Indiana Michigan Power Company’s (I&M) request for a 9.9% increase in residential electric rates and instead argued the utility provider should decrease their rates by 1.6%. That same day, the Michigan Court of Appeals ruled to affirm an MPSC order adopting the Attorney General’s argument to disallow $1.347 million in unreasonable costs the utility proposed to pass onto ratepayers in a recent cost recovery plan.
Arguing for Rate Reduction
In September 2023, I&M filed its application with the MPSC for a $34 million rate increase alongside an increase in its return on equity from 9.9% to 10.5%. I&M includes in this request employee incentive payments ten times the amount of a utility twice its size and designed to create benefits for shareholders rather than customers. Despite this, those payments are structured to be paid not by its shareholder, but by its customers. In addition, I&M seeks to increase the monthly service charge for most residential customers by nearly 59%.
In response to I&M’s rate increase request, Attorney General Nessel filed testimony arguing that instead of a 9.9% increase in their rates and a 59% increase in their monthly service charge, customers should receive a reduction in their rates by 1.6% and no increase in the monthly service charge. Attorney General Nessel’s testimony further argues that the employee incentive payments are too high and that the company’s return on equity should remain at its current level of 9.9%.
“I&M customers should not be subject to yet another rate hike but rather, as my team and expert witnesses have shown, are due for a 1.6% rate decrease,” said Nessel. “Not only did we find they are charging ratepayers more than necessary, this rate case seeks to squeeze them even more to fund employee incentives that benefit neither service nor reliability. I’m hopeful that the Commission will agree and give I&M ratepayers in southwest Michigan a needed break on their monthly utility bills.”
A final decision in the case from the Commission is due sometime in June of this year with hearings before the Commission beginning late next month.
$1.347 Million Saved for I&M Customers
In March of 2021, I&M filed an application to reconcile its 2020 power supply cost recovery plan, seeking to recoup millions of dollars spent by the utility company to purchase or produce electricity. These costs included sums paid to an affiliate power generator, Ohio Valley Electric Corporation (OVEC), to produce power for I&M. The Attorney General intervened and filed testimony arguing that I&M overpaid for the power from its own affiliate and that this violated the Commission’s Code of Conduct for Affiliate Transactions. That code caps a utility’s recovery of costs for purchasing products or services from its affiliate at market price.
The MPSC agreed with the Attorney General’s argument in February 2023 and disallowed $1.347 million in requested cost recovery, saving ratepayers from bearing the unreasonable cost and forcing the burden of the imprudent and non-compliant deal upon the company’s shareholders. I&M appealed to the Court of Appeals and on Thursday, January 18th, the Court affirmed the Commission’s decision, referencing in great detail the arguments made by Attorney General Nessel.
“Unwise and costly business decisions should not be a burden for ratepayers to shoulder, especially when they are explicitly noncompliant with the Michigan Public Service Commission’s code of conduct for utilities,” said Nessel. “My department will continue to fight before the Commission to secure millions in savings for utility ratepayers. Affordability and reliability are what we expect from our utility providers, and in turn they should expect opposition if and when they try to drop other priorities onto the bills of their customers.”
Since taking office, the Attorney General has helped saved Michigan consumers nearly $3 billion by intervening in utility cases before the MPSC. Last week’s testimony filed at the Commission and the Court of Appeals win reaffirms her commitment to affordable energy for consumers.
I&M provides electricity to approximately 133,000 customers in southwestern Michigan.
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