PRESS RELEASE
Sault Ste. Marie, Michigan
Dec 19, 2007
Lee M Baatz - Assistant Vice President - Rates, Edison Sault Electric Company
- 906-632-5170
Edison Sault Electric Company announced today that it will submit a plan to the Michigan Public Service Commission to defer the recovery of 2008 purchased power cost increases over a three-year period.
The deferral plan would phase-in increases in Edison Sault's Power Supply Cost Recovery (PSCR) factor over three-years, as opposed to passing on all of the purchased power increases in a single increase. The first phase of the increase will take effect with bills issued in January 2008, followed by annual increases the next two years to recover the remainder of the deferrals.
The PSCR allows Edison Sault to pass through to its customers any increases or decreases in the cost of obtaining power supply from outside sources. The PSCR is a simple pass through of purchased power costs to customers and does not include any profit or margin.
In September, Edison Sault filed a forecast of its purchased power expenses for 2008 with the Michigan Public Service Commission (MPSC) as part of Edison Sault's annual PSCR process. Edison Sault's purchased power costs are projected to increase substantially by 35% in 2008 primarily due to: I) low volumes of water available for hydro generation, 2) the expiration of favorably priced wholesale contracts, and 3) recovery of under collections of power supply costs from previous years.
Under the PSCR plan as initially filed, residential customers could have seen increases in their bills in excess of 23%. With Edison Sault's deferral plan, residential and commercial customers instead will see bill increases of about 9% for 2008. A residential customer using 750 kilowatt-hours a month would see their bills increase in January from $63.06 to $68.64.
Edison Sault normally uses low-cost hydro generation to produce about 40% of the electricity it sells. The remaining 60% must be purchased from other outside (and higher cost) sources. Due to lower volumes of available water, Edison Sault expects that hydro generation could make up only 20% of its electricity sources in 2008. This could represent a 50% decrease in hydro generation compared to having full water available for generation.
Water elevation levels on Lake Superior reached an all-time recorded low for the month of September. Water supplies have improved slightly since that time, but Lake Superior's water elevation level is still well below its long term average. If water levels on Lake Superior return to their normal levels, the scheduled future increases in Edison Sault's PSCR deferral plan would be reduced.
Another major reason for the increase in the 2008 PSCR factor is the substantially increased cost for outside power purchases for Edison Sault in 2008. One of Edison Sault's favorably priced outside power supply contract is expiring at the end of 2007 and another wholesale power supplier is seeking a substantial increase. In order to minimize such increases, Edison Sault utilized a sixteen step process agreed to in its prior PSCR proceedings and sent out over 100 bid requests for replacement power purchases. Edison Sault received only five responses, with only one of the responses submitting a bid that meet all of Edison Sault's outside purchased power requirements. A new contract with this supplier has been submitted to federal regulators for approval.
Even with the proposed 2008 PSCR increases, Edison Sault will still have electric rates that are below the average charged by other utilities in Michigan.
President Don Sawruk stated: "Edison Sault's Board of Directors has worked diligently to come up with a solution to help our customers with increasing electricity costs. This deferral plan, if accepted, will certainly mitigate what would have been a very substantial one time cost increase. On the bright side of all this is that if water levels on Lake Superior come back and Edison Sault receives more water for hydro generation, customers will see reductions in the PSCR factor on their bills."
Edison Sault Electric Company is a wholly owned subsidiary of Wisconsin Energy Corporation, a Fortune 500 company located in Milwaukee Wisconsin.
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