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Utilities without Transportation Tariffs: The Commission did not require all utilities to use Act 3 tariffs to provide transportation service.
- Xcel Energy (formerly Lake Superior District Power Company, then Northern States Power Company):
- U-8605: On February 10, 1987 the Commission approved a special contract to allow Xcel (then LSDPCo) to provide partial firm-interruptible natural gas service (special sales service) to Bessemer Plywood Co (reference MPSC Orders page, U-8605 Order).
- U-9286: On February 23, 1989 the Commission approved a special contract to allow Xcel (then NSP) to provide interruptible natural gas service (special sales service) to Grand View Hospital (reference MPSC Orders page, U-9286 Order).
- Peninsular Gas Company:
Act 9 Transportation: On July 1, 1988, Peninsular entered into an Act 9 contract to provide Peninsula Copper Industries with natural gas transportation service with the following rate provisions:
- Monthly Customer Charge of $1,000
- Supply Reservation Charge: $0.34 times first 5,000 Mcf of monthly portion of nominated annual contract, and $0.30 times the balance of its monthly portion.
- Transportation Charge: $0.33 per Mcf for first 60,000 Mcf, and $0.33 per Mcf for the balance transported for the year.
- Monthly Balancing: Peninsular will retain customer's excess deliveries up to 5% of customer's consumption in that month. Peninsular will, at its discretion retain additional volumes and charge customer $0.12 per Mcf for the service. If Customers use more gas than it caused to be delivered to the system in a given month, then such excess consumption shall be deemed to have been purchased from system supply under Peninsular's regular Interruptible Sales Rate.
- Wisconsin Public Service Corporation:
Prior to Commission approval of a transportation tariff (on 2/5/01 - see U-12741) WPS had individual Act 9 contracts covering 12 transportation customers on file with the Commission. All of the contracts were self-implemented as negotiated contracts between WPS and the individual customers. Six of the contracts have been subsequently revised and approved by the Commission in order to modernize them and make them all uniform. All of the contracts have daily balancing (page 10, Article X) and monthly balancing (page 8, Article IX) provisions. Six of the contracts were signed as initial contracts in 1997 and 1998, while the Commission approved amendment to five of the contracts in Case No. U-11581, dated January 28, 1998 and one in Case No. U-11663, dated April 28, 1998 (reference MPSC Orders page, U-11581 order, and U-11663 order). The Contacts have uniform provisions and include the following provisions:
- Surcharge for Unauthorized Use of Gas: Customers shall be required to pay a minimum penalty of $20 per Dth for unauthorized use of gas during a period of curtailment. When WPS is exposed to penalties in excess of $20 per Dth, then the minimum penalty rate shall increase to $10 per Dth plus any incremental costs incurred to serve customers. Incremental costs will include, but are not limited to, any ANR penalty rates exceeding $100 per Dth, or the actual per Dth rate of any gas purchased to the extent that it exceeds the $100 per Dth.
- Daily Balancing: Using the daily balancing service must be placed in either a third party pool or a WPS sponsored pool. The pools will be separately balanced. The following rates apply:
% Difference
From Nomination |
Floor Rate
per therm |
Ceiling Rate
per therm |
Effective Rate
per therm |
| >0% to 25 |
$0.0045 |
$0.1216 |
$0.0207 |
| >25% |
$0.0457 |
$0.1673 |
$0.1333 |
In addition to balancing rates, all customers will be assessed their prorated share of pipeline penalties assessed to WPS.
- Constraint Day Balancing: High Flow Constraint Day - buyer may consumer the full amount of buyer's approved daily nomination as recognized by ANR, plus any nominated Peak Day Backup/Annual Supply Backup commodity. Any amounts consumed in excess of backup supplies shall be billed the Surcharge for Unauthorized Use of Gas. Daily balancing fees will be applied to usage below nominations. There will be no waiver of any penalties or fees. Buyer will be given notice of a High Flow Constraint Day at least two hours prior to start.
- Low Flow Constraint Day - buyer must use at a minimum its approved daily nomination as recognized by ANR. If WPS is not charged a penalty by ANR, then normal balancing charges apply. If WPS is assessed penalties from ANR, then buyer's undertake volumes will be assessed the ANR penalty rate in place of the normal balancing fee. Buyer will normally be given 24 hours notice prior to a Low Flow Constraint Day.
- Monthly Balancing: For usage more than nomination (negative imbalance), the customer shall purchase from WPS the monthly imbalance amount at 103% of the Indexed Price of gas commodity for that month, times the Rate Payment Adjustment for each block of gas, plus the D2 demand charge listed in the currently effective Michigan Gas Cost Recovery Plan, plus the Dakota Cost listed in the currently effective plan, plus any authorized surcharges in the currently effective plan.
| Usage Percentage of Nomination |
Rate Payment Adjustment |
| >103.5% up to 110% of total |
100% |
| >110% up to 115% of total |
120% |
| >115% up to 120% of total |
130% |
| >120% of total |
150% |
For usage less than nomination (positive imbalance), the WPS shall purchase from customer the monthly imbalance amount at 97% of the Indexed Price of gas commodity for that month, times the Rate Payment Adjustment for each block of gas, plus the D2 demand charge listed in the currently effective Michigan Gas Cost Recovery Plan, plus the Dakota Cost listed in the currently effective plan. For usage less than nomination, the following schedule applies:
| Usage Percentage of Nomination |
Rate Payment Adjustment |
| >3.5% up to 10% of total |
100% |
| >10% up to 15% of total |
80% |
| >15% up to 20% of total |
70% |
| >20% of total |
50% |
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Special Contracts under Act 3:
The Commission has continued to approve utilities' requests for special contracts to serve customers whose special needs cannot be met through application of the transportation tariffs.
Bypass:
On June 16, 1988 National Steel Corporation won a summary judgment against the Commission in the U.S. District Court, File No. L87-30-CA5, Honorable Robert Holmes Bell presiding, which allowed it to attach directly to Panhandle Eastern Pipe Line Company bypassing Michigan Consolidated Gas Company. Several other large industrial customers have threatened to bypass utilities in Michigan, but no others have actually executed a bypass.
Diversion of Customers' Gas:
The gas curtailment rules for utilities in Michigan have been modified to recognize that some of the gas on the utilities' system is now owned by third parties, including customers. Essentially the new rules provide that the utilities may not divert gas owned by transportation customers for the use of sales customers. This assures transportation customers that during periods of curtailment they are entitled to receive the gas that they have caused to be delivered to the system. For example, on February 23, 1995 the Commission revised Michigan Consolidated Gas Company's tariff provisions (reference U-10603 Order). Consumers Energy Company had their tariffs revised per a February 25, 1998 order (reference U-11108 Order), and Michigan Gas Utilities had their tariffs revised per Commission order dated November 25, 1997 (reference U-11439 Order). See also MPSC Orders page.
Gas Storage Rates:
Michigan has established gas storage rates for two of its LDC's, and has also set rates for five storage companies. Most of the rates are market-based and are designed to provide the maximum flexibility to the companies and their customers to develop the services and rates necessary to meet the needs of the customers. The other rates are cost-based.
- Market-based storage rates
The first market-based storage rate was set in February 1994 for Michigan Consolidated Gas Company (MichCon) in Case No. U-10150 (reference MPSC Orders page, U-10150 Order, U-10150 order denying rehearing). The MichCon storage rate, Rate Schedule No. CS-1, provides for storage agreements of up to five years, and are subject to interruption on system peak days. Rates include a $300 per month Administrative fee, a storage charge of up to $1.50 per Mcf consisting of a demand portion and a commodity portion, and a fuel injection charge of 0.9% of gas injected. Storage rates for Consumers Energy Company, Lee 8 Storage Partnership, and Washington 10 Storage Corporation are similar in structure to the MichCon storage rate. Lee 8's rates were approved by the MPSC in docket number U-10602 by order dated September 27, 1994 and order dated April 13, 1995. WPS-ESI Gas Storage also has market-based storage rates (approved in Case No. U-12209 in order dated February 22, 2000). Current rates (including transportation) provide for a monthly deliverability charge of up to $5.328 per Mcf, a monthly capacity charge of up to $1.045 per Mcf, and use charges of up to $0.0328 per Mcf for injection and withdrawal. These charges are also flexible downward to meet market conditions. Bluewater Gas Storage market-based storage rates were approved in Case No. U-13776 in order dated July 8, 2003. Current rates (including transportation) provide for a monthly deliverability charge of up to $5.00 per Mcf, a monthly capacity charge of up to $1.00 per Mcf, and use charges of up to $0.016 per Mcf for injection and $0.00 for withdrawal. These charges are also flexible downward to meet market conditions. The maximum effective rate for 100-day firm seasonal storage service is $1.616 per Mcf plus 1.5% fuel.
- Cost-based storage rates
In addition to market-based storage rates, the MPSC has two storage companies that provide service under cost-based rates. Eaton Rapids Gas Storage System was granted cost-based rates in Case No. U-9369 in 1990 (reference MPSC Orders page, U-9369 Order). Current rates provide for a monthly deliverability charge of $2.2993 per Mcf, a monthly capacity charge of $0.0207 per Mcf, and fuel use charges of 1.9% for injection and 1.7% for withdrawal. These charges are flexible downward to meet market conditions. Washington 10 Storage Corporation also has cost-based storage rates in addition to its market-based rates (approved in Case No. U-10424 in order dated April 24, 1997). Current rates provide for a monthly deliverability charge of $2.4788 per Mcf, a monthly capacity charge of $0.0238 per Mcf, and fuel use charges of 0.72% for injection and 0.72% for withdrawal.
- FERC-approved storage (and transportation) rates
For storage of gas in interstate commerce, the Federal Energy Regulatory Commission (FERC) has also approved rates. Some of the companies provide all of their service in interstate commerce subject to FERC-approved Gas Tariffs. For other companies that provide some of their services in interstate commerce subject to FERC regulation, FERC has approved rates that are based on costs filed either with the MPSC or the FERC.
| Company |
FERC docket number |
FERC Order approving transportation rates |
Market-
based
rates |
| Consumers Energy Company |
PR08-5-000 |
March
27, 2008 |
no |
| Michigan Consolidated Gas Company |
PR10-47-000 |
November 23, 2010 |
yes |
| |
|
|
|
| Company |
FERC docket number |
FERC Order approving storage rates |
Market-
based
rates |
| Lee 8 Storage Partnership |
PR06-2-000 |
April 7, 2009 |
no |
| Washington 10 Storage Corporation |
PR12-10-000 |
April
25, 2012 |
yes |
| Eaton Rapids Gas Storage System |
CP90-769-000 |
June 8, 1990 approving a blanket certificate |
no |
| BGS Kimball Gas Storage, LLC |
CP04-80-000 |
July 13, 2004 approving a blanket certificate |
yes |
FERC regulations regarding FERC rate approval of Michigan companies:
Under
FERC regulation Section 284.224 (Certain transportation and sales
by local distribution companies), LDCs can get a blanket certificate
that authorizes the LDC, as a Hinshaw pipeline, to engage in the
sale or transportation of gas that is subject to FERC jurisdiction.
Both Consumers and MichCon have blanket certificates. Consumers
Energy has one via FERC order in docket CP90-272-000 dated February
7, 1990 (cited as 50 FERC 62,082) and MichCon has one per
FERC order in docket CP80-340-000 dated July
16, 1980 (cited as 12 FERC 61,044). FERC orders and regulations
are available www.ferc.gov.
A “Hinshaw Pipeline” refers to the “Hinshaw exemption” of the Natural Gas Act of 1938, which comes from the Hinshaw Amendment to the NGA enacted by Congress in 1954. The amendment appears in NGA Section 1C codified as 15 U.S.C. § 717(c), which exempts interstate transportation received and consumed within a State provided that the rates and service are regulated by a State commission.
Under a Section 284.224 blanket certificate, an LDC must select a method to be used to for calculating rates. The choices are Section 284.224(e)(1) and Section 284.224(e)(2). They are used to define the rate choices that the LDC has under FERC regulation Section 284.123. If the LDC does not have rates on file for city gate service, and also does not have existing rates approved by the state commission or a FERC approved methodology for proposed rates, then it must, under Section 284.123(b)(2), apply for FERC rate approval for each transaction under the blanket. Otherwise, the rates are set under Section 284.123(b)(1) under either a rate methodology used by the state commission, or using rates in transportation rates for intrastate service.
Under FERC regulation Section 284.123 (Rates and Charges), an LDC with a blanket certificate must either choose to elect a method to have its rates approved (Sectioin 284.123(b)(1)), or instead apply to the FERC for rate approval (Section 284.123(b)(2)).
Under Section 284.123(b)(1), there are three choices: Use the same methodology, for designing rates to recover costs, that was used in current rates filed with the state regulatory agency; Use the same methodology used in determining allowances in rates filed with the state regulatory agency; or Use the same rates on file with the state regulatory agency for intrastate city gate service.
Under Section 284.123(b)(2), the LDC must apply to the FERC for rate approval, and information showing the proposed rates and charges are fair and equitable.
Consumers and MichCon use different rate methods.
MichCon Gas Company
MichCon, when it first applied for a blanket certificate, did not have existing rates for comparable city gate service on file with the MPSC. It did, however, have rates approved by the MPSC. It therefore made a rate election under Section 284.123(b)(1)(i).
In
FERC docket PR94-9-000, MichCon filed to change its rate election
pursuant to section 284.123(b)(1) of the Commission's regulations,
for rates to be charged for the transportation or storage of natural
gas under its section 284.224 blanket certificate. (See order dated
July 19, 1994). MichCon requested the change because, effective
January 3, 1994, it now had three new rate schedules for intrastate
transportation that are comparable to Part 284 service. MichCon
requested to change its election under Section 284.123(b)(1) to
use the intrastate rates per section 284.123(b)(1)(ii) for all
new contracts effective on or after April 1, 1994. This allowed
MichCon to use the same state-approved rates for transportation
and storage transactions under its blanket certificate as it uses
for comparable intrastate transportation service.
In FERC docket
PR10-47-000, MichCon filed to change its rates to reflect
cost-based transportation rates approved by the MPSC in its June
3, 2010 order in Case No U-15895 as rates for interstate
transportation service effective June 4, 2010.
-
Consumers Energy Company
Consumers, in its blanket certificate, chose the option under Section 284.123(b)(2). Under this section, it must seek FERC approval of each rate. In its application for a blanket certificate, Consumers applied for approval of its transportation rate. Consumers' most recent application is listed above.
Consumers has therefore, by not choosing a rate method under '284.123(b)(1), opted to apply for rate approval for each rate. If Consumers were to desire to use '284.123(b)(1), then it would have to apply to the FERC to change its rate election as MichCon did.
For more storage rate information, see Rate Books for MPSC-approved rates and Gas Tariffs for FERC-approved rates in Michigan.
Off-System Transmission Rate:
Michigan Consolidated Gas Company (MichCon) provides transmission service to customers that wish to move gas solely through MichCon's transmission lines for redelivery to another gas company. Rates for this service include a $300 per month administrative fee, a transmission charge not to exceed $0.15 per Mcf, and a fuel use charge of 0.9% of transported volumes.
SEMCO Energy Gas Company received approval for off-system rates in case U-11766 in an order dated September 23, 1998.
For interstate service subject to FERC regulations, see FERC-approved rates above.
Utility Sales Special Rate Programs:
From 1982 through 1986, Michigan pursued industrial load retention by use of three special sales programs. The first of these programs was initiated by the FERC and was called the Special Marketing Program (SMP). The first SMP to receive FERC approval was the DF-1 rate schedule for the ANR Pipeline Company. The DF-1 rate was available to gas distribution utilities only for resale to certain large industrial customers who had the installed capability to use an alternate fuel, and who could obtain that alternate fuel at a price which would cause them to cease using natural gas if they could not obtain DF-1 service. SMP's and all similar discount rates were based upon the fundamental premise that the incremental cost of natural gas was less than the average cost. For example, for ANR customers, the average cost of gas in 1985 was approximately $4.10/ Dth, while the incremental price was only $3.00/Dth. This made it possible to compete for market share by selling gas on an incremental basis rather than on an average basis. The Michigan Public Service Commission approved SMP rates for gas utilities from 1982 until 1985, when the District of Columbia Court of Appeals ruled that the SMP's were unduly discriminatory.
The MPSC also approved its own special discount rates for industrial customers with alternate fuel capability, referred to as alternate discount rates (ADR's). An example of this type of rate was Michigan Consolidated Gas Company's Rate 4, which was approved by the MPSC in its Order in Case No. U-7609, dated November 22, 1983 (reference MPSC Orders page, U-7609 Order). Rate 4 was available to any customer who had the installed capability to use an alternate fuel in place of natural gas, and who could obtain that fuel at a price which would have caused the customer to cease using natural gas. The commodity charge was set at a level which was designed to be competitive with alternate fuels. Since the ADR's were available to all customers with viable alternate fuel capability, they avoided the "undue discrimination" problem of the SMP rates. ADR's were gradually replaced by transportation service starting in 1984.
Finally, some industrial customers were placed on special contract rates. Special contracts have been used in Michigan to allow maximum flexibility in pricing. Utilities utilizing special contract pricing were able "...to obtain the maximum spread possible given market conditions and the unique situation of each customer". (reference MPSC Orders page, U-7895 Order, p.31). Special contracts were also gradually replaced by transportation service in the mid-1980s.
Miscellaneous Notes:
- Take-or-Pay costs that interstate pipelines billed to utilities were recovered from transportation customers and sales customers. The lump sum portions (called "direct billed costs") of take-or-pay costs were allocated to total utility throughput, including use and loss, on a volumetric basis. The resulting surcharge was assessed to all transportation customers on a volumetric basis. The MPSC monitored the recovery of take-or-pay costs in Gas Cost Recovery Plan and Reconciliation cases.
- SSEC: The System Supply Entitlement Charge was an optional surcharge that consisted of the fixed-cost portion of the gas supply for sales customers. It was calculated in Gas Cost Recovery Plan cases. Payment of the charge entitled the transportation customer to use sales service. Very few transportation customers (less than 4% by volume) exercised their option to pay the System Supply Entitlement Charge for reserving sales service as a backup service. Under the various transportation programs, no backup service was required.
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