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8-K - FORM 8-K - DTE Electric Co | c07458e8vk.htm |
Exhibit 99.1
Summary of Detroit Edisons Rate Case Filing U-164721
October 29, 2010
The Detroit Edison Company (Detroit Edison or the Company) filed a general rate case today with the
Michigan Public Service Commission (MPSC). This document provides a summary of Detroit Edisons
filing. The full testimony of the filing will be available on the MPSCs website
(http://efile.mpsc.state.mi.us/efile/) under case number U-16472.
Consistent with Michigans Public Act 286, we anticipate self-implementing a rate increase on or
after April 29, 2011 with an MPSC order expected by October 2011. We look forward to working
through the elements of the filing with the MPSC, staff and other stakeholders.
Highlights of Detroit Edisons Rate Filing
| Test Year: Detroit Edisons rate case filing is based on a fully projected test year of
April 1, 2011 through March 31, 2012. |
| Base Rates: The table below shows the components of Detroit Edisons rate filing. |
Amount | ||||
Item | ($ millions) | Description | ||
Sales/Revenues |
$116 | Lower load and expiration of wholesale contracts | ||
Customer Choice |
123 | More customers moving to alternative suppliers | ||
Rate Base |
103 | Environmental and infrastructure investments | ||
Pension, OPEB, Other Benefit Expense |
59 | Higher expenses from actual returns and change in discount rate | ||
O&M |
53 | O&M net of CI savings | ||
Taxes and Other |
15 | Other Income and Deductions (primarily AFUDC) | ||
Capital Structure |
(26) | 11.125% ROE offset by lower financing costs | ||
Revenue Requirement |
$443 | |||
Proposed Adjustments |
||||
Customer Choice |
(123) | Delay Choice Incentive Mechanism reset | ||
Pension/OPEB Expense |
(47) | Defer increased pension and OPEB expense | ||
NDS Surcharge |
(20) | Reduce Nuclear Decommissioning Surcharge | ||
Net Rate Request |
$253 | |||
1 This document includes forward-looking statements based
on information currently available to management. Such statements are subject
to certain risks and uncertainties. These statements typically contain, but are
not limited to, the terms anticipate, believe, estimate, and similar
words. These statements should be read in conjunction with the Forward-Looking
Statements section in DTE Energy Companys and Detroit Edisons 2009 Forms
10-K and 2010 Forms 10-Q (which sections are incorporated by reference herein),
and in conjunction with other SEC reports filed by DTE Energy and Detroit
Edison that discuss important factors that could cause DTE Energys and Detroit
Edisons actual results to differ materially. DTE Energy and Detroit Edison
expressly disclaim any current intention to update any forward-looking
statements contained in this document as a result of new information or future
events.
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| Reduced Rate Request: |
The Company is proposing that the MPSC offset or defer, for future recovery, a portion of
the requested rate increase in this case, assuming the MPSC grants certain other proposals.
More specifically, Detroit Edison is proposing the following:
1) | Delay of the recognition of the recent increase in Electric Choice
participation in setting base rates in this proceeding; assuming the MPSC retains the
Choice Incentive Mechanism (CIM) with certain modifications. ($123 million reduction) |
2) | Deferral and amortization of increased pension and OPEB cost in 2011 and 2012
to future periods, pursuant to an accounting application filed in Case No. U-16489 on
October 26, 2010. ($47 million reduction) |
3) | Reduction to the Nuclear Decommissioning Surcharge in this proceeding in
anticipation of seeking a license extension for its Fermi 2 nuclear plant. ($20 million
reduction) |
The net result of these Reduced Rate Request efforts is to reduce the impact on customers
rates by approximately $190 million. Thus, the net rate impact on customers would be
approximately $253 million for the projected test year of April 1, 2011 through March 31,
2012.
| Electric Choice Incentive Mechanism (CIM): |
Detroit Edison proposes the continuation of the CIM to address changes in customers
participating in the Electric Choice program, with one modification. The proposed
modification would eliminate the 200 GWh deadband and 90/10 sharing provision. The new base
point would be 4,987 GWh of Choice sales.
| Rate of Return and Rate Base: |
Detroit Edison is requesting a return on equity (ROE) of 11.125% compared with its current
authorized ROE of 11%. Detroit Edisons weighted cost of capital is 6.87% after tax, 9.76%
pre-tax. The Company is requesting no change to its current permanent capital structure of
approximately 49% equity and 51% long-term debt. The projected average rate base for the
test year is $10.1 billion, which includes an equity base of $4.1 billion.
| Revenue Decoupling Mechanism (RDM): |
Detroit Edisons current pilot RDM compares average actual electric use per customer by
customer class to the level of average electric use per customer used to set Detroit
Edisons rates in the last rate case (Case No. U-15768). The current RDM has been in
operation since February 2010 with the intent to capture the effects of increased energy
efficiency. Based on the Companys experience, the current RDM is being affected by other
factors beyond the effects of increased energy efficiency. Therefore, Detroit Edison
proposes that a modified RDM, which is more exclusively focused on energy efficiency, be
adopted in this case that allows the Company to recover the lost revenue associated with
sales reductions due to increased energy efficiency.
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| Restoration and Line Clearance Mechanisms: |
Detroit Edison proposes that if the MPSC adopts the Companys modified RDM in this
proceeding (as discussed above) and continues to use a five-year average to determine
restoration costs, the restoration tracking mechanism be eliminated. Additionally, if the
restoration tracking mechanism is eliminated, the line clearance tracking mechanism should
also be discontinued. However, if the MPSC does not approve the proposed RDM, the Company
requests that the MPSC retain the current restoration and line clearance tracking
mechanisms.
| Uncollectible Expense Tracking Mechanism (UETM): |
The UETM allows Detroit Edison to recover the majority of its actual uncollectible expense.
Since the level of uncollectible expense is not expected to be as volatile in the near
future as it had been in the recent past, the Company recommends that if the MPSC adopts the
Companys projected level of uncollectible expense for the projected test year of
approximately $73 million, the UETM be suspended.
| Wholesale for Resale (WFR) |
WFR customers are Michigan municipal and cooperative utilities that purchase power supply
from Detroit Edison, under long-term contracts, for resale to Michigan retail customers.
The Company has three WFR contracts that have expired or will expire before the beginning of
the projected test year and one contract that is due to expire during the projected test
year. The Company anticipates that none of these contracts will be renewed after expiration
and should no longer be treated as non-jurisdictional sales. Any revenue collected from the
one WFR contract that is due to expire during the projected test year will be credited to
customers.
For further information, please contact DTE Energys investor relations group at (313) 235-8030.
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