DETROIT - Fewer customers and fewer employees mean Detroit Edison Co. may be overcharging customers, state regulators said Thursday in ordering the utility to explain why its electricity rates should not be reduced.
In its order, the Michigan Public Service Commission noted that the number of customers participating in the electric choice program, which allows customers to move to alternate providers, fell by about 20 percent in 2005, and the amount of energy sold to those customers declined by 26 percent.
The PSC also said Detroit Edison's rates are based on the assumption that the company employs about 8,000 people. But parent company DTE Energy Co. indicated last week that it planned to eliminate up to 18 percent of its 11,000-person workforce, or almost 2,000 employees, over the next two years.
"Today, the commission is starting a proceeding to ensure that customers of Detroit Edison are not paying rates that are no longer justified," PSC Chairman J. Peter Lark said in a statement. "In these difficult economic times, with national energy costs rising, it is imperative that Detroit Edison customers not pay a single dime more than is absolutely necessary to ensure the delivery of reliable energy."
Detroit Edison "believes its customers are entitled to fair and reasonable rates," utility spokeswoman Lorie Kessler said. "We welcome the opportunity to provide the commission with additional information to help them understand ... (that) Detroit Edison has not achieved its recognized rate of return over the past several years."
Participation in the electric choice program - primarily by commercial customers - has fluctuated because of swings in wholesale energy prices, Kessler said. Many of the customers who switched to other energy suppliers under electric choice have returned to Detroit Edison, she said.
"It would be unreasonable to conclude this will be a permanent change," Kessler said of the decline cited in the PSC order. "That balance is going to continue to fluctuate."
The company earned $560 million in 2005, although rates set in November 2004 were based on after-tax net income of $516 million. Labor cost savings, declining sales and a residential rate increase that took effect Jan. 1 "may place Detroit Edison into an over-earnings position during 2006," the PSC said.
The agency gave Detroit Edison a June 16 deadline for filing evidence showing why its rates should not be reduced.
Besides Detroit Edison, which has 2.2 million customers in southeastern Michigan and the Thumb area, DTE also is the parent company of natural gas supplier Michigan Consolidated Gas Co.
Shares of DTE Energy declined by 17 cents to close at $41.90 Thursday on the New York Stock Exchange.
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DTE Energy Co.: http://www.dteenergy.com
Michigan Public Service Commission: http://www.michigan.gov/mpsc
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