-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L+eq8gY71nTqlFmpGHvOiwj4B+MtHrsblPRrRwJI6rjj9hDaVGhy+n58vSwYnW6K kMRbpU0lrXJdKFjI9U+SUw== 0000950124-03-000511.txt : 20030305 0000950124-03-000511.hdr.sgml : 20030305 20030305171113 ACCESSION NUMBER: 0000950124-03-000511 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20030304 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20030305 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CONSUMERS ENERGY CO CENTRAL INDEX KEY: 0000201533 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 380442310 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05611 FILM NUMBER: 03593609 BUSINESS ADDRESS: STREET 1: 212 W MICHIGAN AVE CITY: JACKSON STATE: MI ZIP: 49201 BUSINESS PHONE: 5177881030 MAIL ADDRESS: STREET 1: 212 W MICHIGAN AVE STREET 2: M 946 CITY: JACKSON STATE: MI ZIP: 49201 FORMER COMPANY: FORMER CONFORMED NAME: CONSUMERS POWER CO DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CMS ENERGY CORP CENTRAL INDEX KEY: 0000811156 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 382726431 STATE OF INCORPORATION: MI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09513 FILM NUMBER: 03593610 BUSINESS ADDRESS: STREET 1: FAIRLANE PLZ S STE 1100 STREET 2: 330 TOWN CENTER DR CITY: DEARBORN STATE: MI ZIP: 48126 BUSINESS PHONE: 3134369261 MAIL ADDRESS: STREET 1: FAIRLANE PLAZA SOUTH, SUITE 1100 STREET 2: 330 TOWN CENTER DRIVE CITY: DEARBORN STATE: MI ZIP: 48126 8-K 1 k75255e8vk.txt CURRENT REPORT DATED 03/04/03 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- FORM 8-K CURRENT REPORT SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) MARCH 4, 2003 COMMISSION REGISTRANT; STATE OF INCORPORATION; IRS EMPLOYER FILE NUMBER ADDRESS; AND TELEPHONE NUMBER IDENTIFICATION NO. - ----------- ----------------------------------- ------------------ 1-9513 CMS ENERGY CORPORATION 38-2726431 (A MICHIGAN CORPORATION) FAIRLANE PLAZA SOUTH, SUITE 1100 330 TOWN CENTER DRIVE DEARBORN, MICHIGAN 48126 (313) 436-9261 1-5611 CONSUMERS ENERGY COMPANY 38-0442310 (A MICHIGAN CORPORATION) 212 WEST MICHIGAN AVENUE JACKSON, MICHIGAN (517) 788-1030 ITEM 5. OTHER EVENTS SECURITIZATION On March 4, 2003, Consumers Energy Company, the principal subsidiary of CMS Energy Corporation, filed an application with the Michigan Public Service Commission (MPSC) to begin the securitization process for approximately $1.084 billion in qualified costs, in compliance with the State of Michigan's electric restructuring and securitization laws. The qualified costs Consumers Energy proposes to securitize are: - Expenditures for Clean Air Act compliance totaling $587 million; - Required contributions to electric utility pension costs totaling $227 million; - New capital investments in the Palisades Nuclear Plant totaling $113 million; - Costs of implementing Public Act 141, the state's restructuring law, totaling $97 million; and - Costs of preparing and issuing securitization bonds, retiring existing debt, and establishing a cash flow account to make payment on the bonds, totaling $60 million. Consumers Energy has filed the application at this time since Consumers Energy plans to refinance $777 million and $780 million of debt in 2003 and 2004, respectively. In addition, Consumers Energy expects to issue $295 million of new debt in 2003 and $365 million of new debt in 2004. This additional debt is required for Consumers Energy's ongoing operations and construction program including construction expenditures for Clean Air Act compliance. Consumers Energy also plans to contribute over $150 million in 2003 and over $200 million in 2004 to its pension funds. Consumers Energy will use proceeds from the sale of securitization bonds for refinancing or retirement of debt. Approval of the application will not increase current electric rates for any of Consumers Energy's customers. State law requires the MPSC to act on the request within 90 days, meaning that securitization bonds could be issued as early as August 2003. STRANDED COSTS Also on March 4, 2003, Consumers Energy submitted to the MPSC its stranded cost recovery filing for 2002. Consumers Energy asked to recover $35 million to $103 million in stranded costs or 0.9 cents to 2.6 cents per kilowatt-hour from customers getting power from alternative suppliers pursuant to Public Act 141, the State of Michigan's electric restructuring law. The final amount requested will depend on the MPSC's decision on Consumers Energy's securitization application. Several of the items that Consumers Energy is requesting to be considered stranded costs, it has also requested to be considered as qualified costs under its securitization application. If Consumers Energy's securitization application is approved in full, then its stranded cost filing will only request $35 million of stranded cost recovery. Copies of the securitization application (exclusive of accompanying testimony and exhibits) of Consumers Energy to the MPSC (Case No. U-13715) and the stranded cost application (exclusive of accompanying testimony and exhibits) of Consumers Energy to the MPSC (Case No. U-13720), are filed as exhibits to this report and are incorporated by reference. Both applications, with accompanying testimony and exhibits, can be accessed on the MPSC's website http://www.michigan.gov/mpsc ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits: 99(a) Application for Financing Order, Case No. U-13715, filed March 4, 2003 by Consumers Energy Company with the Michigan Public Service Commission. 99(b) Application of Consumers Energy Company, Case No. U-13720 filed March 4, 2003 by Consumers Energy Company with the Michigan Public Service Commission This Form 8-K contains "forward-looking statements", within the meaning of the safe harbor provisions of the federal securities laws. The "forward-looking statements" are subject to risks and uncertainties. They should be read in conjunction with the "Forward-Looking Statements and Risk Factors" in CMS Energy's Form 10-Q for the Quarterly Period Ended September 30, 2002, Management Discussion and Analysis (incorporated herein by reference) and Consumers Energy's Form 10-K/A for the Year Ended December 31, 2001, Item I, Consumers Forward-Looking Statements Cautionary Factors and Uncertainties that discuss important factors that could cause CMS Energy's and Consumers Energy's results to differ materially from those anticipated in such statements. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized. CMS ENERGY CORPORATION Dated: March 5, 2003 By: /s/ Thomas J. Webb ------------------------------- Thomas J. Webb Executive Vice President and Chief Financial Officer CONSUMERS ENERGY COMPANY Dated: March 5, 2003 By: /s/ Thomas J. Webb ------------------------------- Thomas J. Webb Executive Vice President and Chief Financial Officer 10-K EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION EX-99(a) Application for Financing Order, Case No. U-13715, filed March 4, 2003 by Consumers Energy Company with the Michigan Public Service Commission. EX-99(b) Application of Consumers Energy Company, Case No. U-13720 filed March 4, 2003 by Consumers Energy Company with the Michigan Public Service Commission.
EX-99.(A) 3 k75255exv99wxay.txt APPLICATION FOR FINANCING ORDER EXHIBIT 99(a) S T A T E O F M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the Application of ) Consumers Energy Company for a ) Financing Order Approving the ) Case No. U-13715 Securitization of Certain of its ) Qualified Costs. ) APPLICATION FOR FINANCING ORDER NOW COMES Consumers Energy Company ("Consumers Energy") and, pursuant to the Customer Choice and Electricity Reliability Act, MCL 460.10 et seq.; MSA Section 22.13(10) et seq. ("CCERA"), the Michigan Administrative Procedures Act, MCL 24.201 et seq.; MSA 3.560(101) et seq., MCL 460.1 et seq., as amended, and other applicable law, hereby applies to the Michigan Public Service Commission (the "Commission") for a financing order approving the issuance of securitization bonds for the qualified costs set forth in this Application and the accompanying testimony and exhibits, stating as follows: IDENTITY OF APPLICANT 1. Consumers Energy is an electric utility company subject to the regulatory authority of the Commission. Consumers provides electric service in 62 of 68 counties in the Lower Peninsula of Michigan, serving more than 1.6 million customers in 1,109 incorporated cities, townships and villages, as set forth at Sheet Nos. A-17.00 et seq. of Consumers' Schedule of Rates Governing the Sale of Electric Service, M.P.S.C. No. 12-Electric, Consumers Energy Company. STATEMENT OF STATUTORY AUTHORITY 2. CCERA was enacted by the Michigan Legislature and signed by the Governor in June of 2000 with immediate effect. A portion of CCERA (originally passed as 2000 PA 142 ("Act 142")) sets forth the legislative provisions governing electric utility securitization. See, MCL 460.10h through MCL 460.10o, MCL 460.10z; MSA Section 22.13(10h) through MSA Section 22.13(10o), MSA Section 22.13(10z). Act 142 provides that electric utilities may recover "qualified costs" if the Commission issues a "financing order" approving the issuance of securitization bonds. See, MCL 460.10i(1). Due to the availability of very favorable credit ratings from the rating agencies, these securities are designed to lower the cost of capital of the electric utility, and to otherwise enable electric rates to be at a lower level than they would be if conventional financing was employed by the electric utility to finance the costs being securitized. 3. Act 142 defines "qualified costs" as follows: (g) "Qualified costs" means an electric utility's regulatory assets as determined by the commission, adjusted by the applicable portion of related investment tax credits, plus any costs that the commission determines that the electric utility would be unlikely to collect in a competitive market, including but not limited to, retail open access implementation costs and the costs of a commission approved restructuring, buyout or buy-down of a power purchase contract, together with the costs of issuing, supporting, and servicing securitization bonds and any costs of retiring and refunding the electric utility's existing debt and equity securities in connection with the issuance of securitization bonds. Qualified costs include taxes related to the recovery of securitization charges. MCL 460.10h(g). 2 4. Section 10i(6) requires that the Commission conduct an "expedited contested case proceeding" to consider the application of an electric utility for a financing order, and that a determination be made no later than 90 days after the filing of the application. REQUEST FOR FINANCING ORDER Eligibility for Financing Order. 5. Consumers is an "electric utility" as that term is defined and used in Act 142. 6. Consumers has incurred "qualified costs" as that term is defined and used in Act 142 that are eligible for securitization under that act. 7. MCL 460.10i provides in part: (1) Upon the application of an electric utility, if the commission finds that the net present value of the revenues to be collected under the financing order is less than the amount that would be recovered over the remaining life of the qualified costs using conventional financing methods and that the financing order is consistent with the standards in subsection (2), the commission shall issue a financing order to allow the utility to recover qualified costs. (2) In a financing order, the commission shall ensure all of the following: (a) That the proceeds of the securitization bonds are used solely for the purposes of the refinancing or retirement of debt or equity. (b) That securitization provides tangible and quantifiable benefits to customers of the electric utility. (c) That the expected structuring and expected pricing of the securitization bonds will result in the lowest securitization charges consistent with market conditions and the terms of the financing order. (d) That the amount securitized does not exceed the net present value of the revenue requirement over the life of the proposed securitization bonds associated with the qualified costs sought to be securitized. Id. 3 8. As more fully explained in the accompanying testimony and exhibits which are incorporated herein and made a part hereof by reference, the securitization proposal set forth in this Application meets all of the statutory requirements set forth in Act 142. 9. Underlying the Company's decision to file this Application for securitization at this time is the need to refinance $ 777 million of debt in 2003 and $780 million in 2004. In addition, the Company needs to issue $295 million of new debt in 2003 and $365 million of new debt in 2004. This financing is required for the Company's operations and construction program and to enable it to contribute over $150 million in 2003 and over $200 million in 2004 to its pension fund. Given the Company's current financial condition, which includes significant cash needs in the years 2003 and 2004, securitization of qualified costs is the most cost effective way to meet the Company's cash needs. Securitization thus would provide a means for the Commission to assist the Company in meeting its 2003 and 2004 cash needs in the lowest cost manner possible while at the same time effectuating the intention of the Michigan Legislature in enacting Act 142. Amount to Be Securitized and Related Transactions. 10. As more fully explained in the accompanying testimony and exhibits, Consumers Energy seeks a financing order that will authorize the securitization of $1,084,087,000 of qualified costs. 11. As part of its filing, Consumers Energy is seeking securitization of certain qualified costs related to the Palisades Nuclear Power Plant. Consumers Energy believes that it would be appropriate for the Commission to extend to these costs the conditions 4 relative to a potential sale of the Palisades Nuclear Power Plant imposed in MPSC Case No. U-12505 at pages 13-14. 12. As part of its filing in this case, Consumers Energy is seeking securitization of retail open access implementation costs. The Commission has previously stated that Consumers Energy should file an application and supporting documentation that provides the Commission with a factual basis for reviewing the success of Consumers Energy's electric restructuring implementation efforts in order to seek a determination that assures recovery of implementation costs. Consumers Energy is doing so in this case. Further, as part of this filing, Consumers Energy is making its annual implementation cost review filing for recovery of implementation costs incurred for the period ending December 31, 2002, along with carrying costs until such costs are recovered from customers, and is seeking approval of budgeted implementation costs for 2003. Consumers Energy is requesting that the Commission, in this case, approve full, unconditional recovery of implementation costs, including carrying costs, in the amount of approximately $96.8 million and that the Commission approve recovery of these costs through securitization. 13. Act 142 authorizes an electric utility to assign its rights in securitization property to another entity and provides certain benefits and protections. See, MCL 460.10h(a), 10j-o. As more fully explained in the accompanying testimony and exhibits, Consumers Energy will create one or more special purpose entities and transfer certain securitization property for the purpose of minimizing bankruptcy risks to potential securitization bondholders as much as possible and, thus, maximizing the ratings on the securitization bonds. 5 14. Within the context of approving the securitization transaction in the financing order, Consumers Energy specifically requests the Commission to approve the transactions involving Consumers Energy and the special purpose entities, as described in the accompanying testimony and exhibits, and make any financing order issued in this proceeding applicable to any transferee, successor or assignee of Consumers Energy in accordance with Act 142. Initial Implementation and True-up of Securitization and Tax Charges. 15. Consumers Energy also requests the Commission to approve the terms and conditions of the initial implementation of the securitization charges and tax charges to be collected from Consumers Energy's customers as well as a periodic true-up mechanism, all as described more fully in the accompanying testimony and exhibits, and all of which are designed to result in the highest rating (i.e., a "AAA" rating) for any securitization bonds issued as the result of the financing order requested herein. The mechanisms proposed for initial implementation and periodic true-up would be approved by the Commission in the financing order issued in this proceeding for inclusion in Consumers Energy's electric tariff and would thereafter operate without the need for further Commission order. These mechanisms are substantially the same as the mechanisms approved by the Commission in MPSC Case No U-12505 for Consumers Energy's first issuance of securitization bonds. 6 Use of Proceeds. 16. Consumers Energy will use proceeds from securitization for refinancing or retirement of debt as provided in Section 10i(2)(a). Securitization Savings. 17. As proposed by Consumers Energy, the issuance of securitization bonds described in this Application will not increase electric rates to any customer until January 1, 2006. That is, from the date of bond issuance to January 1, 2006, the securitization charges and tax charges shown on customer bills will be offset by a credit in an equal amount, thus resulting in a zero net impact on electric customers. Correspondingly, because the costs being securitized are not presently reflected in electric rates, the current savings associated with the issuance of securitization bonds will likewise not be reflected in electric rates until that time. As proposed by Consumers Energy, the securitization charges and tax charges approved in this filing will be applied incrementally to customer bills (i.e., without any offsets) commencing January 1, 2006. At that time, Consumers Energy anticipates that this incremental application of securitization charges and tax charges will be coordinated with a redesign of the rates for all jurisdictional electric rate classes, at which time the future savings associated with the issuance of securitization bonds will be reflected in rates in a manner determined by the Commission. 18. Upon the issuance of a financing order by the Commission, Consumers Energy will take all other actions necessary to implement the financing order. 7 TESTIMONY AND EXHIBITS 19. The testimony and exhibits accompanying this Application, which are incorporated herein and made a part hereof by reference, describe more fully the qualified costs sought to be securitized and recovered and demonstrate the eligibility of these costs for securitization pursuant to Act 142. WHEREFORE, Consumers Energy respectfully requests this honorable Commission to take the following actions: A. Issue a financing order applicable to Consumers Energy, its transferees, successors and assignees, pursuant to CCERA and other applicable law, (a) declaring that the costs described in the testimony and exhibits submitted by Consumers Energy are qualified costs under CCERA, because the Commission determines that these costs are regulatory assets, or, in the alternative with respect to the qualified costs related to the Palisades Nuclear Power Plant and the qualified costs related to retail open access, that Consumers Energy would be unlikely to collect in a competitive market and (b) authorizing issuance of securitization bonds for the qualified costs being securitized on terms and conditions substantially similar to the terms and conditions set forth in the testimony and exhibits accompanying this Application. Such order shall reserve to Consumers Energy the sole discretion as to whether and when to proceed with a securitization transaction. B. Authorize Consumers Energy in the financing order to impose a nonbypassable securitization charge payable to the bond trustee pursuant to CCERA as a separate item on customer bills, rendered on and after the issuance of securitization bonds, sufficient to pay the financing charges, principal and interest and other costs 8 associated with the issuance, service and/or support of the securitization bonds as described in the accompanying testimony and exhibits. C. Authorize Consumers Energy to impose at the same time a nonbypassable tax charge sufficient for Consumers Energy to pay taxes due on securitization charge revenues, as more fully explained in the accompanying testimony and exhibits. D. Authorize Consumers Energy to include necessary language in its tariffs to accomplish the imposition of the above-referenced nonbypassable securitization and tax charges and initially implement and periodically true-up the charges described above, all as proposed and more fully explained in the accompanying testimony and exhibits. E. Authorize Consumers Energy to employ appropriate methodology to account for the transactions contemplated by the financing order, including granting any additional accounting authority, appropriate ratemaking treatment and regulatory asset treatment, as proposed and more fully explained in the accompanying testimony and exhibits. F. Grant to Consumers Energy, pursuant to MCL 460.l0i(9), the authority to refund and retire any or all of the securitization bonds that are issued in this proceeding upon demonstration of an ability to refinance under applicable bond covenants and that securitization charges to service new securitization bonds, including transaction costs, would be less than the future securitization charges required to service the securitization bonds being refunded. G. Authorize Consumers Energy to create one or more special purpose entities to which it could transfer securitized property and approve transfers of the securitization 9 property under the financing order issued in this proceeding and rights thereunder to any transferee, successor or assignee of Consumers Energy in accordance with CCERA. H. Grant such other and further relief as may be lawful and appropriate. Respectfully submitted, CONSUMERS ENERGY COMPANY By: /s/ Glenn P. Barba ------------------------------------ Glenn P. Barba Vice President, Controller and Chief Accounting Officer Dated: March 4, 2003 David A. Mikelonis (P-17709) Jon R. Robinson (P-27953) John C. Shea (P-36854) 212 West Michigan Avenue Jackson, Michigan 49201 Attorneys for Consumers Energy Company Tel: (517) 788-2112 Email to: jcshea@cmsenergy.com 10 S T A T E O F M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the Application of ) Consumers Energy Company for a ) Financing Order Approving the ) Case No. U-13715 Securitization of Certain of its ) Qualified Costs. ) VERIFICATION STATE OF MICHIGAN ) )SS COUNTY OF JACKSON ) GLENN P. BARBA, being first duly sworn, deposes and says that he is the Vice President, Controller and Chief Accounting Officer for Consumers Energy Company, that he has executed the foregoing Application for and on behalf of Consumers Energy Company; that he has read the foregoing Application and is familiar with the contents thereof; that the facts contained therein are true and correct to the best of his information knowledge and belief; and that he is duly authorized to execute and file such Application on behalf of Consumers Energy Company. /s/ Glenn P. Barba ------------------------------------- Glenn P. Barba Subscribed and sworn to before me this 4th day of March, 2003. /s/ Sammie B. Dalton ------------------------------------- Sammie B. Dalton Notary Public, Jackson County, Michigan My Commission expires: 01/04/04 11 EX-99.(B) 4 k75255exv99wxby.txt APPLICATION OF CONSUMBERS ENERGY COMPANY EXHIBIT 99(b) STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the application of ) CONSUMERS ENERGY COMPANY ) for determination of net stranded costs for ) Case No. U-13720 the year 2002 and for approval of net ) stranded cost recovery charges. ) - --------------------------------------------) APPLICATION OF CONSUMERS ENERGY COMPANY Consumers Energy Company ("Consumers Energy") applies for approval of a determination of its net stranded costs for the year 2002, and for approval of stranded cost recovery charges to recover those costs. In support of this relief, Consumers Energy says as follows: 1. Consumers Energy is a public utility engaged in, among other things, the generation, purchase, distribution and sale of electric energy to approximately 1.6 million retail customers in the lower peninsula of the State of Michigan. 2. Consumers Energy's retail electric business is subject to the jurisdiction of the Michigan Public Service Commission ("Commission") pursuant to certain provisions of 1939 PA 3, as amended by various acts, including 2000 PA 141, MCL 460.1 et seq; MSA 22.23(1) et seq; 1909 PA 106, as amended, MCL 460.551 et seq; MSA 22.151 et seq; and 1909 PA 300, as amended, MCL 462.2 et seq; MSA 22.21 et seq. 3. In an order issued December 20, 2001 in Case No. U-12639, the Commission adopted a methodology for calculating net stranded costs. That methodology requires an annual calculation of net stranded costs, and the establishment of a charge to recover such costs. In an order issued December 20, 2002 in Case No. U-13380, the Commission issued a further order addressing stranded costs for 2000 and 2001. Rehearing petitions have been filed in Case No. U-13380, and are pending before the Commission at this time. 4. Consumers Energy has applied the stranded cost methodology utilized by the Commission in Case Nos. U-12639 and U-13380 to actual 2002 results. Because of some uncertainty concerning the proper treatment of certain issues, Consumers Energy has made several alternative calculations, which are described as follows: (A) One of the issues raised in the rehearing petitions concerns the proper treatment of costs associated with Clean Air Act capital expenditures. For purposes of one of its alternative calculations for 2002, Consumers Energy has, consistent with a July 10, 2002 Commission order in Case No. U-13380, removed such costs from the stranded cost calculation. This approach presumes that the Commission provides an alternative means of recovering such costs, as was indicated in the July 10, 2002 U-13380 order. Consumers Energy has filed, in Case No. U-13715, an application seeking authorization to recover these costs via the securitization procedure outlined in 2000 PA 141 and 2000 PA 142. MCL 460.10 et seq. Assuming that the Commission grants the relief sought in Case No. U-13715 with respect to these Clean Air Act costs, their removal from the stranded cost calculation for 2002 would be appropriate. If the relief sought in Case No. U-13715 is not granted, these Clean Air Act costs should be included in the stranded cost calculation made for 2002. (B) In Case No. U-13715, Consumers Energy is also seeking approval to utilize the securitization procedure to recover post-2000 capital expenditures made at the Palisades Nuclear Plant. In Case No. U-12505, the Commission approved the classification of Palisades capital investments made through December 31, 2000 as regulatory assets, and also approved the recovery of those capital investments via the securitization procedure. In Case No. U-13715, Consumers Energy is seeking the same treatment of capital investments made at 2 Palisades since 2000. If this relief is granted, such costs should be removed from the stranded cost calculation for 2002. If the relief sought in Case No. U-13715 with respect to these Palisades capital investments is not granted, they should be included in the 2002 stranded cost calculation. 5. If both Clean Air Act costs and post-2000 Palisades capital investments are also removed from the stranded cost calculation because they will be recovered as proposed in Case No. U-13715, Consumers Energy calculates that it incurred $30,973,000 in net stranded costs in 2002. Because of the lag associated with the recovery of this amount (incurred in 2002, but unlikely to be recovered prior to 2004), it is appropriate to add carrying costs, which would increase this amount to approximately $35,461,000. The net stranded cost recovery charge necessary to recover this amount, assuming a recovery period of January 1, 2004 through December 31, 2004, is $0.008867 per kilowatt-hour. 6. Assuming that only the Clean Air Act costs are removed from the stranded cost calculation, Consumers Energy calculates that it incurred $43,496,000 of net stranded costs in 2002. Adding carrying costs would increase this amount to $49,799,000. The net stranded cost recovery charge necessary to recover this amount, assuming a recovery period of January 1, 2004 through December 31, 2004, is $0.012452 per kilowatt-hour. 7. If the relief sought in Case No. U-13715 is denied with respect to the Clean Air Act and Palisades capital investments, and these costs are included in the 2002 stranded cost calculation, Consumers Energy calculates that it incurred $90,195,973 in net stranded costs in 2002. Adding carrying costs would increase this amount to $103,265,369. The net stranded cost recovery charge necessary to recover this amount, assuming a recovery period of January 1, 2004 through December 31, 2004, is $0.025821 per kilowatt-hour. 3 8. An exhibit showing the above calculations in more detail is attached to this Application as Exhibit 1. 9. In the December 20, 2002 order in Case No. U-13380, the Commission directed Consumers Energy to "file an accounting of the specific sources and applications of all excess securitization savings it has realized since the issuance of its securitization bonds" (i.e., those savings in excess of those used to offset the 5% residential rate reduction imposed by 2000 PA 141 that have resulted from the issuance of securitization bonds approved in Case No. U-12505). Attached to this Application as Exhibit 2 is an accounting that summarizes the excess securitization savings realized from the time the bonds were issued through December 31, 2002. The total excess savings realized during this period was $4,712,000. In the October 24, 2000 Case No. U-12505 order, the Commission directed Consumers Energy to apply 50% of the excess savings to reductions in distribution charges for non-residential customers and 50% to reduction in the charges developed to recover stranded costs. Exhibit 2 shows that retail open access ("ROA") customers have, through December 31, 2002, been provided "offsets" to securitization charges that total $3,160,000. It is Consumers Energy's position that these offsets are unlawful, and this issue is on appeal in Court of Appeals No. 241990 (consolidated with No. 241991, an appeal of The Detroit Edison Company), and has been raised in rehearing petitions in Case No. U-13380. In any event, even if application of some portion of the excess securitization savings as an offset to securitization charges for ROA customers is lawful, Exhibit 2 shows that the amount that was provided to ROA customers in this manner through December 31, 2002 is $3,160,000, which exceeds 50% of the total excess savings that were actually available by $804,000. Thus, any future allocation of excess savings must take this historical over-allocation to ROA customers into account. In this case, Consumers Energy proposes to follow the allocation procedure ordered by the Commission in the irrevocable 4 financing order issued in Case No. U-12505, and split the excess savings from the U-12505 securitization bonds 50-50 between distribution rate reductions for non-residential customers and reductions in the charges developed to recover net stranded costs. Because 50% of the excess savings from the U-12505 securitization realized from date of bond issuance to December 31, 2002 have already been utilized in providing securitization charge offsets through December 31, 2002, and because it is appropriate to align the use of excess securitization savings realized in 2002 with the stranded costs incurred in 2002, there are no excess securitization savings available to reduce the 2002 stranded cost charge. WHEREFORE, Consumers Energy Company respectfully requests that the Commission grant the following relief: (A) Determine that the net stranded costs for Consumers Energy in 2002 were $35,461,000, assuming that the Clean Air Act costs and post-2000 Palisades capital investments are securitized as proposed in Case No. U-13715, and approve a corresponding recovery charge of $0.008867; (B) Determine that the net stranded costs for Consumers Energy in 2002 were $49,799,000, assuming that the Clean Air Act costs are securitized as proposed in Case No. U-13715, and approve a corresponding recovery charge of $0.012452; (C) Determine that the net stranded costs for Consumers Energy in 2002 were $103,265,369, assuming that neither the Clean Air Act costs nor post-2000 Palisades capital investments are securitized as proposed in Case No. U-13715, and approve a corresponding recovery charge of $0.025821; 5 (D) Approve the determination of the excess securitization savings shown on Exhibit 2 to this Application, and approve the use of such savings in the manner described in this Application. (E) Grant such other and further relief as is appropriate and lawful. Respectfully submitted, CONSUMERS ENERGY COMPANY Dated: March 4, 2003 By: /s/ John G. Russell ----------------------------------- John G. Russell President-Electric Consumers Energy Company /s/ Jon R. Robinson - ----------------------------------- Jon R. Robinson 212 West Michigan Avenue Jackson, Michigan 49201 (517) 788-0698 Attorney for Consumers Energy Company 6 -----END PRIVACY-ENHANCED MESSAGE-----