Mackinac Island, Edison Sault Settle Case
By Karen Gould

Edison Sault Electric Company customers could receive as much as $347,000 in lower electric bills following a verbal settlement reached last week with the City of Mackinac Island. The settlement, if formally signed, will culminate a legal protest by the City of Mackinac Island over a 16 percent electric rate increase implemented by Edison in 2006.

Edison Sault increased rates to cover the high costs of purchasing electricity from other companies, but Mackinac Island charged that the company could have saved money under a previous rate agreement and, therefore, the rate hike was not justified.

The matter was argued before an administrative law judge, who ruled last fall in favor of the City of Mackinac Island, and the Michigan Public Service Commission (PSC) is now reviewing the judge's findings.

In the meantime, Edison Sault and the city have been negotiating the refund settlement. The refund could be reflected in customers' 2007 or 2008 electric bills, pending the outcome of the agreement and ruling by the PSC. It is not yet known how much lower the average customer's bill will be.

Under the settlement, Edison will also pay the city $25,000 toward its legal expenses and will donate another $25,000 to the Mackinac Island Community Foundation as a fund for city projects.

The city's legal fees are more than $65,000, estimates city attorney Tom Evashevski of St. Ignace. The city is being represented in the protest by the Lansing law firm Fraser, Trebilcock, Davis, and Dunlap.

The agreement also stipulates that Edison Sault will not seek reimbursement of its own legal fees from customers, and if signed, would nullify an Edison Sault motion filed with the PSC December 22 to amortize its legal costs over 10 years through higher electricity rates.

The company has spent more than $100,000 on the litigation, about four percent of its net operating income for 2006, according to its president, Donald Sawruk.

Also under the agreement, any plans to purchase outside power by the electric company will follow the procedure proposed on behalf of the City of Mackinac Island by Tom Waters, an attorney with the Lansing firm who specializes in public utility issues and represented the city during the blackout of 2000, when Edison underwater cables to the Island failed.

In its arguments, the city had contended that purchasing electricity generated from natural gas, diesel, and nuclear power is more expensive than from coal-fired plants. So a written procedure for purchasing power will be agreed to as a guarantee that rate increases will remain reasonable.

The Mackinac Island City Council mulled over the settlement offered by the electric company in several closed meetings in December, and voted to accept a final version Friday, December 29.

The agreement will become effective only if accepted by all other participants in the proceedings and if it is approved by MPSC.

"I think there's something in it for everyone," Mr. Sawruk told The St. Ignace News. "I think it's a fair settlement."

Mr. Evashevski said the settlement was "very reasonable and accomplishes our objective from the beginning."

He said attorneys had initially estimated a return of approximately $2.5 million to customers, but now believe the PSC would have allowed less than $1.5 million, if the case had proceeded.

Edison Sault serves an estimated 23,000 customers in the Eastern Upper Peninsula and is owned by Wisconsin Energy Corporation of Milwaukee. About four percent of its revenue comes from Mackinac Island, but all customers will share in the refund credits.

On December 28, Edison Sault announced a 7.2 percent rate hike for 2007, much of it to cover costs associated with lower water levels in Lake Superior, which will reduce the amount of electricity the company can generate at its hydroelectric plant in Sault Ste. Marie. (See related story elsewhere in this issue.)