DTE Energy Company’s (DTE) unit, DTE Electric Company, has filed a rate-hike appeal to the Michigan Public Service Commission. The incremental rate will be applicable for residential electric customers. This marks the first electricity rate increase for residential customers in the last four years.
DTE Electric’s operation deals with the generation, distribution, purchase and sale of electricity to around 2.1 million residential, commercial and industrial customers in southeastern Michigan.
Upon approval, residential consumers will have to pay an additional $3.25 every month for electricity, reflecting an annual increase of around 1.5% since 2013. DTE Electric will recover $0.37 billion through this rate hike.
The purpose of the latest rate-hike appeal is to recoup around $3.5 billion invested by DTE Electric for its infrastructure development projects, primarily to keep in line with environmental mandates to curtail emissions at its power generation facilities, in the past four years.
While rates of electricity will increase for residential electricity customers, the same for DTE Electric’s commercial and industrial customers will be trimmed.
DTE Energy does not frequently increases electricity rates. In Dec 2013, the company had slashed electricity rates for residential customers, effective throughout 2014, due to lower fuel supply expenses and continuing initiatives on curtailing costs.
DTE Energy follows a systematic capital spending strategy to upgrade its utility infrastructure and diversify its generation mix by expanding renewable operations. In the first nine months of 2014, the company invested $1.5 billion as capital expenditure. DTE Energy plans to spend around $2.2 billion in 2014, including an allocation of around $1.6 billion for projects under the Electric segment. These initiatives will enable the company to provide reliable services and meet increasing customer demand.
It is a common practice for utilities to recoup funds invested in the development of utility assets from customers by hiking rates with approval from the concerned commissions.
In Oct 2014, Black Hills Corporation’s (BKH) subsidiaries, Black Hills Power, Inc. and Cheyenne Light, Fuel and Power Company, increased their respective electricity and natural gas rates after receiving required approvals from the Wyoming Public Service Commission.
Positive outcomes of such filings in terms of rate hikes encourage the utility companies to invest more in infrastructure development ventures and thus improve reliability.
DTE Energy currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the sector include PG&E Corporation (PCG) and ALLETE, Inc. (ALE). PG&E Corporation holds a Zacks Rank #1 (Strong Buy), while ALLETE carries a Zacks Rank #2 (Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment