2.2.0.7 false UTILITY RATE MATTERS 10401 - Disclosure - UTILITY RATE MATTERS true false false false 1 USD false false Unit1 Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 Unit13 Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares xbrli 0 $ 5 Utility Rate Matters 3 us-gaap_PublicUtilitiesDisclosureTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false terselabel false 1 false false false false 0 0 <div> <div style="font-family: 'Times New Roman',Times,serif;"> <div style="margin-top: 12pt; font-size: 10pt;" align="left"><b>4: UTILITY RATE MATTERS</b> </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left">Rate matters are critical to Consumers. Depending upon the specific issues, the outcomes of specific rate cases and proceedings could have a material adverse effect on Consumers' cash flows and results of operations. </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left"><font style="font-variant: small-caps;" class="_mt"><b>CONSUMERS' ELECTRIC UTILITY RATE MATTERS</b></font> </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left"><b>Power Supply Cost Recovery: </b>The PSCR process is designed to allow Consumers to recover all of its power supply costs if incurred under reasonable and prudent policies and practices. The MPSC reviews these costs, policies, and practices in annual plan and reconciliation proceedings. Consumers adjusts its PSCR billing factor monthly in order to minimize the overrecovery or underrecovery amount in the annual PSCR reconciliation. </div></div> <div style="font-family: 'Times New Roman',Times,serif;"> <div style="margin-top: 6pt; font-size: 10pt;" align="left"><i>PSCR Reconciliations</i>: The following table summarizes the PSCR reconciliation filing pending with the MPSC: </div> <div align="center"> <table style="font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr valign="bottom"><td width="20%"> </td> <td width="2%"> </td> <td width="20%"> </td> <td width="2%"> </td> <td width="25%"> </td> <td width="2%"> </td> <td width="25%"> </td></tr> <tr style="font-size: 1px;"><td style="border-top: #000000 1px solid;" valign="top" colspan="7" align="left"> </td></tr> <tr style="font-size: 8pt;" valign="bottom"><td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center">PSCR Cost of</td></tr> <tr style="font-size: 8pt;" valign="bottom"><td nowrap="nowrap" align="left">PSCR Year</td> <td> </td> <td nowrap="nowrap" align="left">Date Filed</td> <td> </td> <td nowrap="nowrap" align="center">Net Underrecovery</td> <td> </td> <td nowrap="nowrap" align="center">Power Sold</td></tr> <tr style="font-size: 1px;"><td style="border-top: #000000 1px solid;" valign="top" colspan="7" align="left"> </td></tr> <tr valign="bottom"><td valign="top"> <div style="text-indent: 0px; margin-left: 0px;">2009 </div></td> <td> </td> <td valign="top" align="left">March 2010 </td> <td> </td> <td valign="top" align="center">$39 million (a) </td> <td> </td> <td valign="top" align="center">$1.6 billion</td></tr> <tr style="font-size: 1px;"><td style="border-top: #000000 3px double;" valign="top" colspan="7" align="left"> </td></tr></table></div> <div style="margin-top: 3pt;"> <table style="font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td width="3%"> </td> <td width="1%"> </td> <td width="96"> </td></tr> <tr valign="top"><td nowrap="nowrap" align="left">(a)</td> <td> </td> <td>In 2005, the MPSC approved an economic development discount for a large industrial customer to promote long-term investments in the industrial infrastructure of Michigan. It was determined in the November 2009 electric rate case order that recovery of this discount should be provided through the electric general rates that Consumers self-implemented in May 2009. That order, however, did not address the recovery of the power-supply component of the discount provided from January 2009 through self-implementation, which totaled $4 million. Consumers has requested recovery of this amount through its 2009 PSCR reconciliation.</td></tr></table></div> <div style="margin-top: 6pt; font-size: 10pt;" align="left">In March 2010, the MPSC issued an order in Consumers' 2007 PSCR reconciliation, disallowing PSCR recovery of $3 million of economic development discounts and $4 million of net replacement power costs associated with a crane incident at Consumers' Campbell plant. The MPSC approved the 2007 PSCR reconciliation, as modified by the order, and authorized Consumers to include an underrecovery of $21 million in its 2008 PSCR plan. In April 2010, Consumers filed for a rehearing in its 2007 PSCR reconciliation, asking the MPSC to reconsider its decision to disallow recovery of a $2 million economic development discount provided in 2007 to a large industrial customer. In June 2010, the MPSC denied Consumers' petition for rehearing. In July 2010, Consumers filed a claim for appeal with the Michigan Court of Appeals regarding the MPSC's decision to disallow recovery of the economic development discount. Consumers cannot predict the outcome of this proceeding. </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left">In June 2010, the MPSC issued an order in Consumers' 2008 PSCR reconciliation, disallowing the PSCR recovery of a $3 million economic development discount. The MPSC approved the 2008 PSCR reconciliation, as modified by the order, and authorized Consumers to include an overrecovery of $14 million in its 2009 PSCR reconciliation. In July 2010, Consumers filed for a rehearing in its 2008 PSCR reconciliation, asking the MPSC to reconsider its decision to disallow recovery of the $3 million economic development discount. Consumers cannot predict the outcome of this proceeding. </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left"><i>PSCR Plan</i>: In September 2009, Consumers submitted its 2010 PSCR Plan to the MPSC. Using the maximum PSCR factor proposed in its plan, Consumers self-implemented the 2010 PSCR charge beginning in January 2010. While Consumers expects to recover all of its PSCR costs, it cannot predict the financial impact or outcome of this proceeding. </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left"><b>Electric Rate Cases: </b>The MPSC, through a final order and rehearing in Consumers' 2009 electric rate case, directed Consumers to refund to customers the difference between the rates it self-implemented in May 2009 and the rates authorized in the order, plus interest, subject to a reconciliation proceeding. In February 2010, Consumers filed an application for the refund of $12 million to its customers beginning in September 2010. In May 2010, the MPSC Staff recommended a refund of $32 million. In June 2010, Consumers revised its proposed refund to $15 million. The MPSC issued an order in June 2010 that dispenses with the need for the ALJ's PFD in this case, which will expedite the refund Consumers must make to its customers. </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left">The MPSC's order in Consumers' 2009 electric rate case also adopted a "pilot" decoupling mechanism and an uncollectible expense tracking mechanism. Various parties have filed appeals concerning aspects of the MPSC order, including both of these ratemaking mechanisms. Two parties also seek to have the Michigan Supreme Court hear these appeals directly. Consumers cannot predict the outcome of these proceedings. </div></div> <div style="font-family: 'Times New Roman',Times,serif;"> <div style="margin-top: 6pt; font-size: 10pt;" align="left">In January 2010, Consumers filed an application with the MPSC seeking an annual increase in revenue of $178 million based on an 11 percent authorized return on equity. The filing requested authority to recover new investments in system reliability, environmental compliance, and technology advancements. In June 2010, the MPSC Staff recommended a revenue increase of $90 million, based on a 10.35 percent return on equity. The MPSC Staff also recommended an additional revenue increase of $25 million (not included in the table below) if the MPSC denies Consumers' request for a tracking mechanism for an economic development discount provided to a large industrial customer. In July 2010, Consumers self-implemented an annual electric rate increase of $150 million, subject to refund with interest. The $28 million reduction from Consumers' requested rate increase reflects Consumers' attempt to be responsive to concerns raised by the MPSC Staff and other intervenors, and to balance the need for investment in improved infrastructure to support economic recovery in Michigan and the resulting rate impacts on customers. The following table details the components of Consumers' self-implemented electric rate increase and the increase recommended by the MPSC Staff: </div> <div align="center"> <table style="font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr valign="bottom"><td width="64%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td> <td width="5%"> </td> <td width="3%"> </td> <td width="1%"> </td> <td width="3%"> </td></tr> <tr style="font-size: 8pt;" valign="bottom"><td style="border-bottom: #000000 1px solid;"> </td> <td style="border-bottom: #000000 1px solid;"> </td> <td style="border-bottom: #000000 1px solid;"> </td> <td style="border-bottom: #000000 1px solid;"> </td> <td style="border-bottom: #000000 1px solid;"> </td> <td style="border-bottom: #000000 1px solid;"> </td> <td style="border-bottom: #000000 1px solid;" colspan="3" nowrap="nowrap" align="center"> </td> <td style="border-bottom: #000000 1px solid;"> </td> <td style="border-bottom: #000000 1px solid;" colspan="3" nowrap="nowrap" align="center">In Millions</td></tr> <tr style="font-size: 8pt;" valign="bottom"><td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td colspan="3" nowrap="nowrap" align="center">Increase</td> <td> </td> <td colspan="3" nowrap="nowrap" align="center"> </td></tr> <tr style="font-size: 8pt;" valign="bottom"><td> </td> <td> </td> <td colspan="3" nowrap="nowrap" align="center">Consumers'</td> <td> </td> <td colspan="3" nowrap="nowrap" align="center">Recommended</td> <td> </td> <td colspan="3" nowrap="nowrap" align="center"> </td></tr> <tr style="font-size: 8pt;" valign="bottom"><td> </td> <td> </td> <td colspan="3" nowrap="nowrap" align="center">Self-Implemented</td> <td> </td> <td colspan="3" nowrap="nowrap" align="center">by the</td> <td> </td> <td colspan="3" nowrap="nowrap" align="center"> </td></tr> <tr style="font-size: 8pt;" valign="bottom"><td nowrap="nowrap" align="left">Components of the increase in revenue</td> <td> </td> <td colspan="3" nowrap="nowrap" align="center">Increase</td> <td> </td> <td colspan="3" nowrap="nowrap" align="center">MPSC Staff</td> <td> </td> <td colspan="3" nowrap="nowrap" align="center">Difference</td></tr> <tr style="font-size: 1px;"><td style="border-top: #000000 1px solid;" colspan="13" align="left"> </td></tr> <tr style="background: #cceeff;" valign="bottom"><td> <div style="text-indent: -15px; margin-left: 15px;">Investment in rate base</div></td> <td> </td> <td align="left">$</td> <td align="right">106</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">80</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right"> (26</td> <td nowrap="nowrap">)</td></tr> <tr valign="bottom"><td> <div style="text-indent: -15px; margin-left: 15px;">Recovery of operating and maintenance costs</div></td> <td> </td> <td> </td> <td align="right">21</td> <td> </td> <td> </td> <td> </td> <td align="right">25</td> <td> </td> <td> </td> <td> </td> <td align="right">4</td> <td> </td></tr> <tr style="background: #cceeff;" valign="bottom"><td> <div style="text-indent: -15px; margin-left: 15px;">Return on equity</div></td> <td> </td> <td> </td> <td align="right">18</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(19</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(37</td> <td nowrap="nowrap">)</td></tr> <tr valign="bottom"><td> <div style="text-indent: -15px; margin-left: 15px;">Impact of sales declines</div></td> <td> </td> <td> </td> <td align="right">5</td> <td> </td> <td> </td> <td> </td> <td align="right">4</td> <td> </td> <td> </td> <td nowrap="nowrap" align="right"> </td> <td align="right">(1</td> <td nowrap="nowrap">)</td></tr> <tr style="font-size: 1px;"><td> </td> <td> </td> <td style="border-top: #000000 1px solid;" colspan="11" nowrap="nowrap" align="left"> </td></tr> <tr style="background: #cceeff;" valign="bottom"><td> <div style="text-indent: -15px; margin-left: 30px;">Total</div></td> <td> </td> <td align="left">$</td> <td align="right">150</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">90</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">(60</td> <td nowrap="nowrap">)</td></tr> <tr style="font-size: 1px;"><td style="border-top: #000000 3px double;" colspan="13" align="left"> </td></tr></table></div> <div style="margin-top: 6pt; font-size: 10pt;" align="left">In its July 2010 order allowing Consumers to self-implement this increase, the MPSC expressed concern about utilities repeatedly self-implementing rate increases over short time periods, and before the return of previous overcollections of self-implemented rate increases. Consumers cannot predict the financial impact or outcome of this electric rate case. </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left"><b>Electric Operation and Maintenance Expenditures Show-Cause Order: </b>In December 2005, the MPSC authorized Consumers to increase its electric rates. In the same order, the MPSC ordered Consumers to spend certain amounts on future tree-trimming and line-clearing activities, as well as on the operation and maintenance of Consumers' fossil-fueled power plants. At that time, the MPSC also ordered Consumers to establish mechanisms to track these expenditures and stated that the rate increase was subject to refund with interest if the specified amounts were not spent on these activities. </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left">In October 2009, the MPSC issued a show-cause order alleging that, in 2007, Consumers spent $14 million less on forestry and fossil-fueled plant operation and maintenance activity than the amount ordered by the MPSC and that Consumers has not refunded this amount to customers. The order directed Consumers to explain why it should not be found in violation of the MPSC's December 2005 order and subjected to applicable sanctions, and why the refunds required by that order have not yet occurred. Consumers' response indicated that the total amount it spent on forestry and fossil-fueled plant operation and maintenance activity for the years 2006 through 2009 exceeded the total amounts included in rates for these activities. </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left">In March 2010, the MPSC Staff requested that the MPSC find Consumers in violation of the December 2005 order and that the MPSC order Consumers to refund $27 million for failure to meet annual spending requirements during 2007 and 2008. Consumers filed a response, stating that it would be unreasonable and unlawful to order a refund of this amount and that Consumers' expenditures were consistent with the MPSC's orders. In March 2010, the ALJ's PFD found Consumers' expenditures to be prudent and that Consumers did not violate the December 2005 order. The ALJ recommended that the MPSC find that no violation of the December 2005 order occurred and that no refunds be made to customers. Consumers cannot predict the outcome of this proceeding. </div></div> <div style="font-family: 'Times New Roman',Times,serif;"> <div style="margin-top: 6pt; font-size: 10pt;" align="left"><b>Big Rock Decommissioning: </b>The MPSC and FERC regulate the recovery of Consumers' costs to decommission Big Rock. Subsequent to 2000, Consumers stopped funding a Big Rock trust fund because the collection period for an MPSC-authorized decommissioning surcharge expired on that date. The level of funds provided by the trust fell short of the amount needed to complete decommissioning and Consumers provided $44 million of corporate contributions for decommissioning costs. </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left">In an order issued in February 2010, the MPSC concluded that decommissioning surcharges collected during a statutory rate freeze from 2001 through 2003 should have been deposited in the decommissioning trust fund. The MPSC agreed that Consumers was entitled to a recovery of the $44 million decommissioning shortfall, but concluded that Consumers had collected this amount previously through the decommissioning surcharge in effect during the rate freeze. In April 2010, the MPSC ordered Consumers to refund $85 million of revenue collected in excess of decommissioning costs plus interest, over seven months beginning in July 2010. Consumers filed an appeal with the Michigan Court of Appeals in March 2010 to dispute the MPSC's conclusion that the collections received during the rate freeze should be subject to refund. At June 30, 2010, Consumers had an $86 million regulatory liability recorded on its Consolidated Balance Sheets for this refund. Consumers cannot predict the outcome of this proceeding. </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left">Consumers has paid $30 million to Entergy to assume ownership and responsibility for the Big Rock ISFSI, and has incurred $55 million for nuclear fuel storage costs as a result of the DOE's failure to accept spent nuclear fuel. Consumers is seeking recovery of these costs from the DOE. At June 30, 2010, Consumers had an $85 million regulatory asset recorded on its Consolidated Balance Sheets for these costs. </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left"><b>Electric Depreciation: </b>In February 2010, Consumers filed an electric depreciation case related to its wholly owned electric utility property. As ordered by the MPSC, Consumers prepared a traditional cost-of-removal study, which supported a $46 million increase in annual depreciation expense. </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left">Also in February 2010, Consumers filed an electric depreciation case for Ludington, the pumped storage plant jointly owned by Consumers and Detroit Edison. This case, filed jointly with Detroit Edison, requests an increase in annual depreciation expense. Consumers' share of this increase is $9 million annually. Consumers cannot predict the financial impact or outcome of these proceedings. </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left"><b>Renewable Energy Plan: </b>In June 2010, Consumers filed its first annual report and reconciliation for its renewable energy plan with the MPSC, requesting approval of Consumers' reconciliation of renewable energy plan costs for 2009. </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left"><b>Energy Optimization Plan: </b>In April 2010, Consumers filed its first annual report and reconciliation for its energy optimization plan with the MPSC, requesting approval of Consumers' reconciliation of energy optimization plan costs for 2009. Consumers also requested approval of the collection of a $6 million incentive payment for both its gas and electric energy optimization plans. During 2009, Consumers achieved 134 percent of its electric savings target and 132 percent of its gas savings target. These achievements qualify Consumers to earn the maximum incentive allowed by the MPSC, which is calculated as 15 percent of Consumers' investment in energy savings. </div></div> <div style="font-family: 'Times New Roman',Times,serif;"> <div style="margin-top: 6pt; font-size: 10pt;" align="left"><font style="font-variant: small-caps;" class="_mt"><b> </b></font> </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left"><font style="font-variant: small-caps;" class="_mt"><b>CONSUMERS' GAS UTILITY RATE MATTERS</b></font> </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left"><b>Gas Cost Recovery: </b>The GCR process is designed to allow Consumers to recover all of its purchased natural gas costs if incurred under reasonable and prudent policies and practices. The MPSC reviews these costs, policies, and practices in annual plan and reconciliation proceedings. Consumers adjusts its GCR billing factor monthly in order to minimize the overrecovery or underrecovery amount in the annual GCR reconciliation. </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left"><i>GCR Reconciliations</i>: The following table summarizes the GCR reconciliation filings pending with the MPSC: </div> <div align="center"> <table style="font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr valign="bottom"><td width="20%"> </td> <td width="2%"> </td> <td width="20%"> </td> <td width="2%"> </td> <td width="25%"> </td> <td width="2%"> </td> <td width="25%"> </td></tr> <tr style="font-size: 1px;"><td style="border-top: #000000 1px solid;" valign="top" colspan="7" align="left"> </td></tr> <tr style="font-size: 8pt;" valign="bottom"><td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td> </td> <td nowrap="nowrap" align="center">GCR Cost of</td></tr> <tr style="font-size: 8pt;" valign="bottom"><td nowrap="nowrap" align="left">GCR Year</td> <td> </td> <td nowrap="nowrap" align="left">Date Filed</td> <td> </td> <td nowrap="nowrap" align="center">Net (Under)/Overrecovery</td> <td> </td> <td nowrap="nowrap" align="center">Gas Sold</td></tr> <tr style="font-size: 1px;"><td style="border-top: #000000 1px solid;" valign="top" colspan="7" align="left"> </td></tr> <tr valign="bottom"><td valign="top"> <div style="text-indent: 0px; margin-left: 0px;">2008-2009 </div></td> <td> </td> <td valign="top" align="left">June 2009 </td> <td> </td> <td valign="top" align="center">$(15) million </td> <td> </td> <td valign="top" align="center">$1.8 billion</td></tr> <tr valign="bottom"><td valign="top"> <div style="text-indent: 0px; margin-left: 0px;">2009-2010 </div></td> <td> </td> <td valign="top" align="left">June 2010 </td> <td> </td> <td valign="top" align="center">  $1 million </td> <td> </td> <td valign="top" align="center">$1.3 billion</td></tr> <tr style="font-size: 1px;"><td style="border-top: #000000 3px double;" valign="top" colspan="7" align="left"> </td></tr></table></div> <div style="margin-top: 6pt; font-size: 10pt;" align="left"><i>GCR Plans: </i>In March 2010, the MPSC authorized Consumers to implement its 2009-2010 base GCR factor and generally approved Consumers' plan with minor adjustments to Consumers' current purchasing guidelines. </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left">In December 2009, Consumers filed an application with the MPSC seeking approval of a GCR plan for its 2010-2011 GCR plan year. In April 2010, Consumers self-implemented its filed GCR plan. While Consumers expects to recover all of its GCR costs, it cannot predict the financial impact or outcome of these proceedings. </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left"><b>Gas Rate Case: </b>In May 2009, Consumers filed an application with the MPSC seeking an annual increase in revenue of $114 million based on an 11 percent authorized return on equity. The filing requested authorization to implement an uncollectible expense tracking mechanism, Pension Plan and OPEB equalization mechanisms, as well as a revenue decoupling mechanism. </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left">In November 2009, Consumers self-implemented a gas rate increase in the annual amount of $89 million. In May 2010, the MPSC issued its order in this case, authorizing Consumers to increase its rates by $66 million based on an authorized return on equity of 10.55 percent. The following table details the components of Consumers' self-implemented gas rate increase and the increase authorized by the MPSC: </div> <div align="center"> <table style="font-size: 10pt;" border="0" cellspacing="0" cellpadding="0" width="100%"> <tr valign="bottom"><td width="64%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td> <td width="5%"> </td> <td width="1%"> </td></tr> <tr style="font-size: 8pt;" valign="bottom"><td style="border-bottom: #000000 1px solid;" colspan="12" nowrap="nowrap" align="right">In Millions</td> <td> </td></tr> <tr style="font-size: 8pt;" valign="bottom"><td> </td> <td> </td> <td colspan="2" nowrap="nowrap" align="center">Consumers'</td> <td> </td> <td> </td> <td colspan="2" nowrap="nowrap" align="center">Increase</td> <td> </td> <td> </td> <td colspan="2" nowrap="nowrap" align="center"> </td> <td> </td></tr> <tr style="font-size: 8pt;" valign="bottom"><td> </td> <td> </td> <td colspan="2" nowrap="nowrap" align="center">Self-Implemented</td> <td> </td> <td> </td> <td colspan="2" nowrap="nowrap" align="center">Authorized by</td> <td> </td> <td> </td> <td colspan="2" nowrap="nowrap" align="center"> </td> <td> </td></tr> <tr style="font-size: 8pt;" valign="bottom"><td nowrap="nowrap" align="left">Components of the increase in revenue</td> <td> </td> <td colspan="2" nowrap="nowrap" align="center">Increase</td> <td> </td> <td> </td> <td colspan="2" nowrap="nowrap" align="center">the MPSC</td> <td> </td> <td> </td> <td colspan="2" nowrap="nowrap" align="center">Difference</td> <td> </td></tr> <tr style="font-size: 1px;"><td style="border-top: #000000 1px solid;" colspan="13" align="left"> </td></tr> <tr style="background: #cceeff;" valign="bottom"><td> <div style="text-indent: -15px; margin-left: 15px;">Impact of sales declines</div></td> <td> </td> <td align="left">$</td> <td align="right">41</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">28</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(13</td> <td nowrap="nowrap">)</td></tr> <tr valign="bottom"><td> <div style="text-indent: -15px; margin-left: 15px;">Investment in rate base</div></td> <td> </td> <td> </td> <td align="right">23</td> <td> </td> <td> </td> <td> </td> <td align="right">27</td> <td> </td> <td> </td> <td> </td> <td align="right">4</td> <td> </td></tr> <tr style="background: #cceeff;" valign="bottom"><td> <div style="text-indent: -15px; margin-left: 15px;">Recovery of operating and maintenance costs</div></td> <td> </td> <td> </td> <td align="right">17</td> <td> </td> <td> </td> <td> </td> <td align="right">13</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(4</td> <td nowrap="nowrap">)</td></tr> <tr valign="bottom"><td> <div style="text-indent: -15px; margin-left: 15px;">Return on equity</div></td> <td> </td> <td> </td> <td align="right">8</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(2</td> <td nowrap="nowrap">)</td> <td> </td> <td nowrap="nowrap" align="left"> </td> <td align="right">(10</td> <td nowrap="nowrap">)</td></tr> <tr style="font-size: 1px;"><td> </td> <td> </td> <td style="border-top: #000000 1px solid;" colspan="11" nowrap="nowrap" align="left"> </td></tr> <tr style="background: #cceeff;" valign="bottom"><td> <div style="text-indent: -15px; margin-left: 30px;">Total</div></td> <td> </td> <td align="left">$</td> <td align="right">89</td> <td> </td> <td> </td> <td align="left">$</td> <td align="right">66</td> <td> </td> <td> </td> <td nowrap="nowrap" align="left">$</td> <td align="right">(23</td> <td nowrap="nowrap">)</td></tr> <tr style="font-size: 1px;"><td style="border-top: #000000 3px double;" colspan="13" align="left"> </td></tr></table></div> <div style="margin-top: 6pt; font-size: 10pt;" align="left">The MPSC directed Consumers to refund to customers the difference between the rates it self-implemented in November 2009 and the rates authorized in this order, plus interest, subject to a reconciliation proceeding. At June 30, 2010, CMS Energy and Consumers had a recorded regulatory liability of $15 million related to this refund. CMS Energy and Consumers determined that the portion of the refund that was specifically identifiable with the first quarter of 2010 was not material and, accordingly, did not revise those financial statements. </div></div> <div style="font-family: 'Times New Roman',Times,serif;"> <div style="margin-top: 6pt; font-size: 10pt;" align="left">The May 2010 order also adopts a revenue decoupling mechanism, effective June 1, 2010, which, subject to certain conditions, allows Consumers to adjust future rates to collect or refund the change in marginal revenue by class arising from the difference between base sales per customer established in the order and weather-adjusted sales per customer. The order denied Consumers' request to implement a gas uncollectible expense tracking mechanism and Pension Plan and OPEB equalization mechanisms. </div> <div style="margin-top: 6pt; font-size: 10pt;" align="left"><b>Gas Depreciation: </b>In September 2009, the MPSC ordered Consumers to adopt certain standard retirement units by January 1, 2010. Consumers estimates that the use of these standard retirement units will increase maintenance expense, and recovery of that expense, by $10 million annually. In May 2010, as ordered by the MPSC, Consumers implemented the new standard retirement units concurrently with the final rates approved in its gas rate case. </div></div> </div> 4: UTILITY RATE MATTERS Rate matters are critical to Consumers. 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