S T A T E O F M I C H I G A N

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

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In the matter of the application of ) PRESQUE ISLE ELECTRIC & GAS CO-OP ) for (1) a power supply cost recovery reconciliation ) proceeding and (2) a times interest earned ratio ) Case No. U-16042-R ratemaking mechanism review – both for the ) 12-month period ended December 31, 2010. ) ) At the October 20, 2011 meeting of the Michigan Public Service Commission in Lansing,

Michigan.

PRESENT: Hon. John D. Quackenbush, Chairman

Hon. Orjiakor N. Isiogu, Commissioner Hon. Greg R. White, Commissioner

ORDER APPROVING SETTLEMENT AGREMENT

On April 8, 2011, Presque Isle Electric & Gas Co-op (Presque Isle) filed an application

concerning: (1) its power supply cost recovery (PSCR) reconciliation proceeding, and (2) its times

interest earned ratio (TIER) ratemaking mechanism review – both for the 12-month period ended

December 31, 2010. On July 11, 2011, Presque Isle filed supplemental testimony and exhibits

regarding cost of service study matters and tariff sheet revisions resulting from recent Federal

Energy Regulatory Commission wholesale rate changes.

On June 1, 2011, a prehearing conference was held before Administrative Law Judge

Dennis W. Mack. Presque Isle and the Commission Staff participated in the proceedings.

Subsequently, the parties submitted a settlement agreement resolving all issues in the case.

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According to the terms of the settlement agreement, attached as Exhibit A, Presque Isle

reported an overrecovery in the amount of $120,016, with a remaining overrecovery from prior

years totaling $817. Thus, the net result was an overrecovery of $120,833. The parties agreed that

Presque Isle will continue to apply less than authorized PSCR factors during remaining months in

2011, with any remaining balance rolled into Presque Isle’s 2012 PSCR plan to be filed by

September 30, 2011.

With respect to its TIER ratemaking mechanism, Presque Isle reported an adjusted TIER of

1.30, requiring a $927,648 revenue increase, or approximately 3.03%. In its July 11, 2011

supplemental filing, Presque Isle proposed that the increase be implemented so that the only rate

classes affected are the Residential monthly, Seasonal and Outdoor Lighting classes based on

already provided cost of service studies with a $1 per month increase in its monthly charge. In

addition, Presque Isle proposed tariff sheet changes to reflect the impact of Wolverine Power

Supply Cooperative, Inc.’s termination of its power supply development fund charge, effective

July 1, 2011.

The Commission finds that the settlement agreement is reasonable and in the public interest,

and should be approved.

THEREFORE, IT IS ORDERED that:

A. The settlement agreement, attached as Exhibit A, is approved.

B. Presque Isle Electric & Gas Co-op’s 2011 power supply cost recovery reconciliation

beginning balance of $120,833 is approved.

C. Presque Isle Electric & Gas Co-op’s times interest earned ratio ratemaking mechanism

review increase in the amount of $927,648 is approved, effective for service rendered with the

next full cycle of billings following the date of this order.

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D. Within 30 days, Presque Isle Electric & Gas Co-op shall file tariff sheets essentially the

same as attached to the settlement agreement.

The Commission reserves jurisdiction and may issue further orders as necessary.

Any party desiring to appeal this order must do so in the appropriate court within 30 days after

issuance and notice of this order, under MCL 462.26.

MICHIGAN PUBLIC SERVICE COMMISSION

________________________________________ John D. Quackenbush, Chairman

________________________________________ Orjiakor N. Isiogu, Commissioner

________________________________________ Greg R. White, Commissioner By its action of October 20, 2011. ________________________________ Mary Jo Kunkle, Executive Secretary