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August 14, 2013

Consumers Energy, AG’s office agree to $1 million settlement

Gas company also fined $430,000 for Royal Oak, Wayne explosions

By Robert Guttersohn
C & G Staff Writer

Attorney General Bill Schuette’s office announced a $1 million agreement Aug. 12 with Consumers Energy to create a Natural Gas Incident Response Fund intended to help victims of natural gas disasters.

Additionally, it will fund improved training and safety practices for utility workers and first responders in Michigan.

Meanwhile, the Michigan Public Service Commission announced the same day that it had fined the gas company $430,000 for two fatal explosions — one in Royal Oak occurring in February and the other in Wayne from 2010.

“We fully accept the commission’s conclusions and the fine announced today by the MPSC and Attorney General Schuette,” Consumers Energy said in a statement. “As we’ve said previously, these incidents failed to meet our standards, or the standards expected by our customers across Michigan.”

A press release from Schuette’s office said he pursued the settlement following the Royal Oak house explosion along Cooper Avenue.

Daniel Malczynski, 58, died in the explosion, and 30 homes were damaged.

Consumers Energy released a report submitted to the Michigan Public Service Commission in April stating its employees working on a gas line the day of the explosion were at fault. The MPSC in an Aug. 8 report stated much of the same. It found that crewmembers did not follow company guidelines while both working underground on a gas line and after they detected the leak. For the Royal Oak incident, the commission fined Consumers Energy $340,000.

For the Wayne explosion, which resulted in two deaths inside a retail store, the commission fined the company $90,000.

Judy Palnau, the media and public information specialist for the MPSC, said the disparity in the fines comes from the number of violations in each incident. Each count, she said, is $10,000, meaning Consumers had 9 violations in Wayne and 34 in Royal Oak.

“The commission has gas safety rules and the rules provide for fines in certain cases,” Palnau said.

As far as the different lengths of time to complete the investigations, she said what went wrong in Royal Oak was much more immediately evident.

The investigation “was much more complicated in Wayne than it was in Royal Oak,” Palnau said. “In Royal Oak, it became clear pretty quickly what went wrong.”

Palnau added that Consumers Energy has 30 days to pay the fine and 60 days to file a response to MPSC on how they plan to prevent any further incidents from occurring.

The MPSC investigation and the attorney general’s settlement with Consumers are independent of one another, officials said.

“Michigan families deserve the highest standards of safety, and the commitments achieved with this agreement are the first steps toward strengthening public safety for the citizens of Michigan,” Schuette said in a statement.

According to the terms of the agreement between his office and Consumers Energy, the company will spend $900,000 toward establishing a Natural Gas Incident Response Fund to help victims impacted by natural gas disasters.

The fund will supply victims with immediate needs like food, clothing and shelter. Victims who access the fund may still sue Consumers Energy following a natural gas incident and accept additional charitable assistance and insurance payments, the release said.

The fund is considered charitable and will be audited annually. Also, Consumers Energy cannot recoup the cost of the fund by raising gas rates.

“The way utility companies set prices in Michigan is a regulated process through the Michigan Public Service Commission,” said Joy Yearout, a spokeswoman from the Attorney General’s Office. “We’ll be monitoring the rate requests and know whether they are going to try and pass it on (to consumers).”

Yearout added that if Consumers does raise rates to recoup money from the fund, the attorney general can take the company to court to enforce the agreement.

The additional $100,000 from the settlement will be used to fund an independent study to improve natural gas safety statewide.

“The idea is to study best practices and safety standards for the natural gas industry in general,” Yearout said.

You can reach C & G Staff Writer Robert Guttersohn at rguttersohn@candgnews.com or at (586)218-5006.