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CHICAGO, Jan 13, 2005 (BUSINESS WIRE) -- Fitch Ratings has assigned a rating of 'BBB-' to Consumers Energy Co.'s (Consumers; NYSE: CMS) $250 million issuance of 5.15% first mortgage bonds, due 2017. Proceeds from the issuance will be used to refinance higher cost debt. The Rating Outlook is Stable.

Fitch upgraded the senior secured rating of Consumers to 'BBB-' from 'BB+' in December 2004, reflecting the regulated utility's strong operating characteristics, stable and predictable cash flows, as well as sound electric and gas distribution franchises. Recently, the utility received final orders from the Michigan Public Service Commission (MPSC) on several regulatory filings, including a gas rate case, a stranded cost case, a securitization case, and a gas depreciation case. Overall, Fitch views the rate proceedings as having a slightly positive impact on Consumers ratings. Additional actions recently taken by the MPSC should result in reduced financial exposure to commodity risk and loss of margin due to electric competition, also having favorable implications for Consumers.

On Dec. 17, 2004, Consumers filed for a $320 million electric base rate increase with the MPSC. Major components of the filing consist of $148 million for rate base additions, including costs associated with environmental compliance, system reliability and customer growth; higher operating and maintenance expenses ($70 million); and pensions and benefits ($45 million). The implementation date is anticipated to be Jan. 1, 2006.

In its current regulatory asset case filing, Consumers has the ability to recover approximately $628 million of costs primarily associated with environmental compliance over the next five years. In the meantime, Consumers has accrued and recorded a regulatory asset of $55 million pre-tax, $36 million after-tax, for its return of and on Clean Air Act expenditures incurred from 2000 through 2003.

On Jan. 12, 2005, Consumers announced that the Palisades nuclear plant had an unscheduled outage due to a vacuum reduction in the main condenser. The company is in the process of determining the specific source of the vacuum reduction; once the source has been identified, any necessary repairs are expected to be made within several days and the plant will return to service shortly thereafter. Additionally, Consumers has taken Unit 3 of the Campbell Plant offline in order to repair what is believed to be a tube leak in the super heater portion of the boiler. The company expects the leak to be repaired within a week after determining the source. Consumers expects to have sufficient power at all times to meet its load requirements from its other plants and from purchase arrangements. These arrangements could increase the cost of power by an estimated $1.1 million (pre-tax) per day in the aggregate, of which approximately $0.44 million per day is not recoverable from ratepayers.

Consumers, the principle subsidiary of CMS Energy, is a combination electric and natural gas utility that serves approximately 1.73 million electric and 1.65 million gas customers in Michigan's Lower Peninsula.

SOURCE: Fitch Ratings

Fitch Ratings
Karen Anderson,312-368-3165 (Chicago)
Jonathan Cho, 212-908-0842 (New York)
Media Relations: Brian Bertsch, 212-908-0549 (New York)

Copyright (C) 2005 Business Wire. All rights reserved.

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