1Effective March 11, 1997, Consumers Power Company became Consumers EnergyCompany.
S T A T E O F M I C H I G A N
BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION
* * * * *
In the matter of the application of )CONSUMERS POWER COMPANY )for authority to increase its rates for ) Case No. U-10685the sale of electricity. ) )
) In the matter of the application of )CONSUMERS POWER COMPANY for )accounting and ratemaking approval of changes ) Case No. U-10754in plant accounting and depreciation practices )for electric and common utility plant. ) )
) In the matter of the application of )CONSUMERS POWER COMPANY for approval )of a special competitive services rate, for certain ) Case No. U-10787accounting and ratemaking approvals in connec- ) tion with that service, and for other relief. ) )
At the April 10, 1997 meeting of the Michigan Public Service Commission in Lansing, Michigan.
PRESENT: Hon. John G. Strand, ChairmanHon. John C. Shea, CommissionerHon. David A. Svanda, Commissioner
ORDER ON REHEARING
On November 14, 1996, the Commission issued an order in these consolidated cases approv-
ing, with modifications, a settlement agreement filed by Consumers Energy Company1 (Consum-
ers) and the Commission Staff (Staff).
Page 2U-10685 et al.
On December 3, 1996, Consumers filed its acceptance of the terms of the order and a petition
for rehearing and modification of the order. Consumers explained that its acceptance of the order
was not contingent upon the Commission’s favorable response to its petition for rehearing. On
December 23, 1996, the Association of Businesses Advocating Tariff Equity (ABATE) filed a
response. On December 26, 1996, the Staff, The Dow Chemical Company (Dow), and Energy
Michigan and Nordic Power (Nordic) filed responses to the petition for rehearing.
On December 9, 1996, Attorney General Frank J. Kelley (Attorney General) filed a petition for
rehearing. On December 27, 1996, Consumers filed a response.
On December 13, 1996, Consumers filed tariffs, as required by the November 14, 1996 order.
On December 13, 1996, Dow filed a petition for rehearing and clarification. On December 26,
Energy Michigan and Nordic filed a response. On January 3, 1997, Consumers filed a response.
On January 10, 1997, SPX Corporation filed a response.
On December 16, 1996, Tenneco Packaging, Inc., (Tenneco) filed a late petition to intervene
and petition for rehearing. On January 6, 1997, Consumers filed responses.
On December 16, 1996, Energy Michigan and Nordic filed a petition for rehearing and
clarification. On December 30, 1996, Energy Michigan and Nordic filed a supplement to their
petition for rehearing. On January 6, 1997, Consumers filed a response to the initial petition. On
January 10, 1997, SPX filed a response. On January 14, 1997, Consumers filed a response to the
supplement.
On December 16, 1996, the Michigan Public Power Agency and the Michigan South Central
Power Agency (the MPPA/MSCPA) filed a petition for rehearing. On January 6, 1997, Consum-
ers filed a response.
Page 3U-10685 et al.
On December 16, 1996, ABATE filed a petition for rehearing and clarification. On
December 19, 1996, it filed a corrected version. On December 26, 1996, Energy Michigan and
Nordic filed a response. On January 6, 1997, Consumers filed a response. On January 10, 1997,
SPX filed a response. On January 24, 1997, the Midland Cogeneration Venture Limited Partner-
ship (MCV) filed a response to SPX’s filing.
On March 7, 1997, Dow filed a motion to compel Consumers to implement the terms of the
November 14, 1996 order with respect to Rate DA and to require Consumers to file a tariff fully
consistent with the order. On March 24, 1997, Consumers filed a response.
Rule 403 of the Commission's Rules of Practice and Procedure, 1992 AACS, R 460.17403,
provides that an application for rehearing may be based on claims of error, newly discovered
evidence, facts or circumstances arising after the hearing, or unintended consequences resulting
from compliance with the order. An application for rehearing is not merely another opportunity
for a party to argue a position or to express disagreement with the Commission's decision. Unless
a party can show the decision to be incorrect or improper because of errors, newly discovered
evidence, or unintended consequences of the decision, the Commission will not grant a rehearing.
Revenue Deficiency
The November 14, 1996 order accepted the proposal to increase the capitalization threshold
for general and common plant expenditures to $1,000. Order, pp.14 and 61-62. The order rejected
the proposal to transfer $93 million from transmission plant depreciation reserve to nuclear
production plant depreciation reserve. Order, pp. 59-61. The order concluded that the revenue
requirement effect of accepting the capitalization threshold change was offset by the revenue
requirement effect of rejecting the proposed depreciation reserve transfer. The Commission
Page 4U-10685 et al.
therefore concluded that it should not change the revenue requirement determined in the February
5, 1996 partial final order. Order, pp. 17-18.
Consumers argues on rehearing that the November 14, 1996 order did not change the plant
balances, depreciation rates, or depreciation expense that were proposed by the settlement
agreement, and thus, contrary to the Commission’s finding, there was no depreciation expense
change to offset the effect of changing the capitalization threshold.
The Attorney General argues that the order contains an inadvertent error to the extent that the
order implicitly approves depreciation rates that reflect a depreciation reserve transfer that the
order explicitly rejected.
The Commission agrees that the November 14, 1996 order failed to implement the Commis-
sion’s intent with respect to depreciation rates. The Commission has recalculated Consumers’
depreciation rates for transmission plant and nuclear production plant to reflect the rejection of the
proposed $93 million depreciation reserve transfer. Exhibit B, attached to this order. The effect is
a reduction in depreciation expense, and the resulting reduction in the revenue requirement offsets
the increase in the revenue requirement associated with the change in the capitalization threshold.
Standby Service
The order denied the request of Energy Michigan and Nordic to make Rate CG standby service
available to all standby customers. Order, pp. 21-22. Energy Michigan and Nordic argue on
rehearing that this conclusion is not supported by the record.
Energy Michigan and Nordic simply renew arguments that the Commission previously
considered and rejected, and their petition for rehearing therefore fails to meet the requirements of
Rule 403. Further, Energy Michigan and Nordic have erroneously asserted that the Commission
Page 5U-10685 et al.
cannot decide a matter of law and policy, such as the availability of standby service, without a
supporting factual record. Section 72(3) of Administrative Procedures Act of 1969 (APA),
MCL 24.272(3); MSA 3.560(172)(3).
Rate DA Duration
The order refers to a five-year term for Rate DA. Order, pp. 77-78. On the other hand, the
order also refers to a termination date of December 31, 2000 when it notes that the “settlement
does not mandate abolishing . . . Rate DA . . . as of December 31, 2000.” Order, p. 77. The tariff
attached to the order provides for service “through at least December 31, 2000 unless the Michigan
Public Service Commission decides to extend direct access service or implement a comparable
service.” Rate DA tariff, Sheet No. E-105.00.
Energy Michigan and Nordic say that the tariff would permit customers to take Rate DA
service for less than four years from any feasible commencement of service under the rate. They
request that the Commission clarify that Rate DA will be available for five years from the date that
service first commences.
The settlement calls for Rate DA to end on December 31, 2000, unless extended by the
Commission. After considering a longer initial term, the Commission approved that term as
proposed by the settlement. Because Energy Michigan and Nordic have simply reasserted
arguments already considered by the Commission, it declines to modify the order as they request.
On the other hand, the Commission reaffirms that it will review the experience with Rate DA and
may extend the term at a later date.
Page 6U-10685 et al.
Size of the Program
The Commission concluded that 240 megawatts (MW) should be made available for Rate DA
and individual contract service. Order, pp. 80-81.
ABATE notes that requests for approximately 1,100 MW of service under Rate DA and
individual contract service have been filed with the Commission or Consumers. It asserts that the
limited scope of Rate DA, no more than 240 MW, is thus wholly inadequate, especially if
Consumers can immediately allocate 140 MW of that amount to the contracts filed on December 3,
1996.
The Commission fully considered the size of the Rate DA program. ABATE’s petition for
rehearing adds nothing new and therefore does not meet the requirements of Rule 403.
140 MW of Rate DA or Individual Contract Service
The order discussed at length how 240 MW of capacity would be allocated between Rate DA
and individual contract service. Order, pp. 76-81. The Commission concluded that 100 MW
should be made available exclusively for Rate DA for a period of 18 months and another 140 MW
should be made available immediately for competition between Rate DA and individual contract
service. Order, pp. 80-81. On December 3, 1996, after having filed its acceptance of the terms of
the order, Consumers filed contracts with a total capacity in excess of 140 MW.
Dow argues that the Commission’s order envisioned that Consumers would offer individual
contract service in competition with Rate DA. To effectuate that intended competition, Dow
asserts, the Commission must ensure that Consumers may not offer any portion of the 240 MW to
a customer that does not have priority to participate in Rate DA by either having requested
Rate DA service before other customers or having won the lottery for participation. It also argues
Page 7U-10685 et al.
that the contracts that Consumers filed on December 3, 1996 were obviously negotiated before
Consumers accepted the terms of the order and before there was a direct access program in which
those customers could choose to participate. Consequently, it asserts, they had no choice between
Rate DA and individual contract service when they signed their contracts, and none of those
contracts should count toward the 140 MW available for competition between Rate DA and
individual contract service.
ABATE argues that the order does not clearly indicate whether there is any preference or
requirement that some portion of the 140 MW be filled by Rate DA service. It suggests that the
individual contract service customers should be chosen by lottery, as Rate DA customers will be
chosen.
Energy Michigan and Nordic fear that Consumers may allocate the entire 140 MW to the
contracts even though hundreds of megawatts of applications for Rate DA were filed the same day.
They ask the Commission to clarify the allocation process in the following manner: (1) Each
customer location for Rate DA or individual contract service would be treated as a separate
application. (2) All individual contract service contracts and all applications for Rate DA received
on December 3 or 4, 1996 would be placed in the lottery and 240 MW of capacity would be
selected, with at least 100 MW under Rate DA, and another 200 MW would be selected as
alternates. (3) No customer could receive more than 50 MW of capacity. (4) For any winning
customer location with an existing contract and a Rate DA application, the customer would have to
agree, within 30 days, to participate in Rate DA or the capacity would be allocated to an alternate.
It also requests that customers be given the opportunity to present facts that might change their
priority.
Page 8U-10685 et al.
In response, Consumers says that it currently treats each customer meter as a separate account
and plans to conduct the Rate DA lottery accordingly. On the other hand, it also says that, to the
extent it currently treats two or more locations as a single customer account, the lottery will reflect
that treatment. It does not support limiting the Rate DA capacity available to any customer.
In response, SPX says that the proposal to treat each customer location as a separate applica-
tion should not be used to defeat the right of smaller customers to aggregate loads up to 6 MW.
The Commission agrees that the lottery must be conducted in a manner than does not defeat
the right granted by the order for aggregation under the Rate DA program. Order, p. 85. With that
limitation, the Commission agrees that the lottery should be conducted on the basis of customer
accounts, as Consumers proposes, which is consistent with its current treatment of its customers.
As required by the November 14, 1996 order, priority shall be given to applications on a first-
come, first-served basis, with a lottery used to assign a priority to the applications received on the
same day. Order, p. 105. The Commission also agrees that alternates should be selected, and
therefore the lottery should be used to assign a priority to each customer account covered by a Rate
DA application.
The Commission disagrees with Energy Michigan’s and Nordic’s proposal that the contracts
be included in the lottery. The November 14, 1996 order did not require that treatment of the
contracts because the choice between individual contract service and Rate DA was to be made by
customers. The lottery, on the other hand, was to allocate capacity between applications for
Rate DA that were otherwise of equal priority. The Commission also disagrees with their proposal
that no customer should be eligible for more than 50 MW of Rate DA capacity. The selection will
be done randomly by lottery, and fairness does not require a further restriction on the outcome of
the selection process. The Commission agrees with Energy Michigan and Nordic that a customer
2Consistent with the intent of the settlement agreement and the order that customers havean option of choosing up to 100 MW of Rate DA for 18 months, the 18-month period will notbegin until Rate DA is, in fact, available; i.e., both the Commission and the Federal EnergyRegulatory Commission have approved Rate DA tariff sheets.
Page 9U-10685 et al.
with an existing (previously approved) contract that is selected in the lottery must choose to
participate in Rate DA or the capacity will be allocated to another customer willing to take service
under Rate DA. On the other hand, a customer with a Rate DA application to whom Consumers
offers individual contract service need not choose to take service under Rate DA, although, for the
first 18 months, Consumers must continue to offer Rate DA capacity to eligible customers until at
least 100 MW of Rate DA capacity has been filled.2
The remaining question is whether the contracts that Consumers filed on December 3, 1996
fill the 140 MW of capacity that was to be available for competition between Rate DA and
individual contract service. The November 14, 1996 order stated:
[T]o ensure that fair and full competition is created between Consumers (through the useof its individual contract service) and eligible third-party suppliers (through the use ofRate DA), an additional requirement must be imposed. Specifically, service providedunder these individual contracts must comply with all standards and billing practicesimposed, and must include payment for all mandatory charges required, under Rate DA.
Order, p. 119. Presumably, Consumers believes that all of the contracts comply with the relevant
terms of the Rate DA program, even though it is apparent that the contracts contain terms that are
not identical to the terms offered under Rate DA (e.g., the length of the contracts and the power
factor). Because Rate DA involves unbundled access to third-party suppliers and individual
contract service is a form of bundled retail service, the rates, terms, and conditions of the two
cannot be identical. Nevertheless, if competition between the two is to be fair and meaningful, the
Commission can permit only those differences that are absolutely required by the differences in the
nature of the service that the customer has chosen.
Page 10U-10685 et al.
The Commission concludes that it should not resolve this issue without providing the parties
an opportunity to be heard. The Commission will therefore set a hearing at which the parties may
present evidence and argument about which of the rates, terms, and conditions of Rate DA should
apply equally to individual contract service and the extent to which the contracts filed on
December 3, 1996 comply with those provisions. Upon completion of the hearing, the Commis-
sion will decide which of the contracts comply with the requirement of comparability in the
November 14, 1996 order. For the contracts that comply, Consumers may count their capacity
toward the 140 MW. If a portion of the 140 MW remains unfilled, it will be opened to Rate DA,
based upon the priority determined in the lottery. Consistent with the policy of competition
between individual contract service and Rate DA, Consumers may offer individual contract service
to those customers. If they choose the option of a contract, their Rate DA capacity will not be
offered to another customer.
List of Participants
Dow argues that Consumers should be required to file with the Commission, and serve on the
parties, a list of customers that have requested Rate DA service, arranged by the date on which the
customers made their requests, with sufficient documentation to demonstrate that the list is
accurate. Dow asserts that such a list would permit customers to verify that Consumers considers
them to be eligible and would permit those that believe Consumers has unfairly excluded them to
raise the matter with the Commission.
In response, Consumers says that it sent a confirmation to each customer that submitted a
request to participate in Rate DA and Dow has not established a need to know the identity of all
other potential participants.
Page 11U-10685 et al.
The Commission agrees with Dow that requiring Consumers to file and serve a list of
customers that have requested Rate DA service, arranged by the date on which the customers made
their requests, will further the implementation of Rate DA. By reference to such a list, each
applicant can confirm that Consumers has received its application and determine the filing priority
that Consumers has assigned to that customer. Those who believe that the list is in error are then
free to raise that issue with Consumers or, if necessary, with the Commission.
Reciprocity
The Commission concluded that all utilities that wanted to supply power pursuant to Rate DA
would be required, as a condition of participation, to open a comparable amount of their native
load to competition from Consumers. The Commission also concluded that if an affiliate of a
utility participated as a third-party supplier, the utility would be subject to the reciprocity require-
ment, but that if a utility provided power through an unaffiliated power marketer, the utility would
not be subject to the requirement. Order, pp. 90-91.
Consumers argues that the Commission’s decision to exempt the utility supplier of an
unaffiliated power marketer from the reciprocity requirement effectively negates the requirement
because a utility can readily structure its participation through an unaffiliated power marketer.
In defining the scope of the reciprocity requirement, the Commission considered the issue that
Consumers raises. The Commission concluded that it would not impose the reciprocity require-
ment on utility suppliers of unaffiliated power marketers. Consumers has not offered any new
perspective on this issue, and the Commission denies rehearing.
In a related matter, Energy Michigan and Nordic propose that Rate DA customers be permitted
to contract for regulation and frequency response service with municipal utilities or municipal
Page 12U-10685 et al.
power agencies located within Consumers’ service territory. To implement this recommendation,
Energy Michigan and Nordic say that the Commission must determine that the reciprocity
requirement does not apply to those suppliers or applies only to a similar volume and type of
service.
In response, Consumers says that there is no reason to make this change, which will only invite
endless argument about the nature of the service that a municipal utility provides.
Consistent with the Commission’s order, municipal utilities and municipal power agencies
may provide primary power supply or backup service, but will, as a condition of their participation,
be required to offer reciprocity only for the type of service they offer under Rate DA and, as with
all reciprocity under Rate DA, for the same amount of capacity. The Commission does not agree
with Consumers that implementation of this condition will present any serious practical difficul-
ties.
Affiliate Participation
The Commission defined eligible third-party suppliers to include all sources of power, both
within and without Michigan, with the exception of Consumers itself. Order, p. 89.
Dow argues that the Commission should clarify that Consumers and its affiliates are not
eligible to participate as power marketers. It asserts that Consumers should not be permitted to
avoid the limited competition created under Rate DA by competing with others through an
affiliate.
In response, Consumers says that the November 14, 1996 order did not preclude Consumers’
affiliates from acting as third-party suppliers and that it would be inconsistent with the intent of the
order to limit, rather than expand, the number of eligible suppliers.
3With respect to SPX’s assertion that the MCV cannot participate as a third-partysupplier, the Commission notes that the MCV has 1,240 MW under contract to Consumers andConsumers cannot act as a third-party supplier under Rate DA. Consequently, no part of theMCV capacity already under contract to Consumers may be offered under Rate DA, whether byConsumers or the MCV.
Page 13U-10685 et al.
The Commission agrees that Consumers’ affiliates should not be permitted to act as third-party
suppliers for any part of the 100 MW reserved for Rate DA. The effect is to maximize the
competition between Consumers and unaffiliated third-party suppliers, and is consistent with the
rationale for setting aside the 100 MW.3
Energy Michigan and Nordic argue that the Commission must define the term “affiliate” to
ensure that suppliers providing service through power marketers are not subjected to the reciproc-
ity requirement unless they fall within a clearly defined category of relationships to the marketer.
The Commission concludes that this issue is better addressed in a context where the underly-
ing facts may be developed, such as in the contested case proceeding in which the marketer seeks a
certificate of public convenience and necessity or seeks approval of its contracts.
Separate Metering
The Commission approved the requirement of the settlement agreement that Rate DA service
be separately metered, by which the Commission meant that a single meter could not be used to
record a customer’s demand and energy usage for load that was served under Rate DA and any
other tariff or contract. Order, pp. 92-93.
ABATE points out that there was extensive testimony on the issue of separate metering in the
retail wheeling cases involving Consumers and The Detroit Edison Company, Cases Nos. U-10143
and U-10176. It argues that the testimony showed that separate metering is unnecessary, overly
expensive, and a significant, if not completely prohibitive, cost of participation.
Page 14U-10685 et al.
Energy Michigan and Nordic argue that the Commission’s decision on separate metering is not
supported by record evidence. They also request that the Commission rule that the customer may
provide the meter and that Consumers must use that meter for all purposes.
The arguments raised on rehearing do not satisfy the requirements for rehearing. The parties
have simply re-offered the evidence and arguments that the Commission has considered and
rejected. In addition, Energy Michigan and Nordic erroneously assert that a matter of policy, such
as whether to require separate metering, must be supported by record evidence. Section 72(3) of
the APA.
As to the practical consequences, it would appear that if a customer chooses to take Rate DA
service for the entire load that is currently served by a single meter, the requirement of separate
metering would have no effect. On the other hand, if customers cannot or will not choose to place
the entire load served by one meter on Rate DA, or third-party suppliers will not or cannot serve
the entire load of a single meter, the Commission invites the parties to offer additional information
on this issue at an appropriate time. That information would have important implications for the
development and viability of a competitive electric industry. For purposes of this program, the
Commission has determined that a customer should not have the choice of metering its load served
by both Rate DA and another tariff or contract service with one meter. It is not legal error to
approve a limited direct access program as an initial step toward opening the electric generation
market to competition.
As to Energy Michigan’s and Nordic’s request that the customer be permitted to provide the
meter, the tariff that Consumers filed says that the customer “is responsible for the purchase and
installation of all separate metering equipment necessitated by its switch to Direct Access Service.”
Rate DA tariff, Sheet No. E-106.00. Thus, Rate DA customers are free to contract with others for
4Open Access Rule, 61 Fed. Reg. 21,540 (1996)(to be codified at 18 CFR 35.15, 35.26-.28, 385.2011).
Page 15U-10685 et al.
any new meters and related installation. On the other hand, the Commission does not interpret the
tariff as requiring the replacement of meters already in place simply because the customer chooses
to take service under Rate DA.
Deadband Service
The Commission approved a “deadband” of plus or minus 3% as the range within which a
third-party supplier must balance the energy delivered to Consumers with the energy used by the
customer. A failure to maintain that balance causes the customer to incur additional charges.
Order, p. 96. The Commission also determined that, to address concerns raised by the Federal
Energy Regulatory Commission’s (FERC) assertion of jurisdiction in Order No. 8884 over the
transmission of electricity for a direct access program, it would take official notice of Consumers’
open access transmission tariff on file with the FERC and apply the standard charges set forth in
that tariff. Order, p. 94. The tariff that Consumers filed following issuance of the order provides
for a 1.5% deadband, as found in Consumers’ FERC tariff.
Dow asserts that the Commission should require Consumers to file immediately a new tariff
that is consistent with the Commission’s order, particularly with respect to the deadband and
power factor (discussed below). Dow asserts that, in accepting the order, Consumers agreed to
provide Rate DA service pursuant to the terms and conditions set forth in the Commission’s order
at the rates set forth in the FERC tariff. Dow argues that the FERC will permit modifications to
the wholesale transmission tariff to accommodate retail wheeling and asserts that the larger
Page 16U-10685 et al.
deadband provided by the Commission’s order is the type of variation the FERC envisioned might
be necessary.
ABATE argues that requiring a third-party supplier to follow each individual customer’s load
within even a 3% deadband is not workable and must be corrected.
Energy Michigan and Nordic also argue that the 3% deadband, and the inability to aggregate
load served by a third-party supplier for purposes of meeting the deadband requirement, will create
an exceedingly difficult problem for a third-party supplier trying to follow the load of each
customer on an almost instantaneous basis. They say that it is therefore critical that the Commis-
sion carefully detail the terms under which Consumers will provide replacement power for periods
of less than 90 days so that customers can avoid the imposition of any penalty for exceeding the
deadband limits.
In response, Consumers says that Energy Michigan and Nordic are not seeking a clarification
related to the replacement power provision, which was never intended or described as a means to
permit the customer to avoid exceeding the deadband limit, to avoid unauthorized use charges, or
to obtain load following service from Consumers. Rather, it says, replacement power is available
if the third-party supplier completely fails to deliver power as required by its contract.
The Commission agrees that Energy Michigan and Nordic have sought to misapply the
replacement power provision of the tariff, which is not a substitute for the load following that is
required under Rate DA. On the other hand, concerns with the deadband provision are lessened, if
not eliminated, by recognizing that the tariff that Consumers filed must be revised to conform to
the tariff on file with the FERC. That tariff provides for a deadband of 1.5% with a 1 MW
5Upon rehearing, the FERC has approved a deadband minimum of 2 MW for the proforma open access tariff. Order No. 888-A, March 4, 1997.
Page 17U-10685 et al.
minimum. Consumers’ Open Access Transmission Tariff, Original Sheet No. 121.5 The Commis-
sion’s decision to use the FERC tariff for Rate DA requires that the deadband minimum, as well as
the range, be used. As a practical matter, the effect is to create a deadband in excess of 3% for
loads of less than 33 MW and as much as 50% for the minimum Rate DA load of 2 MW.
An effective deadband of as much as 50% may suggest to Consumers a need to modify the
FERC tariff as it applies to a direct access program, just as a deadband of 1.5% or a power factor
of 0.928, 0.951, or 1.000 (discussed below) may suggest to potential customers a need to modify
the FERC tariff. The potential need for such changes, and perhaps others, need not be resolved at
this time. To permit Rate DA to go forward without a challenge to the FERC’s assertion of
jurisdiction, and without the delay associated with seeking to modify the FERC tariff, the
Commission has decided to use, at least for now, the FERC tariff for the transmission component
of Rate DA. Therefore, the Commission denies Dow’s request that Consumers be required to file
a Rate DA tariff that corresponds in all respects to the November 14, 1996 order, but rather will
require Rate DA service to be offered in conformity with the FERC tariff.
Power Factor
The Commission’s order did not discuss power factors, but the order did indicate that the
Commission would take notice of Consumers’ FERC tariff for purposes of establishing transmis-
sion rates. Order, p. 94. Consumers asserts that the tariff it filed uses the power factors found in
its FERC tariff.
6The tariff proposes a power factor of 1.000 for network transmission service.
7The hearing should also examine the question of the point at which the Rate DAcustomer’s power factor should be measured and whether it makes sense to apply the traditionaltransmission power factor measurement in a retail context. The Commission raises thesequestions in part because it seems likely that a traditional network transmission customer’spower factor is not measured at a single end-user’s facility.
Page 18U-10685 et al.
Energy Michigan and Nordic note that Consumers’ filed tariff proposes power factors of 0.928
and 0.951 for point-to-point transmission service rather than the 0.8 found in Consumers’ retail
sales tariff.6 They argue that, to avoid discrimination, the same power factor should be used for
Rate DA as is used for retail and special contract customers. Energy Michigan and Nordic note
that the same issue exists with respect to line losses because Consumers has substituted the FERC
tariff figures for the retail tariff numbers.
As discussed above in the context of the deadband, the Commission decided to adopt the
FERC tariff for the transmission component of Rate DA. With respect to point-to-point transmis-
sion service, the FERC tariff provides:
Unless otherwise agreed, the Transmission Customer is required to maintain a powerfactor within the same range as the Transmission Provider pursuant to Good UtilityPractices. The power factor requirements are specified in the Service Agreement whereapplicable.
Consumers’ Open Access Transmission Tariff, Original Sheet No. 83, paragraph 24.3. With
respect to network transmission service the FERC tariff is less clear. Furthermore, the resolution
of this issue is closely related to the issue of comparability between individual contract service and
Rate DA, and can be addressed in that hearing. The parties can also address whether it is
reasonable and appropriate to conclude that Consumers has “otherwise agreed” that Rate DA
customers may maintain a power factor of 0.8 for point-to-point transmission service.7 In any
Page 19U-10685 et al.
event, and regardless of the outcome of that hearing, the power factor and other issues addressed
by the FERC tariff must be resolved, at least for now, by the terms of that tariff.
Replacement Power
Replacement power is an alternate source of power for use when the primary third-party
supplier fails to deliver power to Consumers’ grid for delivery to the Rate DA customer. The
Commission noted that Rate DA customers were free to seek replacement power from any eligible
third-party supplier, as well as from Consumers. To define the terms under which Consumers
would provide this optional service, the Commission approved the replacement power provision
found in the settlement agreement. Order, p. 99.
ABATE says that the requirement that a customer that wants to take replacement power
service from Consumers sign that contract no later than when it signs the power supply contract
with its third-party supplier is unworkable. ABATE suggests that the Commission could permit
the customer to sign a replacement power contract at any time before the Commission approves the
contract with the third-party supplier or as late as when the power begins to flow. ABATE also
suggests that, because the customer will pay the actual cost of replacement power and Consumers
will not have to plan system capacity for replacement power purposes, the Commission should
permit the customer, with short notice, to terminate its contract with Consumers and obtain
replacement power from another source.
Energy Michigan and Nordic make essentially the same argument.
In response, Consumers says that it would not object to modifying the tariff provision to allow
the customer to sign a contract with Consumers for replacement power on the later of the day the
customer signs its contract with a third-party supplier or 10 days after the customer is selected by
Page 20U-10685 et al.
lottery to participate in Rate DA. Consumers also says that its generally applicable Rule B13.2
prevents customers from changing rates more often that once every 12 months, and argues that
Rate DA customers should be subject to the same limitation.
The Commission accepts Consumers’ offered amendment to the replacement power provision.
The Commission rejects Consumers’ view that Rate DA customers should be required to comply
with the rule that prevents rate changes more often than once every 12 months. Consistent with
the competitive nature of Rate DA, it is appropriate to permit customers to select another replace-
ment power provider at any time if Consumers’ replacement power tariff is not competitive,
especially when Consumers is under no obligation to plan system capacity to provide replacement
power.
Regulatory Charge
Consumers’ tariff rates include the costs associated with Statement of Financial Accounting
Standards (SFAS) No. 106 (accounting for postretirement benefits), nuclear plant decommission-
ing, the Midland nuclear plant amortization, SFAS No. 109 (accounting for deferred income
taxes), and past demand-side management programs. The Commission concluded that Rate DA
customers should continue to pay those costs even if they obtained generation services from a
third-party supplier. Therefore, the November 14, 1996 order approved a regulatory charge to
recover those costs. Order, pp. 99-103
ABATE argues that the regulatory charge overburdens an already costly program.
ABATE has simply reargued its position, which does not satisfy the requirements of Rule 403
for rehearing. On the other hand, since the Commission issued the November 14, 1996 order, it
has become more clear that the FERC will not readily permit the states to implement any direct
8The revenue effect to Consumers of initially not permitting it to collect the regulatorycharge is unknown at this time. Customers will not commence Rate DA service immediately,and the schedule in Case No. U-11283 will permit a Commission order and FERC concurrencesometime in the Fall.
Page 21U-10685 et al.
access program, other than one of short duration, using the open access tariff with any modifica-
tions. Therefore, to permit the Rate DA program to go forward at this time, the Commission will
adopt, for now, the FERC tariff without modification. Consequently, the regulatory charge may
not be imposed until the Commission issues its final order in Case No. U-11283 and has obtained
the FERC’s concurrence on the jurisdictional split between Consumers’ transmission and
distribution facilities. At that time, the Commission will have clear authority to impose the
regulatory charge on the state jurisdictional distribution facilities and intends to do so.8
Returning Customers
The settlement proposed that all customers seeking to return to full service do so only under
the terms of the replacement power provision of Rate DA, which would require the customer to
pay the greater of (1) the actual cost of replacement power plus all Rate DA charges or (2) the
applicable firm tariff rate. The Commission approved that proposal with the modification that a
customer returning to full service after fulfilling the requirements of its Rate DA contract would
not be required to pay the Rate DA charges. Order, pp. 104-105.
ABATE argues that there is no basis for requiring Rate DA customers that have fulfilled the
requirements of their contracts to pay actual replacement power costs rather than standard tariff
rates. It acknowledges that the Commission said that Consumers would not have to plan for future
generation services for these customers, but argues that no new customer or returning contract
customer is subjected to this economic punishment. It says that the penalty is further unjustified
Page 22U-10685 et al.
for a new, untested program, especially if Consumers’ conduct is the reason the customer seeks to
return to tariff service. Further, ABATE argues that, for a program that will not exceed 240 MW
at most, it is likely that Consumers can accommodate returning Rate DA customers in the context
of planning for normal load growth.
The Commission considered this issue fully before issuing the November 14, 1996 order.
ABATE has not persuaded that Commission that it should reconsider its decision, except in one
respect. If Consumers’ conduct is the reason that a Rate DA customer decides to terminate its
participation in the program, the customer may return to standard tariff service.
Scheduling
Energy Michigan and Nordic suggest that the Commission must permit a third-party supplier
to provide power on an instantaneous basis in increments less than 100 kilowatt (kW), notwith-
standing other tariff provisions on the deadband and scheduling. They say that the requirement
that scheduling be done in 100 kW increments is unrealistic for customers with small loads, for
whom a 1.5% deadband requires adjustments to nominations that are less than the 100 kW
minimum for changes in the delivery schedule. Energy Michigan and Nordic also propose that the
deadband be balanced daily, rather than hourly, and that the minimum deadband violation be 100
kW. They also request that the Commission permit third-party suppliers to aggregate the
nominations and load following services of their customers. They assert that doing so would not
impede the ability of Consumers to determine whether a particular Rate DA customer was
complying with its contractual obligations and would produce fewer changes in nominations and
less risk of exceeding the deadband limits. Finally, they complain that the prohibition on
scheduling more than the reserved capacity will prevent the Rate DA customer from using its full
Page 23U-10685 et al.
reserved capacity after accounting for the line loss factor of 3-4% or the customer will have to
reserve 3-4% more transmission capacity than it actually expects to use.
In response, Consumers agrees to reduce the minimum scheduling requirement to 1 kW and to
permit hourly, rather than daily, changes in the schedule of deliveries if they can be reasonably
accommodated.
The Commission accepts those concessions as consistent with the FERC tariff and reasonably
designed to assist third-party suppliers in performing their contractual responsibilities. Several of
Energy Michigan’s and Nordic’s other concerns should be lessened or eliminated by the 1 MW (or
2 MW) minimum deadband. To the extent those concerns remain, the Commission repeats that the
provisions of the FERC tariff govern.
Transmission Transfer Capability
The Commission concluded that Consumers was in the best position to determine whether its
transmission and distribution system could accommodate a particular interconnection or delivery
schedule requested pursuant to Rate DA. Order, pp. 105-106.
ABATE argues that this authority cannot legally, and should not, be given to a utility with a
strong interest in finding insufficient transfer capability.
Energy Michigan and Nordic propose that the same transfer capability limitations that apply to
Rate DA customers should apply to special contract customers. Energy Michigan and Nordic
suggest that transmission capacity constraints be addressed by prorating the available capacity
among all tariff, special contract, and Rate DA customers. They also propose that customers be
given notice of Consumers’ decision and an opportunity to respond.
Page 24U-10685 et al.
The Commission concludes that, at least initially, transfer capability issues must be addressed
pursuant to the FERC tariff, as other similar issues are governed by that tariff.
Energy Michigan and Nordic also say that Rate DA customers will be required to pay for
unauthorized use, spinning reserves, and standby reserves, and Rate DA customers should
therefore be entitled to the same reliability of service as tariff and contract customers. It proposes
that if there is a system or local outage, service to all firm customers should be prorated without
discrimination against Rate DA customers.
In response, Consumers argues that Energy Michigan and Nordic are confusing transmission
and generation services. It says that once power from a third-party supplier is delivered to
Consumers’ system, that power will be delivered to the customer, but it says that the Rate DA
customer is not paying for, and is not entitled to, continuous backup service from Consumers’
generation assets.
The Commission concludes that Energy Michigan and Nordic are mistaken in suggesting that
Rate DA customers will be paying for continuous backup service from Consumers or that they are
entitled to it. Unless they make other arrangements with Consumers, the rates that Rate DA
customers will pay to Consumers are for transmission and distribution, not generation, services and
they are entitled to receive only those services. As noted above, curtailment or interruption of
transmission services will be governed by the FERC tariff.
Direct Assignment Facilities
Energy Michigan and Nordic say that, as a result of Consumers’ application in Case No.
U-11283 requesting approval of an allocation of facilities between transmission and local
distribution, there is a danger that some Rate DA customers will be overcharged. In particular,
Page 25U-10685 et al.
Energy Michigan and Nordic fear that the cost of certain radial transmission lines may be directly
assigned to certain customers without an offsetting reduction in the Rate DA charges.
The Commission has set the application in Case No. U-11283 for hearing. The resolution of
Energy Michigan’s and Nordic’s concern must await a Commission order in Case No. U-11283.
Missing Tariff
Energy Michigan and Nordic say that Rule D13.2.C. is missing from the filed tariff (Rule
D14.2.C. in the tariff attached to the order). Consumers responds that it omitted the rule because
its FERC tariff does not have that provision. Consumers says that it will implement the FERC
tariff requirement that excess energy be returned in kind during the same billing cycle.
Because the Commission has adopted the FERC tariff language, it is unnecessary to include
the omitted language in Consumers’ tariff.
Terms of the Tariff
Energy Michigan and Nordic request that the Commission give the parties 15 days to review
and comment on the tariff that Consumers files to implement Rate DA.
The Commission agrees that customers should have an opportunity to review and comment on
the tariff that Consumers files in response to this order.
Enforcement
Energy Michigan and Nordic argue that it is not clear that a customer or third-party supplier
will have standing to participate in a power supply cost recovery (PSCR) case to seek a disallow-
ance of MCV costs as a penalty for Consumers’ failure to comply with the settlement. It asks that
the Commission clarify the standing of these parties.
Page 26U-10685 et al.
In response, Consumers argues that the settlement agreement does not provide for the
disallowance of MCV costs, even if Consumers fails to comply with the terms of the settlement,
contrary to the argument of Energy Michigan and Nordic.
Ordering paragraph “M” of the November 14, 1996 order requires Consumers to file evidence
of compliance with the implementation of the Direct Access Service tariff in its PSCR reconcilia-
tion filing for 1996 and subsequent years. It follows from that requirement that Consumers’
compliance will be subject to a meaningful examination in those cases and that parties with a
direct interest in the implementation of Rate DA should be allowed to participate.
Dispute Resolution
ABATE says that the Commission must plainly state its intention to exert primary jurisdiction
over all disputes that arise from Consumers’ implementation of Rate DA. ABATE fears that,
because the Commission decided to use Consumers’ FERC open access tariff for the transmission
portion of the Rate DA charges, Consumers will assert that customers must file complaints with
the FERC, even though service under Rate DA will be primarily distribution service in connection
with retail sales under a state program.
The Commission cannot create jurisdiction in itself. Customers are free to raise issues and file
complaints in the forum of their choice, and other parties are free to challenge that choice of
forum. Therefore, ABATE’s concern must be resolved in the context of contested cases.
Individual Contract Service Discounts
The order says that nonparticipating customers should be protected from any underrecoveries
of PSCR costs and other surcharges that result from individual contract service. Order, pp. 119-
121.
Page 27U-10685 et al.
Energy Michigan and Nordic say that it is unclear how this protection will be implemented and
request that the Commission clearly state that Consumers or its shareholders must absorb the
difference between the contract revenues and standard tariff revenues.
The Commission fully addressed this issue in the November 14, 1996 order and stopped short
of holding that Consumers could never shift any portion of the discount to other customers.
Energy Michigan’s and Nordic’s petition, which simply expresses disagreement with that decision,
does not meet the requirements for rehearing.
Customer Retention
The order rejected the proposal of the MPPA/MSCPA that individual contract service be
available only to protect existing load at a location currently served by Consumers. Order,
pp. 122-123.
The MPPA/MSCPA point out that the Commission noted that, in the last five years, none of
the members of the MPPA/MSCPA had added a customer with a maximum demand of 3 MW or
more. They assert that the order does not accurately portray the fact that municipal utilities are in
competition for customers with a demand in excess of 3 MW. They offer an affidavit, with
evidence developed after the close of the record, that municipal utilities have added at least two
customers with demands in excess of 3 MW since the close of the record and had directly
competed with Consumers and an electric cooperative for a third, which chose Consumers. They
also allege that, in March 1995, well before the settlement agreement was filed, a municipal utility
began serving another facility with a demand in excess of 3 MW. Finally, they argue that the
economic development rates of municipalities, to which the order referred, are fundamentally
different from the individual contract service offered by Consumers.
9ABATE prefers the term “joint position,” which the Commission has also used to referto the settlement agreement. The label did not affect the Commission’s decision to consider thejoint position or settlement agreement under the terms of Rule 333 of the Commission’s Rules ofPractice and Procedure, 1992 AACS, R 460.17333.
Page 28U-10685 et al.
In response, Consumers says that all of the contracts filed on December 3, 1996 are with
existing customers and the MPPA/MSCPA’s argument is therefore moot if the Commission
accepts Consumers’ view that those contracts fill the 140 MW available for competition between
Rate DA and individual contract service. Consumers says that because the contracts are subject to
various pricing and cost recovery restrictions and because the Commission must approve the
contracts, the MPPA/MSCPA can raise their concerns if they believe that Consumers has misused
the individual contract service. Consumers also questions whether there was any competition for
at least three of the customers mentioned by the MPPA/MSCPA.
The MPPA/MSCPA’s petition for rehearing does not satisfy the requirements of Rule 403 to
the extent it reasserts arguments that the Commission’s order considered and rejected. To the
extent it offers new evidence, the Commission will not reopen the record on this issue. The
contracts that Consumers filed are, as it turns out, with existing customers, but the Commission
does not agree with the MPPA/MSCPA’s view that, in competition for new customers, Consumers
should be placed at a disadvantage as compared to municipal utilities.
Settlement Procedures
ABATE argues that the Commission incorrectly found that the two parties to the settlement
agreement, Consumers and the Staff, adequately represented the public interest.9 ABATE says that
the Commission cannot reach such a conclusion when every other party opposed the settlement.
ABATE also argues that the Commission incorrectly found that the settlement was in the public
10ABATE speculates about whether the Commission will always find that the Staffrepresents the public interest and whether the Commission would ever approve a settlement thatthe Staff did not join. The Commission does not foresee circumstances under which it wouldfind that the Staff did not represent the public interest, but can readily foresee circumstancesunder which the lack of Staff participation would not be an impediment to approval of asettlement.
Page 29U-10685 et al.
interest, represented a fair and reasonable resolution of the issues, and was supported by substantial
evidence. Further, ABATE renews its argument that the Commission committed legal error in
approving the recovery of additional MCV costs. It re-asserts that the Commission should have
granted its motion for partial summary disposition and should not have granted rehearing of the
May 9, 1995 order, which placed recovery of the MCV costs back at issue in Case No. U-10685.
ABATE has simply reasserted arguments that the Commission previously considered and
rejected. Its petition for rehearing therefore does not meet the requirements of Rule 403.10
Tenneco Petition
Tenneco alleges in its petition to intervene that its ability to participate in Rate DA will be
affected by the final order in this proceeding and that its rights are not adequately represented by
any other party. As to the substance of the issues, Tenneco argues that the separate metering
requirement is unnecessary and onerous.
In response, Consumers says that Tenneco’s petition is extremely late and merely raises an
issue that others have addressed both at the evidentiary hearings and by petitions for rehearing of
the Commission’s order.
The Commission grants Tenneco’s late petition for leave to intervene. The issue it raises has
been argued extensively by others and permitting it to intervene now will not delay a resolution of
these cases. The Commission denies the petition for rehearing, which asserts a position that the
Page 30U-10685 et al.
Commission has previously considered and rejected. As such, the petition for rehearing does not
meet the requirements of Rule 403.
Implementation Schedule
In its March 7, 1997 motion, Dow requests that the Commission order Consumers to conduct
the lottery to determine the priority among customers that have requested Rate DA service and to
file a tariff in compliance with the November 14, 1996 order. Dow notes that Consumers has
asserted in Case No. U-11283 that the FERC requires the classification of transmission and local
distribution facilities as a prerequisite to implementation of a direct access program. Dow denies
that Order No. 888 imposes such a requirement, although it acknowledges that a tariff must be
filed with the FERC. Dow asserts that Consumers has tacitly admitted, in the December 13, 1996
letter that accompanied the proposed Rate DA tariff, that it need not delay the filing of a tariff with
the FERC, but has taken the position that it should delay its filing because it wishes to avoid
having to make two tariff filings with the FERC--one before the classification is completed and the
other after. Dow complains that Consumers’ desire to avoid two filings with the FERC is patently
inadequate to justify further delay in implementing Rate DA.
In a January 10, 1997 letter to the Commission’s Executive Secretary, Consumers proposed an
implementation process that is likely to result in the first customers taking service under Rate DA
sometime next year, which is an unacceptable implementation of the settlement. Therefore, the
Commission will require the following modifications to Consumers’ proposed implementation
schedule:
1. Within 4 days of the date of this order, Consumers shall file with the Commission and
serve on the parties and all Rate DA applicants, a list of customers that have requested Rate DA
Page 31U-10685 et al.
service, arranged by the date on which the customers made their requests. Consumers shall
immediately seek to resolve any remaining questions and challenges to an applicant’s eligibility to
take service under Rate DA.
2. Within 7 days of the date of this order, Consumers shall serve on the Staff, all parties to
these cases, and every Rate DA applicant (regardless of whether Consumers agrees that they are
eligible to take service under Rate DA), a notice of the time and place at which the lottery will
occur.
3. Within 14 days of the date of this order, Consumers shall file tariff sheets essentially the
same as those attached to this order as Exhibit A. The parties shall have 14 days to review and file
comments on those tariff sheets. If no party files comments, Consumers shall file with the FERC,
within 28 days of the date of this order, all filings needed to implement Rate DA, and Consumers
shall use its best efforts to obtain prompt approval, if needed. If any party files comments,
Consumers shall file with the FERC, within 14 days of the date of the Commission order address-
ing those comments, all filings needed to implement Rate DA, and Consumers shall use its best
efforts to obtain prompt approval, if needed.
4. Within 21 days of the date of this order, Consumers, acting through an independent third
party, shall conduct the lottery to establish a priority for each customer account covered by a
Rate DA application, regardless of whether Consumers believes that an applicant is eligible to take
service under Rate DA. Any disputes not resolved to the satisfaction of the applicant prior to the
lottery shall be resolved after the lottery is conducted and the applicant has received a priority.
5. Immediately upon completion of the lottery, Consumers shall commence a diligent, good
faith effort to negotiate and resolve for applicants with the highest priority all remaining issues
needed to implement the Rate DA program. Consumers shall continue to negotiate with applicants
Page 32U-10685 et al.
with successively lower priorities until the full capacity allocated to Rate DA has been placed in
service, including any part of the 140 MW that may become available after completion of the
hearing required by this order.
6. An applicant that does not obtain a certificate of public convenience and necessity and
Commission approval of its third-party supplier contract within 6 months of signing a Rate DA
contract or does not commence Rate DA service within 30 days of satisfying all requirements
necessary to commence service shall forfeit its priority, unless the Commission determines
otherwise for good cause.
7. Upon issuance of the Commission’s order in Case No. U-11283, Consumers shall file a
revised Rate DA tariff for Commission approval and shall make the appropriate filings with the
FERC.
The Commission FINDS that:
a. Jurisdiction is pursuant to 1909 PA 106, as amended, MCL 460.551 et seq.; MSA 22.151
et seq.; 1919 PA 419, as amended, MCL 460.51 et seq.; MSA 22.1 et seq.; 1939 PA 3, as
amended, MCL 460.1 et seq.; MSA 22.13(1) et seq.; 1969 PA 306, as amended, MCL 24.201
et seq.; MSA 3.560(101) et seq.; and the Commission's Rules of Practice and Procedure, as
amended, 1992 AACS, R 460.17101 et seq.
b. Tenneco’s late petition for leave to intervene should be granted.
c. The petitions for rehearing should be granted in part and denied in part, as discussed in this
order.
d. Consumers’ Rate DA tariff should be amended as shown on Exhibit A attached to this
order.
Page 33U-10685 et al.
e. Consumers should implement Rate DA according to the schedule set forth in this order.
f. Consumers’ depreciation rates should be adjusted as shown on Exhibit B attached to this
order.
g. With respect to a hearing on the conformity of the individual contract service contracts with
the rates, terms, and conditions of Rate DA, a prehearing conference shall be held on April 22,
1997 at 9:00 a.m. at the Commission’s offices at 6545 Mercantile Way, Lansing, Michigan.
THEREFORE, IT IS ORDERED that:
A. The petition for leave to intervene filed by Tenneco Packaging, Inc., is granted.
B. The petitions for rehearing are granted in part and denied in part, as discussed in this order.
C. Within 14 days, Consumers Energy Company shall file tariff sheets essentially the same as
those attached to this order as Exhibit A. The parties shall have 14 days to review and file
comments on those tariff sheets.
D. Consumers Energy Company shall implement Rate DA according to the schedule set forth
in this order.
E. A prehearing conference shall be held on April 22, 1997 at 9:00 a.m. at the Commission’s
offices at 6545 Mercantile Way, Lansing, Michigan.
The Commission reserves jurisdiction and may issue further orders as necessary.
Page 34U-10685 et al.
Any party desiring to appeal this order must do so in the appropriate court within 30 days after issuance
and notice of this order, pursuant to MCL 462.26; MSA 22.45.
MICHIGAN PUBLIC SERVICE COMMISSION
John G. Strand Chairman
( S E A L )
John C. Shea Commissioner, concurring in part and
dissenting in part in a separate opinion.
David A. Svanda Commissioner, concurring in a separateopinion.
By its action of April 10, 1997.
Dorothy Wideman Executive Secretary
Page 35U-10685 et al.
Any party desiring to appeal this order must do so in the appropriate court within 30 days after issuance
and notice of this order, pursuant to MCL 462.26; MSA 22.45.
MICHIGAN PUBLIC SERVICE COMMISSION
Chairman
Commissioner, concurring in part anddissenting in part in a separate opinion.
Commissioner, concurring in a separateopinion.
By its action of April 10, 1997.
Its Executive Secretary
In the matter of the application of )CONSUMERS POWER COMPANY )for authority to increase its rates for ) Case No. U-10685the sale of electricity. ) )
) In the matter of the application of )CONSUMERS POWER COMPANY for )accounting and ratemaking approval of changes ) Case No. U-10754in plant accounting and depreciation practices )for electric and common utility plant. ) )
) In the matter of the application of )CONSUMERS POWER COMPANY for approval )of a special competitive services rate, for certain ) Case No. U-10787accounting and ratemaking approvals in connec- ) tion with that service, and for other relief. ) )
Suggested Minute:
“Adopt and issue order dated April 10, 1997 granting in part and denying in partthe petitions for rehearing with respect to the implementation of Rate DA byConsumers Energy Company and setting a further hearing on the compliance ofthe individual contract service contracts with the rates, terms, and conditions ofRate DA, as set forth in the order.”
S T A T E O F M I C H I G A N
BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION
* * * * *
In the matter of the application of )CONSUMERS POWER COMPANY )for authority to increase its rates for ) Case No. U-10685the sale of electricity. ) )
) In the matter of the application of )CONSUMERS POWER COMPANY for )accounting and ratemaking approval of changes ) Case No. U-10754in plant accounting and depreciation practices)for electric and common utility plant.) )
) In the matter of the application of )CONSUMERS POWER COMPANY for approval )of a special competitive services rate, for certain) Case No. U-10787accounting and ratemaking approvals in connec-) tion with that service, and for other relief.) )
DISSENTING AND CONCURRING OPINION OF COMMISSIONER JOHN C. SHEA
(Submitted on April 10, 1997 concerning order issued on same date.)
The depreciation rates for Consumers Energy Company (“Consumers”) as set forth on Exhibit
A-4, Appendix 6 of the proposed settlement which were adopted in the November 14, 1996 order
in this docket do not reflect the Commission’s conclusion to reject the one-time $93.6 million
depreciation reserve transfer from transmission plant to nuclear plant. Thus, the November 14,
1996 order is in error, and the Commission is obligated to grant Consumers’ petition for rehearing
to correct its, the Commission’s, mistake. No other petition, in my view, meets the standard of
Rule 403 of the Commission’s Rules of Practice and Procedure, 1992 AACS, R 460.17403, and,
therefore, all such petitions should be denied.
Page 38U-10685 et al.
The majority is on far shakier ground as it concocts an excuse not to affirm the November 14,
1996 order, which each of the other Commissioners signed, concerning the Rate DA program. I
believe that the intent of the order is obvious and not in need of any interpretation: The size and
conditions of the Rate DA program and the treatment of Consumers’ contracting with its custom-
ers are clearly set forth in the order. See, e.g., November 14, 1996 Order at 81, n 43.
The majority’s action today should cause the regulatory community to view with skepticism
any settlement agreement that this Commission purports to authorize. Indeed, it will be interesting
to examine what further concessions the majority may attempt to exact under the guise of
examining the filings required by today’s order. The failure to approve the special contracts
submitted by Consumers containing lower rates to those contracting customers holds those
customers hostage to the whim of the majority. If the goal of the majority is to rationalize
regulation, today’s order is a giant step backward; if the majority has another goal, they owe it to
the ratepayers and utilities of Michigan to state it expressly.
I would grant rehearing on Consumers’ request concerning depreciation for the limited
purpose of revising the November 14, 1996 order to reflect the rejection of the depreciation reserve
transfers, and I would deny all other pending petitions.
John C. Shea
S T A T E O F M I C H I G A N
BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION
* * * * *
In the matter of the application of )CONSUMERS POWER COMPANY )for authority to increase its rates for ) Case No. U-10685the sale of electricity. ) )
) In the matter of the application of )CONSUMERS POWER COMPANY for )accounting and ratemaking approval of changes ) Case No. U-10754in plant accounting and depreciation practices)for electric and common utility plant.) )
) In the matter of the application of )CONSUMERS POWER COMPANY for approval )of a special competitive services rate, for certain) Case No. U-10787accounting and ratemaking approvals in connec-) tion with that service, and for other relief.) )
CONCURRING OPINION OFCOMMISSIONER DAVID A. SVANDA
(Submitted on April 10, 1997 concerning order issued on same date.)
Today I join with Chairman Strand in approving the order granting in part and denying in part
the petitions for rehearing with respect to the implementation of Rate DA by Consumers Energy
(formerly Consumers Power Company) in Cases Nos. U-10685, U-10754, and U-10787. I concur
because, in large part, today’s order reaffirms the intent of our November 14, 1996 order establish-
ing a workable, customer-oriented, competitive direct access program. The November 14, 1996
order was an unmistakable commitment on the part of this Commission to competition in the
electric service territory of Consumers Energy through a direct access program. Those that believe
otherwise should take note.
Page 40U-10685 et al.
The Commission’s commitment to competition was clearly expressed on p. 12 of the
November order when it stated “the public interest requires [the Commission] to take measures
that will maximize the benefits of competition.” On the following page of the order, the Commis-
sion reiterated its intent when it opined that the “rates, terms, and conditions of the direct access
program are adjusted, as set forth in detail in this order, to promote greater competition for retail
customers.” p. 13. On p. 37, the Commission explained that it “sought to identify and promote
policies that will minimize the disruptions of making a transition to an increasingly competitive,
market-driven environment and maximize the benefits of that environment for ratepayers and the
Michigan economy.” Further, the Commission suggested that, “a customer-oriented approach will
become all the more important.”
With these sentiments woven throughout the original order, and given the very direct language
of that order with respect to the scope of the Rate DA program, I am troubled by the controversy
which has surrounded the issue of the size of the Rate DA block. In the November order, the
Commission indicated that, “among the stated goals of the proposed settlement are creating true
competition between the utility and other suppliers of electric generation and providing customers
with an opportunity to test the feasibility of Rate DA as a means of satisfying their electric needs.”
Order, p. 79. The Commission concluded that the Rate DA program must be modified “to ensure
that qualifying retail customers have a reasonable opportunity to enjoy the benefits of competition
and to test the viability of Consumers’ direct access service.” Order, p. 80. The clearest indication
of the Commission’s intentions regarding the size of the Rate DA block is expressed on that same
page where it is stated that making this change “will expose 240 MW of Consumers’ load to
competition.”
Page 41U-10685 et al.
Construing all of the above to mean that 140 MW of the 240 MW allocated to the Rate DA
program could be locked up by individual contract service contracts before any competition
occurs, without providing any true customer choice, and without consideration of the condition of
the “playing field,” requires a very convoluted interpretation of the November order.
Such an interpretation would be analogous to a basketball championship game, where only the
home team is allowed to suit up and take the floor, and then being declared winner by default. It
does not equate to competition as we know it in any other aspect of our lives and should not be
acceptable here.
It is significant that the interest of customers in arranging Rate DA service (1,100 MW)
overwhelms the interest expressed by customers in individual contract service (158 MW). Since
the Commission’s original order took “several significant steps toward creating a more level
playing field between Rate DA and Consumers’ individual contract service” p. 117, the facts
support a decision favoring customer, not utility, choice. Consumers had the opportunity to
negotiate individual contracts that conformed to the requirements imposed on Rate DA customers,
as specified in the order. Instead Consumers may have attempted to “tilt” the playing field away
from Rate DA service toward individual contract service. One could mount a compelling
argument for moving forward with 240 MW of Rate DA today and allowing Consumers to
negotiate contracts under some other program. However, the hearing which is ordered in response
to this issue will serve a purpose. I have an open mind with regard to the technical questions
raised, but I remain troubled that we are placed in the position where the discussion continues, but
direct access for customers remains stalled.
For the reasons stated above, I concur.