STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION REPLY BRIEF OF THE GREAT LAKES RENEWABLE ENERGY ASSOCIATION

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1 STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the Application of DTE Electric Company for authority to increase its rates, amend its rate schedules and rules governing the distribution and supply of electric energy, and for miscellaneous accounting authority / Case No. U REPLY BRIEF OF THE GREAT LAKES RENEWABLE ENERGY ASSOCIATION INTRODUCTION The Great Lakes Renewable Energy Association (GLREA) files this Reply Brief in accordance with the schedule set by the presiding Administrative Law Judge (ALJ). This case involves the application of DTE Electric Company (DTE) to increase its base electric rates, and includes major proposals by DTE to implement a Distributed Generation (DG) tariff, which poses major issues impacting DTE s residential and other customers. 1. GLREA SUPPORTS THE STAFF S ANALYSIS OF THE REGULATORY APPROACH TO A PROPOSED OUTFLOW INFLOW TARIFF FOR THE DISTRIBUTIVE GENERATION (DG) PROGRAM The GLREA supports the Staff s Brief (pp 83. et seq) recommending several modifications to the DTE proposed inflow/outflow distributive generation tariffs (DG Tariff). The Staff analysis of the applicable statutory provisions is rational and holistic, and provides the correct interpretation of the applicable statutes governing both net metering and the DG Tariff, in contrast to DTE s interpretation of the statutes which are selective and self-serving. 1

2 DTE, looking after its own interests, understandably advocates the limitation of any competition to its monopoly business model, even if arising from its own customer base. However, the reality is that the Legislature provided for the ability of customers to install their own facilities to reduce their internal consumption of energy, and to be compensated for any net outflows from their premises, and to be credited in future bills rendered by the utility to the customer if their outflows should exceed their inflows. The Staff is correct that the net outflow generated by a customer should include not only an energy value but also a capacity value comprising PSCR costs minus transmission costs. This is after the generating customer receives the full offsetting benefit arising from the reduction of the customer s own consumption. The GLREA takes issue with DTE s undeveloped and speculative concept that customers who generate their own energy (and thereby provide capacity offsets) by providing net outflow to the grid, should only be credited with a MISO energy LMP credit. In contrast, the Staff correctly asserts that any such excess generation contributed to the grid should be credited with the PSCR value of the contribution minus transmission (the later subtraction being required by statute, but not because it makes any economic sense). The Staff s analysis is correct that DG customers engaged in outflow situations are providing both capacity and energy benefits to the utility and to the grid. The issue involves how to reasonably measure said contributions. DTE s proposal is beneficial to the utility stockholders, but is contrary to the interests of ratepayers and individual customers with DG facilities, and the public interest. DTE erroneously asserts that it is inequitable to provide proper outflow credits to DG customers because non-dg customers do not receive said outflow credits. DTE s argument lacks substance and is not a proper reason for either reducing outflow credits or to impose on SAC charge on DG customers. DTE also has not established its equitable claim in any cost of 2

3 service study to develop this concept. DTE s proposed inadequate outflow credit or punitive SAC charge would simply benefit DTE s stockholders, and would not in any way address the rates charged to non-dg customers. Moreover, DTE in essence does not have any standing to assert such equitable ideas in contrast to this Commission s authority to establish just and reasonable rates and to balance the interests of stockholders and ratepayers. If DTE s only concern is that the DG rate proposals of either the Staff or other intervenors does not equitably treat non-dg customers, said premise is both unproven and conceptually very weak. First, the DG customers themselves invest their own funds to install DG facilities to generate energy and contribute to capacity needs, which investments are not made by non-dg customers. Secondly, under a portfolio effect and over time, additional DG customer investment across DTE s service territory will reduce DTE s PSCR costs, including transmission costs (even though the statute may not allow recognition of a credit for transmission savings). The non-dg customers will benefit over time from this portfolio effect comprising DG customers investing in capacity and energy facilities that reduce PSCR costs, including transmission costs. Again, DTE s equitable theory on this point is offset by the fact that non- DG customers have not invested in such DG facilities, and secondly, by the fact that non-dg customers will benefit from reduced PSCR and transmission costs charged to all customers. 1 GLREA further asserts that the record is clear that DTE has provided no cost of service study whatsoever to support its claim that the Commission can consider some equitable shift from DG customers to non-dg customers if a robust DG Tariff is approved. In contrast, DTE asserts only a vague speculative concept without any proof that said shift is real or is immediate, 1 Transmission costs, including costs charged by transmission companies under MISO Tariffs, are charged to Michigan retail utility customers under 1982 PA 304 (Act 304), MCL 460.6j, et seq. 3

4 or exists at all. Said DTE assertions are also premature because the effect of DG participation by DTE customers will occur over time, during which the utility and the Commission can readily adjust tariff rates based upon realized trends and results. GLREA agrees with Staff that DG customers providing net energy outflow should be reasonably compensated. In addition, all proposals in this case recognize savings to DG or net metering customers on the consumption that they save through their own investment in DG facilities (based on a retail rate including capacity and energy). The debate regarding DTE s outflow/inflow tariff only relates to the amount of compensation to be accorded the DG customer (or net metering customer) which provide excess energy to provide to the grid. Clearly, DG customers, by reducing energy and capacity needs, do in reality reduce transmission costs on a long-term basis, which in turn reduces costs charged to Michigan retail customers. DG customers thus reduce capacity and transmission needs and costs, which provide a benefit to all ratepayers, including non-dg customers. This reality justifies rejection of DTE s unexplained and undocumented concern about an equitable shift between DG customers and non-dg customers. In reality, DTE s opposition to the DG proposals of GLREA, Staff, and other parties, arises from DTE s own self-serving motivation to restrict competition to its monopoly business model, and to restrain the empowerment of residential and other customers to address and reduce their energy bills and requirements. GLREA therefore asserts that the positions of GLREA, Staff, and other parties concerning DG Tariffs promote the public interest, in contrast to the selfserving proposals of DTE. 4

5 2. DTE S PROPOSAL FOR A SYSTEM ACCESS CONTRIBUTION CHARGE IS UNWARRANTED AND UNJUSTIFIED GLREA asserts that DTE s proposal for a System Access Contribution (SAC) charge to be imposed upon DG customers is wholly unsupported, unjustified, and unwarranted. The MPSC Staff s brief has identified several reasons why said SAC charges are unacceptable and should be rejected. GLREA asserts that the cost of service studies presented by DTE (and its admissions by DTE cost of service witnesses under cross examination by GLREA counsel) establish that there exists no cost study by DTE to support the basis for any SAC charges. This alone is a conclusive basis for rejecting DTE s SAC charges. Secondly, GLREA asserts that DTE s proposed SAC charges should be rejected on the basis that they have no rational relationship to any incremental cost impact to DTE or the gruid carried by DG resources. In reality, the SAC charges proposed by DTE are nothing more than a proposal to restrict competition by DG customers facilities and interconnections, and to preserve its monopoly business model, no matter how uneconomic it may be over time. GLREA further asserts that DTE s proposed SAC surcharges are irrational and not cost based for additional reasons (in addition to those identified in Staff s brief). First, the SAC charges do not recognize the time, expense, and investment, that a DG customer invests in DG facilities (which benefit not only the DG customer in reduced consumption, but also benefits the DTE and the grid over time). Again, the DG customers, on a cumulative or comprehensive basis, will also contribute to reducing PSCR costs and transmission costs of the utility and other 5

6 utility customers, even though DTE asserts that the statute does not allow a direct credit to DG customers of transmission cost savings. 2 GLREA further asserts that the establishment of a proper DG Tariff, with fair compensation for DG customers, also is equitable to customers and to non-dg customers because it provides an ongoing opportunity for all utility customers to consider and perhaps implement DG facilities in the future to address their own individual circumstances. This is another equitable concept that supports appropriate DG Tariff proposals. GLREA further asserts that the primary kind of DG facilities that would be implemented or installed by utility customers on their own sites would be cost effective solar facilities. In Michigan, as many states elsewhere, there exists a reasonable alignment between solar generation that can be derived from DG solar facilities compared to peak-loads and peak-load costs during the summer months (when peak-load air conditioning costs are high). In these months, excess outflow provided by DG solar customers benefits the local distribution network, and the grid overall. While some may argue on a short term basis that the exact hours of said solar DG contribution occurs during slightly different hours for the months of June through September, it is undeniable that a portion of said summer capacity and energy needs result from DG facilities. Moreover, peak loads experienced later in the day can be ameliorated by implementation of battery and storage technologies. DTE as of yet has undertaken very minimal, if any, steps to promote the alignment of DG customer solar capacity and energy with summer 2 The DG customers are providing a subsidy to other non-dg customers in providing diversity to DTE s local distribution system, and its grid and transmission system, and to the MISO transmission system, and to offsetting Act 304 PSCR costs, which offset any DTE assertions that DG customers would be inequitably benefitted from the DG proposals due to concerns concerning non-dg customers. 6

7 peaks, or to advance storage or battery implementation to robustly reduce costs during peak summer days and hours. 3. DTE S OPPOSITION TO A REASONABLE DG TARIFF IGNORES THE PORTFOLIO BENEFITS LONG TERM THAT WOULD RESULT FROM THE ADOPTION OF SAID TARIFF GLREA further asserts that the company s basic opposition to a reasonable DG Tariff ignores the longer term portfolio effect benefits that DG customers can provide to DTE s utility system and the overall grid. The addition of a diverse number of DG customers across DTE s electric service territory, over a period of time, would constitute a gradual and longer-term portfolio impact benefit upon DTE s overall system. The result is that proper DG customer tariffs should be implemented now which tariffs will be subject to continual review in future years. 4. THE GLREA RECOMMENDS AMENDMENTS TO DTE S PROPOSED TARIFFS 16 AND 18 AS RECOMMENDED BY THE STAFF AND GLREA The GLREA recommends that the Commission adopt changes to DTE s proposed tariff terms and terminology, including Tariffs 16 and 18, as recommended by the MPSC Staff and by GLREA s witnesses (as quoted in GLREA s Initial Brief). The GLREA also agrees with the Staff brief (pp 134, et seq) regarding specific issues relating to the outflow/inflow tariff. CONCLUSION AND RELIEF Based upon its evidentiary presentation in this case, and this Initial Brief, GLREA requests the Administrative Law Judge (ALJ) to recommend, and the Commission to adopt, 7

8 GLREA s positions and proposals in this case. GLREA requests such further and consistent relief that is lawful and reasonable. Respectfully submitted, Dated: February 1, 2019 Don L. Keskey (P23003) Brian W. Coyer (P40809) Public Law Resource Center PLLC University Office Place 333 Albert Avenue, Suite 425 East Lansing, MI Telephone: (517) s: donkeskey@publiclawresourcecenter.com bwcoyer@publiclawresourcecenter.com 8

9 STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the Application of DTE Electric Company for authority to increase its rates, amend its rate schedules and rules governing the distribution and supply of electric energy, and for miscellaneous accounting authority / Case No. U ELECTRONIC SERVICE LIST On February 1, 2019 an electronic copy of Reply Brief of the Great Lakes Renewable Energy Association was served on the following via upon: Name/Party Administrative Law Judge Hon. Sally L. Wallace DTE Electric Company Andrea E. Hayden Megan E. Irving Lauren DuVal Donofrio Jon P. Christinidis MPSC Staff Daniel Sonneveldt Amit T. Singh Spencer A. Sattler Environmental Law & Policy Center Margrethe Kearney Jean-Luc Kreitner Energy Michigan Inc., Chargepoint, Michigan Energy Innovation Business Council, and the Institute for Energy Innovation Laura A. Chappelle Timothy J. Lundgren Toni L. Newell Justin Kooms Address wallaces2@michigan.gov mpscfilings@dteenergy.com andrea.hayden@dteenergy.com megan.irving@dteenergy.com lauren.donofrio@dteenergy.com jon.christinidis@dteenergy.com sonneveldtd@michigan.gov singha9@michigan.gov sattlers@michigan.gov mkearney@elpc.org jkreitner@elpc.org lachappelle@varnumlaw.com tjlundgren@varnumlaw.com tlnewell@varnumlaw.com jkooms@varnumlaw.com 1

10 Attorney General Bill Schuette Joel B. King Michigan Cable Telecommunications Association Michael Ashton Association of Businesses Advocating Tariff Equity (ABATE) Bryan A. Brandenburg Robert A. W. Strong Michigan Environmental Council, Natural Resources Defense Council, Sierra Club Christopher M. Bzdok Lydia Barbash-Riley David Bender Shannon Fisk Chinyere A. Osuala The Kroger Company Kurt J. Boehm Jody Kyler Cohn Utility Workers Union of America Local 223 John R. Canzano Ben. King Soulardarity Lydia Barbash-Riley Mark N. Templeton Robert A. Weinstock WalMart Melissa M. Horne

11 The statements above are true to the best of my knowledge, information and belief. PUBLIC LAW RESOURCE CENTER PLLC Dated: February 1, 2019 Carol A. Dane Public Law Resource Center PLLC University Office Place 333 Albert Avenue, Suite 425 East Lansing, MI Telephone: (517)