November 1, 2018 VIA ELECTRONIC CASE FILING

Transcription

1 Clark Hill PLC 212 East Grand River Avenue Lansing, Michigan Bryan A. Brandenburg T T F F bbrandenburg@clarkhill.com clarkhill.com VIA ELECTRONIC CASE FILING Ms. Kavita Kale Executive Secretary Michigan Public Service Commission 7109 W. Saginaw Highway Lansing, Michigan November 1, 2018 Re: MPSC Case No. U-20317: In the matter, on the Commission s Own Motion, to consider changes in the rates of all of the Michigan rate-regulated electric, steam, and natural gas utilities to reflect the effects of the federal Tax Cuts and Jobs Act of 2017: Indiana Michigan Power Company (Electric files an application for determination of Calculation C as described in orders U and U Dear Ms. Kale: Enclosed for filing please find the Association of Businesses Advocating Tariff Equity s Petition to Intervene, along with a Proof of Service in the above case. Sincerely, CLARK HILL PLC Bryan A. Brandenburg BAB/tlb cc w/enc.: Parties of Record ALJ Jonathan F. Thoits /325501

2 STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * * In the matter on the Commission s Own Motion, to consider changes in the rates of all of the Michigan rate-regulated electric, steam, and natural gas utilities to reflect the effects of the federal Tax Cuts and Jobs Act of 2017: INDIANA MICHIGAN POWER COMPANY (Electric files an application for determination of Calculation C as described in orders U and U Case No. U ALJ Jonathan F. Thoits PROOF OF SERVICE STATE OF MICHIGAN ss COUNTY OF INGHAM Bryan A. Brandenburg, being first duly sworn, deposes and says that on November 1, 2018, he did cause to be served the Petition to Intervene of the Association of Businesses Advocating Tariff Equity, as well as this Proof of Service, in the above docket, via electronic mail, to the persons identified on the attached service list. Bryan A. Brandenburg Subscribed and sworn to before me this 1st day of November, Tina L. Bibbs, Notary Public Clinton County, Michigan My Commission Expires: November 13, 2021 Acting in Ingham County /325501

3 SERVICE LIST MPSC Case No. U Administrative Law Judge Hon. Jonathan F. Thoits Michigan Public Service Commission 7109 W. Saginaw Hwy., 3rd Floor Lansing, Michigan Counsel for Indiana Michigan Power Company Richard J. Aaron Consultants for ABATE Mike P. Gorman Amanda M. Alderson Chris C. Walters Brubaker & Associates, Inc. Counsel for MPSC Staff Heather M.S. Durian Benjamin J. Holwerda Counsel for Attorney General Michael E. Moody Counsel for ABATE Bryan A. Brandenburg Michael J. Pattwell Clark Hill PLC /325501

4 STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * * In the matter on the Commission s Own Motion, to consider changes in the rates of all the Michigan rate-regulated electric, steam and natural gas utilities to reflect the effects of the federal Tax Cuts and Jobs Act of 2017: INDIANA MICHIGAN POWER COMPANY (Electric files an application for determination of Calculation C as described in orders U and U Case No. U ALJ Jonathan F. Thoits PETITION TO INTERVENE OF THE ASSOCIATION OF BUSINESSES ADVOCATING TARIFF EQUITY The Association of Businesses Advocating Tariff Equity (ABATE, by and through its attorneys, Clark Hill PLC, hereby petitions the Michigan Public Service Commission (Commission for leave to intervene in this case pursuant to R (Rule 410 of the Commission s Rules of Practice and Procedure. In support of this petition, ABATE states as follows: 1. ABATE is a voluntary association of large industrial companies that conduct business throughout the state of Michigan. The primary purpose of ABATE is to participate in state and federal regulatory proceedings to protect the interests of businesses in connection with energy and utility matters. To that end, ABATE consistently advocates for cost-of-service based energy rates, equitable terms of service, and increased access to a competitive energy market. ABATE is also interested in assuring that rates, surcharges, and conditions of service are adopted in conformance with the law and in a fair and reasonable manner. 2. Collectively, ABATE s members employ almost 100,000 Michiganders and spend approximately $1.5 billion on energy and related services in Michigan each year. As the 1

5 representative of such large users of electricity, natural gas, and transportation services, ABATE is vitally interested in achieving increased economic efficiencies for the utilities that serve its members. 3. Present members of ABATE include: AK Steel Corporation; Cargill, Inc.; The Dow Chemical Company; DW-National Standard-Niles LLC; Eastman Chemical Company; Eaton Corporation; Edw. C. Levy Co.; Enbridge Energy, Limited Partnership; FCA US LLC; General Motors LLC; Gerdau MacSteel INC.; Graphic Packaging International, Inc.; Hemlock Semiconductor Operations LLC; J. Rettenmaier USA LP; Marathon Petroleum Corporation; Martin Marietta Magnesia Specialties LLC; Metal Technologies, Inc.; MPI Research; Occidental Chemical Corporation; OX Paperboard Michigan, LLC; Pfizer Inc.; Praxair, Inc.; United States Gypsum Corporation; United States Steel Corporation; WestRock California, Inc.; White Pigeon Paper Company; and Zoetis LLC. 4. ABATE members purchase large amounts of electricity and other services from Indiana Michigan Power Company (I&M or Company under various tariff provisions and will be subject to the rates, terms, and conditions of service approved in this proceeding. Therefore, ABATE seeks to intervene in this matter by right. 5. At the end of 2017, Congress passed and the President signed into law the Tax Cuts and Jobs Act (TCJA. Among other changes, the TCJA lowered the federal corporate income tax rate from 35% to 21%, effective January 1, The new federal requirements affect both the current tax expense and deferred tax accounting methods used by utilities. Current utility rates paid by customers were set by the MPSC in previous utility rate cases using the 35% federal income tax rate. Because of the new 21% tax rate going into effect, utility rates will need to be adjusted in order to ensure customers realize the benefits of the lower tax rate. 2

6 6. On December 27, 2017, the MPSC ordered all rate-regulated utilities under its jurisdiction to use regulatory accounting treatment to keep track of the impacts of the TCJA on current and deferred taxes, beginning January 1, The MPSC indicated that it was likely to initiate contested case proceedings for each affected utility to address the impacts of TCJA on the utility s rates. In addition, the MPSC asked each utility to comment on the estimated impacts of the tax law changes, and to suggest a method to flow benefits back to customers. The MPSC also solicited input from other interested parties. 7. On February 2, 2018, ABATE took advantage of the Commission s invitation by responding to the utilities comments regarding the extent of the impacts of the TCJA on utility rates, and how the resulting benefit should flow back to ratepayers. After reviewing the comments submitted by the utilities and other stakeholders in Case No. U-18494, the MPSC issued an order on February 22, This order adopted the proposal submitted by MPSC Staff for returning the benefits attributable to the lower federal income tax rate to customers. 8. Staff s proposal includes a three-step approach to addressing the tax law change, including implementing credits to customer bills to account for lower current tax expenses, and holding a separate proceeding for each utility to calculate the remaining impacts of the new tax law. Specifically, the MPSC indicated that it would establish and implement the following for each rate-regulated utility: Credit A is the going-forward credit to rates resulting from lower income taxes. Credit B is the backward-looking credit to rates resulting from lower income taxes for the period from January 1, 2018 through the time when Credit A is implemented. Calculation C includes all remaining impacts of the tax law change, and would be determined in a separate contested case proceeding. 3

7 9. In a February 22, 2018 order in Case No. U-18494, the Commission directed the Company to file its Calculation C application by October 1, Consistent with that directive, the Company timely filed its Calculation C application. Upon review of the same, ABATE seeks leave to intervene. 10. Although Rule 410 speaks in terms of leave to intervene, the Commission has indicated that it considers the ability to intervene to be one of right when a petitioner can meet the two-prong test for standing. 1 This test requires a showing that the prospective intervenor will (1 suffer an injury in fact as a result of the outcome of the case; and (2 the interests allegedly endangered fall within the zone of interests intended to be protected or regulated by the statute or constitutional guarantee in question ABATE meets the two-prong test for standing because its members have a direct financial interest in how the Company determines the value and amortization period for each component of Calculation C. Therefore, the proposals set forth in the Company s application will directly impact the rates that ABATE s members pay. Clearly, ABATE s interest in the adoption of reasonable and prudent utility rates falls within the zone of interests to be protected by the Commission s consideration of the issues in this proceeding. 12. In addition to meeting the conditions for intervention by right, ABATE meets the Commission s criteria for permissive intervention. As recognized in prior Commission orders, the Commission s discretion to grant leave to intervene is broader than the two-prong test Unlike a court of law, an administrative agency can allow intervention whenever the 1 The United States Supreme Court established the two-prong test for standing in Association of Data Processing Service Organizations, Inc. v Camp, 397 US 150; 90 S Ct 827; 25 L Ed 2d 184 (1970, applied to utility matters in Drake v The Detroit Edison Co, 453 F Supp 1123, 1127 (WD Mich, 1978, and adopted by the Commission in its November 10, 1988 Order in Case No. U In re Consumers Energy for authority to implement a power supply cost recovery plan, MPSC Case No. U-17317, March 6, 2014 Order, p 4 (emphasis added. 4

8 resulting delay will likely be outweighed by the benefit of the intervenor s participation. 3 Permissive intervention has also been granted where a proceeding raises novel questions and important issues of policy and the intervenor will bring a unique perspective to the case ABATE has regularly intervened in proceedings before the Commission and other regulatory bodies for over 25 years. As a result, ABATE is well-versed on the appropriate accounting treatment of protected and unprotected excess deferred income tax (ADIT balances. As the representative of Michigan s largest energy users, ABATE is in a position to offer the Commission a unique perspective related to the economic impact of differing amortization periods. 14. As in prior cases, ABATE will provide the Commission with useful analyses regarding the data included in the Company s filing. If needed, ABATE will scrutinize the reasonableness and prudence of the Company s proposals through discovery and crossexamination. It is also likely that ABATE will sponsor its own expert witness to present the Commission with an additional perspective related to an appropriate refund period for the Company s unprotected excess ADIT balance. ABATE maintains that it is capable of assisting the Commission make significant policy determinations in this case without unnecessarily delaying the process. As such, ABATE meets the test for permissive intervention. 15. Concurrently with the filing of its application, the Company filed testimony and exhibits in support of its Calculation C application. For example, I&M estimates that its retail generation and distribution functions excess ADIT total $105,727,896. Of this total, I&M 3 In re Michigan Consolidated for authority to increase its rates, MPSC Case No. U-10150, December 8, 1992 Order, p 5. 4 In re Consumers Energy to fully comply with Public Act 295 of 2008, MPSC Case No. U-17771, October 27, 2015 Order, p 6, citing In re Mascotech Forming Technologies, MPSC Case No. U-11057, June 5, 1996 Order, pp

9 currently estimates that $68,348,684 is protected excess ADIT and $37,379,212 is unprotected excess ADIT ABATE will carefully examine the Company s filing to ensure that its calculations and proposals are lawful and reasonable. Furthermore, ABATE will make recommendations that, if adopted, will result in a fair and equitable allocation of the Calculation C proceeds. 17. The interests of ABATE and its members are not adequately represented by any other potential party to this case; therefore, it would be detrimental to the public interest to deny this petition to intervene. 18. ABATE reserves the right to take other positions and/or seek other relief based on a review of the various filings, the responses to discovery, or positions taken in briefs. Respectfully submitted, CLARK HILL PLC Date: November 1, 2018 By: Bryan A. Brandenburg (P77216 Michael J. Pattwell (P72419 Attorneys for the Association of Businesses Advocating Tariff Equity Clark Hill PLC 212 East César E. Chávez Avenue Lansing, MI bbrandenburg@clarkhill.com mpattwell@clarkhill.com 5 Direct Testimony of Bryan Owens, p 5. 6