The following is attached for paperless electronic filing: Sincerely,

Transcription

1 November 28, 2017 Ms. Kavita Kale Michigan Public Service Commission 7109 W. Saginaw Hwy. P. O. Box Lansing, MI Via E-filing RE: MPSC Case No. U Dear Ms. Kale: The following is attached for paperless electronic filing: Reply Brief of Michigan Environment Council, Natural Resources Defense Council and Sierra Club Proof of Service Sincerely, Christopher M. Bzdok cc: Parties to Case No. U-18255, ALJ Mark D. Eyster James Clift, MEC Shannon Fisk, Earthjustice Ariana Gonzalez, NRDC Kristin Henry, Sierra Club Tony Mendoza, Sierra Club Elena Saxonhouse, Sierra Club

2 STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the Application of DTE ELECTRIC COMPANY for the authority U to increase its rates, amend its rate schedules and rules governing the distribution and ALJ Mark D. Eyster supply of electric energy, and for miscellaneous accounting authority. REPLY BRIEF BY MICHIGAN ENVIRONMENTAL COUNCIL, NATURAL RESOURCES DEFENSE COUNCIL AND SIERRA CLUB

3 TABLE OF CONTENTS I. INTRODUCTION... 1 II. III. REPLY TO DTE REGARDING RIVER ROUGE CAPITAL AND MAINTENANCE EXPENDITURES... 1 REPLY TO DTE AND STAFF REGARDING FOSSIL GENERATION OPERATIONS AND MAINTENANCE EXPENSE... 5 IV. REPLY TO DTE AND STAFF REGARDING FIXED MONTHLY SERVICE CHARGES... 6 V. REPLY TO DTE REGARDING SUMMER ON-PEAK RATES VI. REPLY TO DTE AND STAFF REGARDING LOW INCOME CUSTOMER ISSUES DTE s factual objections to witness Colton s recommendations are unavailing The Commission should consider Witness Colton s recommendations in this general rate case DTE s arguments against removing the LIA cap are unavailing VII. CONCLUSION i

4 I. INTRODUCTION The Michigan Environmental Council, Natural Resources Defense Council, and Sierra Club (together, MEC-NRDC-SC ) submit this reply brief to respond mainly to DTE on five issues discussed in the Company s initial brief: Capital and maintenance expenditures on Tier 2 coal units, especially River Rouge; Fossil Generation Operations and Maintenance (O&M) expenditures; Fixed monthly service charge for residential customers; Residential on-peak summer rates; and Energy usage reduction assistance for payment-troubled low-income customers. MEC-NRDC-SC also respond to Staff with regard to the fixed monthly service charge and low income customers issues. With respect to issues covered in our initial brief but not mentioned in this reply brief, MEC-NRDC-SC stand on the arguments made in the initial brief. II. Reply to DTE Regarding River Rouge capital and maintenance Expenditures In our initial brief, MEC-NRDC-SC explained how in DTE s last rate case, Case No. U , the Commission directed DTE to support additional expenditures on the remaining coalfired unit at the River Rouge power plant with an updated Net Present Value (NPV) economic analysis. 1 The purpose of such an analysis was to determine whether there were net economic benefits to customers from continuing to operate the plant until 2020, as opposed to retiring it earlier. MEC-NRDC-SC further explained that DTE disregarded the Commission s directive, on the basis that the Company determined instead that River Rouge should continue operating for 1 MEC-NRDC-SC Initial Brief at

5 reliability reasons irrespective of economics. And MEC-NRDC-SC explained that DTE s decision in this regard was not supported by the evidence on reliability not at the time the decision was made, nor at the time of the hearing in this case. MEC-NRDC-SC s initial brief devoted 26 pages to discussing this evidence. 2 In its initial brief, DTE avoids discussing any of this evidence, or really engaging on this issue at all. DTE s initial brief contends that the Company assessed the need to operate its Tier 2 coal-fired generating units as part of a strategic resource planning evaluation; and that DTE decided it is in the best interest of its customers to continue operating the Tier 2 units until their planned retirement dates for reliability reasons. 3 However, DTE never acknowledges that the evidence comprising the strategic evaluation projected no capacity shortfall. 4 Nor does the Company acknowledge the significant headroom in Zone 7 capacity resources combined with the MISO capacity import limit, which allows DTE to import lower-cost capacity so that its customers can benefit from being part of an interconnected grid. 5 It is possible that the Company is tactically reserving the bulk of its argument on this issue for the reply brief. However, DTE bears the burden of demonstrating that its expenditures are reasonable and prudent. As the Commission has noted more than once: In the statute providing for the use of a projected test year, nothing eliminated the requirement that all rate increases must be shown to be just and reasonable. MCL 460.6a(1); see, also, MCL 460.6, , and et seq. The same statutory section that allows for use of projected costs also requires that the utility shall place 2 Id. at DTE Initial Brief at MEC-NRDC-SC Initial Brief at Id. at

6 in evidence facts relied upon to support the utility s petition or application to increase its rates. MCL 460.6a(1). 6 The Commission added that under these statutes, if the utility realistically expects inclusion of the total projected costs, it must supply the Commission with enough evidence to support a finding that the costs are just and reasonable in the absence of thorough, detailed, and meaningful evidence, the Commission s hands are tied. 7 The fact that, in its initial brief in this case, DTE did not even attempt to present an affirmative case that River Rouge is economic to continue operating just crystallizes the point that DTE has not met its burden in this proceeding under the directives outlined above. Therefore, and for the reasons stated in MEC-NRDC-SC s initial brief, the Commission should not reward DTE for disregarding the order in the last rate case. The Commission should deny the Company s request for rate recovery of historic 2017 and projected test year capital and maintenance expenditures on River Rouge. DTE raises two other issues related to this topic that require a brief response. The first is that MISO s permission is needed to retire units pursuant to the MISO Attachment Y process. 8 While this statement is partly true, the need for a MISO determination did not prevent DTE from performing a Net Present Value economic analysis for St. Clair Unit 4 9 and then ultimately filing an Attachment Y deactivation notice with MISO. 10 DTE could have but chose not to perform a similar economic analysis for River Rouge. In any event, the Commission has already rejected 6 Case No. U-16794, Final Order at 13 (June 7, 2012) (quoted in Case No. U-18014, Final Order at 8-9 (Jan. 31, 2017). 7 Id. 8 DTE initial brief at 18 n Ex. SC-40 (DTE s Net Present Value economic analysis for St. Clair Unit 4). 10 Warren Cross, 5 TR 328 (Mr. Warren testifying that DTE filed an Attachment Y notice with MISO for St. Clair Unit 4). 3

7 any implication that the requirement to engage in the MISO process prior to retirement supplants the need to evaluate the economics of continued operation in order to gain approval for rate recovery: The Commission also rejects DTE Electric s contention that it cannot simply shut Unit 3 down without MISO s permission. As MEC/NRDC/SC points out, The MISO discussion is a red herring, for several reasons That a utility analysis of the economics of a generating unit is a predicate to, rather than an end run around, the MISO approval process is shown by the fact that, as explained by Mr. Warren, the MISO process does not consider the economics to customers of the unit s continued operation versus retirement. Instead, MISO retirement approval considers potential impacts on grid reliability, including evaluation of mitigation measures. In other words, the MISO process pre-supposes that the utility has already undertaken an economic analysis of continued operation versus retirement of a generating unit. The MISO process does not prevent the utility from undertaking that analysis, nor dictate when to undertake that analysis. 11 The second issue requiring a brief response is the Company s objection to the Administrative Law Judge s (ALJ s) decision on MEC-NRDC-SC s motion to take official notice of certain testimony and exhibits from Consumers Energy s securitization case involving the Palisades nuclear plant. 12 The ALJ granted the motion and took official notice of the information. 13 The noticed information consists of Consumers projections of MISO Zone 7 capacity with and without the Palisades plant, and MEC-NRDC-SC discuss the information at 11 Case No. U-18014, Commission Final Order at 17 (Jan. 31, 2017). 12 DTE Initial Brief at 9; the Palisades case is Case No. U Hearing on Mot. for Official Notice, 10 TR

8 pages of our initial brief. This information is relevant to the current state of reliability in Zone 7 about which DTE has raised its concerns. The important item to point out here regarding this topic is that while the ALJ granted MEC-NRDC-SC s motion, he also specifically allowed DTE to file a response to the information by November 17, That date has now come and gone without DTE filing any such response. In its initial brief, DTE states that it excepts to the ruling to take official notice of various months of old [sic] Consumers Energy testimony and exhibits from Case No. U and preserves its appellate rights. 15 However, the arguments in DTE s initial brief on the motion for official notice must be viewed in light of the fact that DTE had the option to submit a response to the information, but chose not to do so. And the Commission must view DTE s arguments on the merits of the reliability issue in the light that the noticed information from the Consumers case now stands unrebutted in this record. III. REPLY TO DTE AND STAFF REGARDING FOSSIL GENERATION OPERATIONS AND MAINTENANCE EXPENSE As discussed in MEC-NRDC-SC s initial brief, DTE s decision to retire St. Clair Unit 4 resulted in a $1.4 million reduction in forecasted Fossil Generation O&M expense that was not recognized in any updated DTE testimony or exhibits. 16 To its credit, DTE acknowledges this change in its initial brief. 17 However, the Company is only conceding a reduction of $ Id. at DTE Initial Brief at MEC-NRDC-SC Initial Brief at DTE Initial Brief at 53. 5

9 million, on the theory that the reduction should only reflect ten months of 2018 rather than the whole test year. 18 The Commission should reject this attempt to claw back $200,000 of the $1.4 million reduction in O&M expense. DTE decided to retire St. Clair Unit 4 in July four months before the start of the test year on November 1, When asked why DTE did not want the Commission to give effect to the reduction until 2018, DTE witness Warren offered no clear answer, stating only: This is around the activities associated with the operations and maintaining of the unit. So we these activities are primarily around the maintenance of a unit, activities that we still have to perform some of them as common to the unit. 19 Further, Staff also recommends the full $1.4 million reduction for St. Clair Unit In addition to St. Clair Unit 4, MEC-NRDC-SC support Staff s proposed reduction of $3,580,000 reduction in Fossil Generation O&M expense due to inflation adjustments. 21 And MEC-NRDC-SC continue to support a reduction in River Rouge O&M expense, as detailed in our initial brief at pages IV. REPLY TO DTE AND STAFF REGARDING FIXED MONTHLY SERVICE CHARGES In MEC-NRDC-SC s initial brief, we explained that this is the third consecutive case in which DTE has sought to increase its fixed monthly service charge for residential customers. 22 MEC-NRDC-SC further explained that in each of the two prior cases U and U Id. at Warren Cross, 5 TR Staff Initial Brief at Id. 22 MEC-NRDC-SC Initial Brief at

10 the Commission rejected DTE s proposal to classify a portion of distribution system cost as customer-related and include them in the fixed charge. 23 Instead, the Commission held that DTE could only include the marginal costs associated with attaching a customer to the system in the fixed charge. 24 Undeterred, DTE once again seeks to increase the residential fixed charge from $7.50 to $9.00 by classifying fixed distribution costs as customer-related and including them in the charge. In its initial brief, DTE makes the same arguments that the Commission has rejected twice before. In essence, the Company asserts that distribution system costs are sized to demand, and once installed, are fixed; and that the monthly service charge should be used as a proxy for a demand charge to collect demand-related fixed costs from residential and small commercial customers. 25 On cross exam, DTE s cost-of-service witness Thomas Lacey acknowledged that he was aware of the Commission s rulings on this issue; and acknowledged that the Commission had rejected his argument in two gas cases as well as the electric cases mentioned above. 26 Searching for a new rationale to justify its continued re-litigation of this issue, DTE turns in its initial brief to the National Association of Regulatory Utility Commissioners Electric Utility Cost Allocation Manual ( NARUC Manual ), stating that it classifies both distribution plant and equipment as demand-related, customer-related, or a combination of those two (and not energy related) Id; see also, Case No. U-17767, Final Order at 119 (Dec. 11, 2015); Case No. U-18014, Final Order at 110 (Jan. 31, 2017). 24 Id. 25 DTE Initial Brief at Lacey Cross, 7 TR DTE Initial Brief at 87; Ex.A-31 (NARUC Manual). 7

11 But the Company s resort to the NARUC Manual is also unavailing. First, nowhere does the Manual state that fixed charge should include costs which are demand-related (or a combination of demand-related and customer-related). Second, as discussed above and in MEC- NRDC-SC s initial brief, the Commission has ruled that utilities should only include customerrelated marginal costs in the demand charge not costs that are a combination of demand-related and customer-related. Table 6-1 of the NARUC Manual, which classifies distribution plant, lists only services, meters, installations on customer premises, and leased property on customer premises as being solely customer-related. 28 Table 6-2, which classifies distribution expenses, lists only meter expenses, customer installation expenses, and meter maintenance expenses as being solely customer-related. 29 Third, the Commission has already ruled that the NARUC Manual likewise supports using only the marginal costs of customer attachment in developing a customer charge. 30 Lastly, DTE mentions in a footnote that the Brattle Group survey of utility fixed charges found that the Omaha Public Power District will collect 100% of its fixed distribution costs in its customer charge. 31 As explained in MEC-NRDC-SC s initial brief, DTE has given no reason why the Commission should assign one small utility in Nebraska out of 25 utilities that Brattle surveyed such outsize importance to the determination of this question. If anything, the fact that the Company had to reach so far to find a utility approach that supported its position shows the true weakness of DTE s position. Further, even if Omaha Public Power was important to the 28 Ex. A-31 at 98 (NARUC Manual at 87). 29 Id. at 99 (NARUC Manual at 88). 30 Case No. U-18014, Final Order at 107 (Jan. 31, 2017). The reference for the Commission s statement is page 144 of the NARUC Manual (p. 160 of Ex. A-31). 31 DTE Initial Brief at 87 n.85. The Brattle Group survey is Ex. NRD-4. 8

12 determination of this issue for some reason, Tables 1 and 2 of the Brattle report show that only customer-related costs are included in Omaha s fixed charge, and that capacity or demandrelated costs are not. 32 Finally, Staff continues to support its more modest proposed increase in the fixed charge from $7.50 to $8.00 per month. As discussed in MEC-NRDC-SC s initial brief, the Commission should reject Staff s proposed increase. 33 First, Staff s witness Charles Putnam provided no justification for rounding up from his calculation of customer-related costs of $7.92 to the proposed charge of $8.00. Second, customers in multi-family housing who do not require an individual service drop have customer-related costs of only $6.96 per customer per month lower than the current charge. 34 Third, the Commission has previously recognized negative effects of raising service charges such as making energy efficiency investments less economic and disproportionately harming customers who use less energy and/or have lower incomes. 35 Fourth, the charge was just raised in DTE s last rate case, less than one year ago, and the effect of repeated small increases is no different than the effect of a single large increase. In a circumstance where Staff s proposal is a round-up, where customers in multi-family housing already pay more in service charge than their customer-related costs, where raising the service charge has negative social impacts, and where the charge was just raised in the last case, the most prudent course is to defer consideration of any additional increases to the next case at least. 32 Ex. NRD-4 at 11, 12 (Brattle Group Survey at 4, 5). 33 MEC-NRDC-SC Initial Brief at Wallach Direct, 8 TR Case No. U-17767, Commission Order at (Dec. 11, 2015). 9

13 V. REPLY TO DTE REGARDING SUMMER ON-PEAK RATES As explained in MEC-NRDC-SC s initial brief, rates are statutorily required to reflect the cost of service. 36 In this case, MEC-NRDC-SC Witness Douglas Jester evaluated whether DTE s primary residential rate, D1, reflects the cost of providing service to customers within the residential class. 37 In particular, Mr. Jester performed regression analyses of data from DTE s cost of service study that showed that the allocation of production plant costs does not align with costs to serve and as a result leads to intra-class subsidization and fails to send accurate price signals. 38 Most problematically, Rate D1 sends virtually no price signal to residential customers that using electricity during summer afternoons is a major driver of utility costs, and provides no incentive to adjust usage in response. Based on the regressions, Mr. Jester recommended that production plant capacity costs should be allocated to customers based on their summer on-peak energy usage. 39 That rate design that most accurately aligns customer charges with cost causation and provides an appropriate price signal to customers to reduce usage on summer weekday afternoons. 40 Doing so could lower customer bills in the long run. 41 Staff also recommended changes to rate design that are consistent with Mr. Jester s recommendations though for different reasons. Staff Witness Nicholas Revere recommended that DTE collect capacity-related costs under Section 6w(3) of Public Act 341 of 2016 through summer on-peak kwh charges. 42 While MEC-NRDC-SC s initial brief noted that there are some 36 MEC-NRDC-SC Initial Brief at 82; see also, MCL (1). 37 Jester Direct, 8 TR Id. at 1536, MEC-NRDC-SC Initial Brief at Jester Direct, 8 TR Id. 42 Revere Direct, 9 TR 2240 et seq. 10

14 differences between Mr. Jester s proposal and Mr. Revere s proposal, both recommendations would better align the collection of capacity costs with a customer s share of responsibility for those costs. In its initial brief, DTE objects to both sets of recommendations but focuses most of its argument on Staff. 43 DTE argues that the Commission should reject Staff s residential rate design because it would fundamentally change how capacity costs are recovered from customers, without any sound basis for the changes or consideration of the consequences. 44 DTE states that Staff s recommendation would significantly increase rates during the summer on-peak period. 45 DTE then argues that despite this dramatic pricing change, Staff assumes without analysis or any other basis that customers summer on-peak usage will equal historic usage, rather than customers altering their usage in accordance with price signals with a potential impact on the Company s revenue recovery. 46 DTE asserts that Staff provides no analysis or testimony regarding customer satisfaction (which could be expected to diminish) or how its proposal would impact customers financially. 47 In a footnote, DTE then adopts the same arguments in response to MEC-NRDC-SC Witness Jester s recommendations. 48 And DTE makes a similar argument with respect to secondary commercial rates. 49 As already discussed in MEC-NRDC-SC s initial brief, however, none of these arguments warrant rejection of the recommendation to shift production cost recovery into 43 DTE Initial Brief at Id. at Id. 46 Id. at Id. at Id. at 109 n DTE Initial Brief at

15 summer on-peak usage. First, DTE s assertion that the Revere and Jester recommendations will result in higher summer prices is true, and also the point of the recommendations. Since summer on-peak use is the largest cause of production-related costs, cost causation requires the recovery of more production-related costs through summer on-peak rates. Otherwise, off-peak use subsidizes on-peak use which is the opposite of aligning rates with costs to serve. Second, DTE has not provided any evidence to support its claim that a revenue deficiency would result from adopting such an increase. The testimonies cited in DTE s initial brief on this point are merely unsupported predictions by Company witnesses. 50 The recommendations are intended to be revenue-neutral overall. Further, Mr. Jester s analysis is based on the Company s cost of service study, including its estimates of production costs. To the extent customers reduce summer energy usage in response to the rates, the Company s capacityrelated costs will also be reduced. And even if a revenue deficiency did result, DTE could file a new rate case supported by data documenting any such impact and requesting appropriate rate relief. Finally, as discussed in more detail in MEC-NRDC-SC s initial brief, to the extent that the recommendations result in price signals that promote energy efficiency and reduce costs, those are positive outcomes consistent with Commission objectives. 51 Third, DTE has also provided no evidence for its assertion that customer satisfaction would diminish under the proposed rate, again resorting only to an unsupported prediction by one of its witnesses. 52 As Mr. Jester pointed out, shifting recovery of capacity-related costs to summer peak would enable customers to have greater control over their bills than they by and 50 Williams Rebuttal, 8 TR ; Bloch Rebuttal, 9 TR ; Holmes Rebuttal, 8 TR ; Stanczak Rebuttal, 5 TR MEC-NRDC-SC Initial Brief at (discussing Case No. U-17689, Order at (June 15, 2015)). 52 Williams Rebuttal, 8 TR

16 large have had before. 53 And based on his regression analyses, modifying rates in this way would reduce the current over-charging of low-usage customers, relative to the cost of serving them. 54 In sum, evidence from both Staff and MEC-NRDC-SC demonstrates that DTE s current default residential rate does not align the recovery of production or capacity-related costs with cost causation. The recommendation to shift recovery of these costs to summer peak usage would provide better price signals and would better ensure cost-of-service rates goals that have been expressed by the Commission, Consumers Energy, and DTE since at least the 2015 cost of service cases, U and U It is past time to get serious about moving tangibly in this direction. VI. REPLY TO DTE AND STAFF REGARDING LOW-INCOME CUSTOMER ISSUES In our initial brief, MEC-NRDC-SC explained that DTE has a large number of low income residential customers, and that while the Company maintains several programs intended to assist them, these programs are insufficient to the scale of the problem: tens of thousands of these customers continue to face payment troubles or shut-offs. 55 MEC-NRDC-SC further explained that raising residential rates will only exacerbate these problems; and that these issues also impose costs on DTE s other customers for collection activities, through an increased working capital requirement, and as uncollectible expense. 56 To address these issues, MEC-NRDC-SC Witness Roger Colton recommended that, as a condition of raising residential rates, the Commission should require DTE to add funding for 53 Jester Direct, 8 TR Id. at MEC-NRDC-SC Initial Brief at Id. at

17 energy usage reduction as a component of its bill affordability assistance programs. Based on testimony at the hearing, MEC-NRDC-SC refined this recommendation to focus on customers on deferred payment arrangements or DPAs, because these customers need help and fail at alarming rates but also show a willingness to enter into payment agreements with DTE. 57 In the alternative, MEC-NRDC-SC recommended that the Commission condition the residential rate increase on DTE amending its Energy Waste Reduction ( EWR ) plan to substantially increase low-income program funding and implement Mr. Colton s recommended measures. 58 MEC- NRDC-SC also recommended that the Commission lift the cap on DTE s most effective bill credit, the Low-Income Assistance ( LIA ) credit of $40 per month. 59 At the hearing in this case, DTE s witnesses acknowledged the difficulties faced by the Company s low income customers and concurred that there was merit in some of Mr. Colton s recommendations. However, in its initial brief DTE opposes addressing these issues in the rate case, and argues that the Commission should consider them in an EWR case instead. 60 (This is ironic, since in DTE s EWR case it argues exactly the opposite as detailed below.) DTE also opposed lifting the participation cap for its LIA program. 61 For its part, Staff supported Mr. Colton s proposals on their merits, but also argued for their consideration in an EWR case. 62 The Commission should reject arguments in DTE s initial brief against providing more assistance to payment-troubled low-income customers. First, DTE s factual objections to Mr. Colton s recommendations mischaracterize the record in this case or are otherwise not well- 57 MEC-NRDC-SC Initial brief at 72 and Id. at Id. at DTE Initial Brief at Id. 62 Staff Initial Brief at

18 founded. Additionally, the Commission should address these issues at some level in this rate case because that is where the low-income bill assistance tariffs are approved and residential rates are increasing, and because that rate increase will exacerbate the existing problems. Further, the evidence in this case showed unequivocally that DTE s EWR programs are not designed or implemented to address bill affordability issues, or sufficient to the magnitude of the need. Finally, DTE s objections to lifting the cap on its most effective bill assistance program are not well-taken. 1. DTE s factual objections to witness Colton s recommendations are unavailing. DTE offers a scattershot collection of factual arguments against Mr. Colton s recommendations, but these arguments largely miss their mark. First, DTE argues that it already has a number of low-income programs built into its general rate structure MEC-NRDC-SC repeatedly acknowledged the veracity of this statement in our initial brief. 64 However, MEC- NRDC-SC also explained in detail why these existing programs are inadequate to the scale of the need. For one example, the hearing revealed that the LIA credit only helps about 27% of the 120,000 low-income customers who are far enough behind on their bills to require a DPA. 65 For another example, only 8% of the total number of low-income customers in payment trouble were even referred to energy efficiency assistance, and DTE does not keep data on how many of these were assisted in actually making energy efficiency improvements to their homes DTE Initial Brief at See MEC-NRDC-SC Initial Brief at 55, 63, 65 See MEC-NRDC-SC Initial Brief at Id. at 68; Colton Direct, 8 TR

19 DTE next argues that any additional funding would just place additional burdens on the rest of the Company s customers. 67 While any increase in any expense category would place some additional burden on the Company s customers, contextually this amount is relatively small. Mr. Colton s primary recommendation of $17.1 million in low-income energy usage reduction funding would represent about three-tenths of one percent of DTE s proposed $5 billion in total general rate revenue. 68 Mr. Colton s alternative recommendation of $4.5 million in additional EWR funding for the same purpose would represent less than one-tenth of one percent of DTE s proposed general rate revenue. And DTE agrees at least in principle that providing energy usage reduction assistance to DTE s payment-troubled low-income customers could reduce other general rate case expenses, such as credit and collection expense, uncollectibles, and working capital requirements. 69 Third, DTE claims that Mr. Colton is recommending program benefits for landlords with no benefits to low-income tenants. 70 However, this argument ignores the evidence in the record. It is true that DTE Witness Johnson s testimony regarding multi-family units assumes that all multi-family housing units are master-metered and/or that the landlord pays the tenants utility bills. 71 Yet, the Company acknowledged both in discovery responses and in Mr. Johnson s cross exam that it has no data on the number of multi-family housing units with tenants who are individually metered. 72 Mr. Johnson also said he did not know the specific number of individually-metered low-income multifamily units in which the landlord or building owner paid 67 DTE Initial Brief at Ex. A-14, Sched. F2 at 2:44, col. c. 69 See discussion of Mr. Stanczak s cross exam in MEC-NRDC-SC s initial brief at p DTE Initial Brief at 108 n Johnson Rebuttal, 7 TR 955; Johnson Cross, 7 TR Johnson Cross, 7 TR

20 the utility instead of the tenant; and he [didn t] know that any one is more prevalent than the other. 73 DTE cannot claim that a program would not benefit certain customers if it has no data from which to draw such a conclusion. Mr. Johnson s argument about landlord eligibility for low-income assistance is also irrelevant for low-income renters who pay their own utility bills. 74 Ownership of the property is not a prerequisite to qualification for energy-use reduction measures offered under DTE s Low-Income Self-Sufficiency ( LSP ) program, the only lowincome program under which DTE currently offers referrals to energy usage reduction measures. 75 Fourth, DTE argues that [t]he foundation for Mr. Colton s suggestion is also inaccurate and misleading. 76 However, the citations DTE provides to back this claim are either not responsive to Mr. Colton s suggestions, or not fully representative of the evidence in this case. For example, DTE claims that in Mr. Colton s testimony he estimated that the Company s lowincome pilot program reaches less than 7% of DTE s low-income customers. 77 That is an accurate statistic. DTE Witness Johnson stated on cross that the pilot reaches 32,000 electric customers and 35,000 electric and gas customers, and he agreed that Mr. Colton s estimate of DTE low-income customers in the mid-400,000 range was reasonable. 78 For another example, DTE claims that it created 163,451 low-income payment plans in While less than one-percent of LSP customers had their electric service disconnected due 73 Johnson Cross, 7 TR Johnson Rebuttal, 7 TR LSP eligibility is determined by household income and energy usage. Ex. SC-22 (Discovery Response MECNRDCSCDE-1.22). 76 DTE Initial Brief at Id. at 108 n Johnson Cross, 7 TR 978, ,

21 to nonpayment, of the other roughly 120,000 customers on DPAs who were not in LSP, at least 83,000 of them defaulted. 79 Or, in other words, less than one in three low-income customers outside the LSP program successfully completed their DPA. 80 It is hard to understand how DTE can claim these payment plans are addressing the problem when two-thirds of the customers in the largest category of those plans are failing out. As one last example, DTE cites the fact that 13% of those flagged as low income were disconnected between May and September of 2017 presumably as evidence that disconnects are not attributable to low-income customer energy burden. 81 However, as the hearing showed, this figure represents almost 8,000 low-income customers in only a four-month period. 82 As Mr. Colton explained, these disconnections have disruptive and sometimes tragic consequences for low-income families. 83 Given these types of consequences, it is hard to understand how DTE could point to 8,000 low-income customers being shut off of electric services in just four months as evidence that this is not a problem that needs addressing. 2. The Commission should consider Witness Colton s recommendations in this general rate case. Both DTE and Staff argue in their initial briefs for the consideration of Mr. Colton s recommendations in an EWR case rather than a general rate case. DTE states that adding an 79 Id. at Id. at DTE Initial Brief at 108 n Johnson Cross, 7 TR Colton Direct, 8 TR 1592 (citing NAACP, Environmental and Climate Justice Program, Lights Out in the Cold: Reforming Utility Shut-Off Practices As if Human Rights Matter (March 2017), 18

22 energy usage reduction component to DTE s bill affordability programs would be more appropriate for consideration in the Company s [EWR] program. 84 Staff s position is more nuanced. Staff supports the merits of Mr. Colton s recommendations, calling them useful, comprehensive enhancements to the Company s treatment of the arrearage assistance for low-income customers. 85 Staff noted that DTE witness Stanczak acknowledged that a large population of their residential customers meet eligibility criteria for low-income residential rates and programs; and that while the Company has assistance programs, some low-income customers still have difficulty paying for their energy bills. 86 Staff also noted that Mr. Stanczak agreed that, in principle, there is more that the Company could be doing for low-income customers in terms of helping to reduce their energy use; and that reduced energy use by low-income customers can also benefit other Company customers by reducing expenses related to collections of overdue accounts and uncollectible losses. 87 Staff also stated its agreement with MEC-NRDC-SC that in order to effectively target low-income customers, coordinate bill-pay assistance and arrearage reduction programs, the Company must also incorporate programs designed to reduce customers energy bills on a goingforward basis. 88 All that said, Staff concludes that this rate case is not the proper forum to decide matters related to the structure of low-income programs designed to reduce energy usage. 89 Staff offers no citation to testimony, statute or precedent to support this statement it is apparently just a 84 DTE Initial Brief at Staff Initial Brief at Id. at 80 (citing Stanczak Cross, 5 TR ). 87 Id. (citing Stanczak Cross, 5 TR 204). 88 Id. (citing Colton ddirect, 8 TR 1585). 89 Id. 19

23 matter of Staff s opinion. However, unlike DTE, Staff goes on to recommend that the Commission acknowledge the value of Mr. Colton s recommendations regarding improving coordination of low-income bill payment assistance with energy use reduction programs, but indicate that these recommendations should be presented in DTE s EWR plan case. 90 Also, Staff requests that the Commission inform DTE Electric that it should explore low-income customers ability to effectively access EWR programs in its next EWR plan case. 91 While not necessarily dispositive of the issue, the ALJ should consider taking notice of the diametrically opposite positions that DTE and Staff have taken on Mr. Colton s recommendations in DTE s pending EWR plan case, Case No. U After arguing here that the Commission should only consider Mr. Colton s recommendations in an EWR case, DTE brazenly argues in its EWR case for the consideration of that Mr. Colton s recommendations only in a rate case. 93 By contrast, Staff submitted testimony in the EWR case recommending the adoption of Mr. Colton s suggestions Id. at Id. 92 Under Rule 428, R , the Commission and ALJ can take official notice of judicially cognizable facts and may take notice of general, technical, or scientific facts within the commission's specialized knowledge. 93 Case No. U-18262, DTE Witness Jason Kupser s Rebuttal Testimony at 6-7 (Doc. No. 0044, filed Nov. 20, 2017): Q. Do you believe it is appropriate that the EWR plan also be accountable for the delivery of energy usage reduction as described by [Staff] Witness Banks in the previous question? A. No. There are low-income programs that address affordability and credit and collections and other energy assistance programs designed to help low income customers avoid shut off and assist in payment of utility bills. These programs are all considered and approved as part of DTE Electric s general rate case and the design and costs recovery of these programs are determined in the general rate case. It appears that Witness Banks does not understand that under the utility regulatory ratemaking structure in Michigan, these programs are not part of the EWR programs or rate making cost recovery for EWR programs. The Michigan statutory structure related to EWR clearly excludes these programs from EWR proceedings, as they are reviewed and approved in 20

24 Irrespective of DTE s inconsistencies on this point, the Commission should take action on MEC-NRDC-SC s proposals in this case. As explained in MEC-NRDC-SC s initial brief, rates are being increased on low-income customers in this case. 95 These customers are already suffering high rates of arrearages and shut-offs that impact them and spread costs to other customers, and these costs are also recovered in general rates. Existing EWR programs are for the most part not designed or implemented to reduce arrearages and shut-offs. 96 So it is hard to fathom in a case where impacts to low-income customers will increase and the spillover costs will spread to other customers through general rates why DTE is urging the Commission to defer credible proposals to help these customers to another program that DTE claims is not designed for that purpose. Staff s good faith on this issue via its initial brief and its testimony in the EWR case is acknowledged. That said, it is worth pointing out one potentially serious limitation on Staff s recommendation to defer these issues to EWR. That limitation is a statutory restriction on the Commission s authority to impose changes on a utility in an EWR case a restriction that does not exist in a general rate case. Under Public Act 295 of 2008, as amended by Public Act 342 of 2016, the Commission can approve an EWR plan, approve it with changes consented to by the utility, or deny it. 97 Thus, in order for the Commission to require that low-income energy usage utility general rate cases. These programs as are fundamentally different, legislatively separated, procedurally separated, and funded separately. See also, Id. at 9: Witness Colton is trying to litigate matters in this case that are fundamentally different, legislatively separated, procedurally separated, and funded separately from EWR Plan programs. 94 Case No. U-18262, Staff Witness Brad Banks Direct Testimony at (Doc. No. 0041, filed Nov. 20, 2017). 95 MEC-NRDC-SC Initial Brief at Id. at 77-78; see also Exs. SC-29, SC-28, & SC MCL

25 reduction measure targeting payment-troubled customers be added to DTE s EWR plan, the Company would have to consent to it. No such limitation exists in this rate case. So either by requiring DTE to add Mr. Colton s recommendations to its low-income bill affordability programs and fund them through general rates, or by conditioning an increase in residential rates on the adoption of Mr. Colton s proposals at a specific funding level in DTE s EWR plan, it is prudent for the Commission to act now. 3. DTE s arguments against removing the LIA cap are unavailing. DTE proposes to remove the eligibility requirement for the LIA credit that customers must have been billed $1,700 or less over the last 12 months, 98 and MEC-NRDC-SC support this change. By itself, however, this change is not enough because DTE proposes to leave the 32,000 customer cap in place (though as an average and not a hard cap). As explained in MEC- NRDC-SC s initial brief, the Commission should remove this cap as 32,000 customers is a small fraction of the DTE customers who are eligible for the $40 per month credit, as well as a fraction of the low-income customers who are in payment trouble based on the DPA statistics. 99 Further, MEC-NRDC-SC s initial brief explained that in Case No. U-17767, the Commission rejected a proposed cap on DTE s other low-income credit program RIA and the cap on the LIA credit raises similar equitable concerns regarding who can participate and who cannot. 100 In its initial brief in this case, DTE objects to eliminating the cap on enrollment for LIA because according to the Company that could dramatically increase the funding requirement from its current level of $15.4 million per year (32,000 customers at $40 per month for DTE Initial Brief at MEC-NRDC-SC Initial Brief at Id. at and Case No. U-17767, Commission Order at (Dec. 11, 2015) (approving Rate D1.6). 22

26 months) to $233.8 million per year (487,000 customers at $40 per month for 12 months). 101 However, the record shows that DTE grossly overstates the likely cost increase due to eliminating the cap. DTE bases its objection to Mr. Colton s recommendation on the rebuttal testimony of Company witness Johnson. 102 Mr. Johnson estimated the cost of removing the cap by adopting Mr. Colton s low income customer base estimate of 487,000, then multiplying that number by $40 (the LIA bill credit) for 12 months. However, at the hearing Mr. Johnson recognized that a 100% subscription rate is unrealistic. During cross examination, when asked if he had any reason to believe that if the cap was lifted, that would result in the program being fully subscribed by all low income customers within the test year[,] he responded In the projected test year, no, I do not. 103 The Commission should not allow DTE to maintain the enrollment cap and exclude otherwise eligible customers from receiving assistance the Company recognizes they need. 101 DTE Initial Brief at Id. 103 Johnson Cross, 7 TR

27 VII. CONCLUSION For the reasons discussed in this reply brief, MEC-NRDC-SC reiterate the requests for relief enumerated in our initial brief. Respectfully submitted, OLSON, BZDOK & HOWARD, P.C. Counsel for MEC, NRDC and Sierra Club Date: November 28, 2017 By: Christopher M Bzdok (P53094) 420 E. Front St. Traverse City, MI Phone: 231/ ; Fax: 231/ chris@envlaw.com 24

28 STATE OF MICHIGAN MICHIGAN PUBLIC SERVICE COMMISSION In the matter of DTE ELECTRIC COMPANY for authority to increase its rates, amend its rate schedules and rules of governing the distribution and supply of electric energy, and for miscellaneous accounting authority. Case N o. U ALJ Mark D. Eyster PROOF OF SERVICE On the date below, an electronic copy of the Reply Brief of the Michigan Environmental Council, the Natural Resources Defense Council and Sierra Club was served on the following: Name/Party Administrative Law Judge Mark D. Eyster Counsel for DTE Electric Co. Michael J. Solo David S. Maquera Richard P. Middleton Jon P. Christindis Andrea Hayden Counsel for MPSC Staff Lauren D. Donofrio Michael J. Orris Heather Durian Counsel for the Kroger Company Kurt Boehm Jody Kyler Cohn Council for ABATE Robert A. W. Strong Michael J. Pattwell Sean P. Gallagher Stephen A. Campbell Constellation New Energy, Inc. Jennifer Utter Heston Energy Michigan, Inc. Timothy J. Lundgren Laura A. Chappelle Toni L. Newell Address eysterm@michigan.gov mpscfilings@dteenergy.com solom@dteenergy.com maquerad@dteenergy.com middeltonr@dteenergy.com christinidisj@dteenergy.com haydena@dteenergy.com donofriol@michigan.gov orrism@michigan.gov durianh@michigan.gov kboehm@bkllawfirm.com jklercohn@bkllawfirm.com rstrong@clarkhill.com mpattwell@clarkhill.com sgallagher@clarkhill.com scampbell@clarkhill.com jheston@fraselawfirm.com tjlundgren@varnumlaw.com lachappelle@varnumlaw.com tlnewell@varnumlaw.com

29 Michigan Cable Telecommunications Association David E. S. Marvin Michael S. Ashton Counsel for Local 223, Utility Workers Union of America, AFL-CIO John A. Canzano Patrick R. Rorai Counsel for Midwest Cogeneration Association John R. Liskey Patricia Sharkey Environmental Law & Policy Center Margrethe Kearney Bradly Klein Midwest Cogeneration Association Patricia F. Sharkey Counsel for Attorney General Michael Moody Counsel for Residential Consumer Group Don Keskey Brian W. Coyer Counsel for Michigan Waste Energy, Inc. d/b/a Detroit Renewable Power and Detroit Thermal, LLC Arthur J. LeVasseur The statements above are true to the best of my knowledge, information and belief. OLSON, BZDOK & HOWARD, P.C. Counsel for MEC-NRDC-SC Date: November 28, 2017 By: Karla Gerds, Legal Assistant Kimberly Flynn, Legal Assistant Marcia Randazzo, Legal Assistant 420 E. Front St. Traverse City, MI Phone: 231/ and and 2