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 ENERGY COMPANY for ) approval of a power supply cost recovery plan and ) Case No. for approval of monthly power supply cost recovery ) factors for the year 2017. ) ) At the July 24, 2018 meeting of the Michigan Public Service Commission in Lansing, Michigan. PRESENT: Hon. Sally A. Talberg, Chairman Hon. Norman J. Saari, Commissioner Hon. Rachael A. Eubanks, Commissioner ORDER GRANTING REHEARING AND CLARIFICATION History of Proceedings On September 30, 2016, Consumers Energy Company (Consumers) filed an application, with supporting testimony and exhibits, requesting authority to implement a power supply cost recovery (PSCR) plan in its rate schedules for 2017 metered jurisdictional sales of electricity. In its application, Consumers initially requested approval of a uniform monthly maximum PSCR factor of $0.00124 per kilowatt hour for all classes of customers. A prehearing conference was held on November 30, 2016, before Administrative Law Judge Dennis W. Mack (ALJ). The ALJ granted petitions to intervene filed by Midland Cogeneration Venture Limited Partnership; the Association of Businesses Advocating Tariff Equity (ABATE); the Residential Customer Group (RCG); the Michigan Department of the Attorney General;
Michigan Power Limited Partnership/Ada Cogeneration Limited Partnership; and the Sierra Club/Michigan Environmental Council. The Commission Staff (Staff) also participated in the proceeding. On November 6, 2017, the ALJ issued a Proposal for Decision (PFD). ABATE and the RCG filed exceptions to the PFD on November 28, 2017, and Consumers filed replies to the exceptions on December 12, 2017. On February 5, 2018, the Commission issued its order (February 5 order) determining, in part, to disallow $1.7 million in costs associated with Consumers potential purchase of the Southeastern Michigan Gas Company (SEMCO) owned and operated lateral pipeline that supplies natural gas to Consumers Zeeland facility. On March 7, 2018, Consumers filed a petition for rehearing and clarification. Consumers questions a portion of the $1.7 million disallowance related to the Zeeland lateral pipeline. No party filed a response. In its petition, Consumers argues that the Commission misconstrued the contractual terms of the option to purchase the pipeline and that the disallowance of $1.7 million by the Commission pursuant to MCL 460.6j(13)(d) has the unintended consequence of disallowing demand charges that the utility pays SEMCO pursuant to a natural gas transportation contract. Consumers agrees that $1 million of the total was properly characterized as a capital cost and better suited for recovery in a general rate case, but that record evidence clearly demonstrates that the total purchase price includes a $700,000 demand charge for 2017. Consumers argues that the Commission typically allows for recovery of demand charges though the PSCR and that the Page 2
Commission should correct its findings in the February 5 order and make clear that the demand charge that it paid SEMCO in 2017 should be approved for recovery in the 2017 PSCR plan. 1 Discussion Mich Admin Code, R 792.10437(1) (Rule 437(1)) addresses petitions for rehearing and provides, in part, as follows: A petition for rehearing based on a claim of error shall specify all findings of fact and conclusions of law claimed to be erroneous with a brief statement of the basis of the error. A petition for rehearing based on a claim of newly discovered evidence, on facts or circumstances arising subsequent to the close of the record, or unintended consequences resulting from compliance with the decision or order shall specifically set forth the matters relied upon. Furthermore, [u]nless 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. January 31, 2017 order in Case No. U-17691, p. 8. In the instant proceeding, Consumers raises concerns over the last paragraph on page 16 of the February 5 order, which reads: Therefore, the $1.7 million for the purchase of the Zeeland lateral pipeline is disallowed from Consumers 2017 PSCR plan. Consumers ultimate recovery of the costs associated with the Zeeland pipeline, should it opt to extend the contract, will be addressed in its next PSCR reconciliation case. Consumers argues that disallowing $1.7 million for the purchase of the Zeeland lateral pipeline may result in the unintended consequence of disallowing the $700,000 demand charge for 2017 PSCR costs that was calculated as part the total purchase price. The Commission agrees. The contractual provision between Consumers and SEMCO for the delivery of gas to the Zeeland facility through the lateral pipeline allowed Consumers two options at the 1 On March 30, 2018, Consumers filed an application to reconcile its PSCR plan for the 12-month period ended December 31, 2017, in Case No. U-20068. Page 3
end of the five-year term concluding on December 31, 2017. Option A allowed Consumers to purchase the pipeline for $1 million Option B allowed Consumers to extend the contract for an additional five years. Regardless of which option Consumers chose, the contractual obligation to pay the demand charge of $700,000 for 2017 did not change. During the course of the 2017 PSCR plan case, it was uncertain which option Consumers would select. The RCG argued in its initial brief that Consumers should select Option A with the $1 million purchase and the $700,000 demand charge included as a 2017 PSCR cost. RCG brief, p. 11. The RCG further argued that Option B was unreasonable and imprudent and that any additional annual costs should be disallowed in PSCR plans. Id. p. 12. The ALJ disagreed with the RCG s arguments and found that the RCG failed to recognize the operation and maintenance costs associated with owning the lateral pipeline and ultimately determined the record devoid of any evidence that would require any expenses related to the pipeline, i.e. either for its purchase or the extension of the contract, be excluded from the 2017 PSCR plan. PFD p. 30. The Commission disagreed with the ALJ and determined that the entire $1.7 million be excluded as a capital cost better suited for recovery in a general rate case. However, the February 5 order also specifically provided that pipeline contract costs should be included in the 2017 PSCR plan. February 5 order, p. 15. Consumers eventually elected to extend the contract with SEMCO rather than purchase the pipeline. And although the Commission stated that the ultimate recovery of the costs associated with the Zeeland pipeline would be addressed in Consumers next PSCR reconciliation case Page 4
should the company opt to extend the contract, Consumers concerns over the inclusion of the $700,000 for the demand charge for 2017 in the total disallowance is warranted and the February 5 order should be clarified accordingly. THEREFORE, IT IS ORDERED that: A. Consumers Energy Company s petition for rehearing is granted. B. The Commission s February 5, 2018 order in this case is modified to clarify that the $700,000 demand charge associated with the Zeeland lateral pipeline is not disallowed from Consumers Energy Company s 2017 power supply cost recovery plan and that the associated costs may be addressed in the company s power supply cost recovery reconciliation case for the year ended 2017 in Case No. U-20068. Page 5
The Commission reserves jurisdiction and may issue further orders as necessary. 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. To comply with the Michigan Rules of Court s requirement to notify the Commission of an appeal, appellants shall send required notices to both the Commission s Executive Secretary and to the Commission s Legal Counsel. Electronic notifications should be sent to the Executive Secretary at mpscedockets@michigan.gov and to the Michigan Department of the Attorney General - Public Service Division at pungp1@michigan.gov. In lieu of electronic submissions, paper copies of such notifications may be sent to the Executive Secretary and the Attorney General - Public Service Division at 7109 W. Saginaw Hwy., Lansing, MI 48917. MICHIGAN PUBLIC SERVICE COMMISSION Sally A. Talberg, Chairman Norman J. Saari, Commissioner By its action of July 24, 2018. Rachael A. Eubanks, Commissioner Kavita Kale, Executive Secretary Page 6
P R O O F O F S E R V I C E STATE OF MICHIGAN ) Case No. County of Ingham ) Lisa Felice being duly sworn, deposes and says that on July 24, 2018 A.D. she electronically notified the attached list of this Commission Order via e-mail transmission, to the persons as shown on the attached service list (Listserv Distribution List). Subscribed and sworn to before me this 24th day of July 2018 Lisa Felice Angela P. Sanderson Notary Public, Shiawassee County, Michigan As acting in Eaton County My Commission Expires: May 21, 2024
Service List for Case: Name Amit T. Singh Anne Uitvlugt Brian W. Coyer Celeste R. Gill Christopher M. Bzdok Consumers Energy Company 1 of 2 Consumers Energy Company 2 of 2 David E.S. Marvin Dennis Mack Don L. Keskey Gary A. Gensch Jr. Jason T. Hanselman John A. Janiszewski Lydia Barbash-Riley Michael J. Pattwell Richard J. Aaron Robert A.W. Strong Robert W. Beach Sean P. Gallagher Stephen A. Campbell Theresa A.G. Staley Tracy Jane Andrews Email Address singha9@michigan.gov anne.uitvlugt@cmsenergy.com bwcoyer@publiclawresourcecenter.com gillc1@michigan.gov chris@envlaw.com mpsc.filings@cmsenergy.com matorrey@cmsenergy.com dmarvin@fraserlawfirm.com mackd2@michigan.gov donkeskey@publiclawresourcecenter.com gary.genschjr@cmsenergy.com jhanselman@dykema.com jjaniszewski@dykema.com lydia@envlaw.com mpattwell@clarkhill.com raaron@dykema.com rstrong@clarkhill.com robert.beach@cmsenergy.com sgallagher@clarkhill.com scampbell@clarkhill.com theresa.staley@cmsenergy.com tjandrews@envlaw.com