Ass'n of Bus. Advocating Tariff Equity v. Consumers Energy Co. (In re Consumers Energy Co.)
| Decision Date | 28 December 2017 |
| Docket Number | No. 330797,No. 330675, No. 330745,330675 |
| Citation | 322 Mich.App. 480,913 N.W.2d 406 |
| Parties | IN RE Application of CONSUMERS ENERGY COMPANY to Increase Rates. Association of Businesses Advocating Tariff Equity, Appellant, v. Consumers Energy Company, Petitioner–Appellee, and Michigan Public Service Commission, Michigan Cable Telecommunications Association, Michigan Environmental Council, Natural Resources Defense Council, and Hemlock Semiconductor Corporation, Appellees. In re Application of Consumers Energy Company to Increase Rates. Residential Customer Group and Michelle Rison, Appellants, v. Consumers Energy Company, Petitioner–Appellee, and Michigan Public Service Commission, Michigan Cable Telecommunications Association, Michigan Environmental Council, Natural Resources Defense Council, and Hemlock Semiconductor Corporation, Appellees. In re Application of Consumers Energy Company to Increase Rates. Attorney General, Plaintiff–Appellant, v. Consumers Energy Company, Defendant–Appellee, and Michigan Public Service Commission, Michigan Environmental Council, Natural Resources Defense Council, and Hemlock Semiconductor Corporation, Appellees. |
| Court | Court of Appeal of Michigan — District of US |
Clark Hill PLC (by Robert A. W. Strong, Michael J. Pattwell, and Sean Patrick Gallagher ) for the Association of Businesses Advocating Tariff Equity.
Public Law Resource Center PLLC (by Don L. Keskey and Brian W. Coyer ) for the Residential Customer Group and Michelle Rison.
Bill Schuette, Attorney General, Aaron D. Lindstrom, Solicitor General, Matthew Schneider, Chief Legal Counsel, B. Eric Restuccia, Deputy Solicitor General, and Steven D. Hughey, Spencer A. Sattler, and Lauren D. Donofrio, Assistant Attorneys General, for the Public Service Commission.
H. Richard Chambers, Bret A. Totoraitis, and Kelly M. Hall for Consumers Energy Company.
Bill Schuette, Attorney General, Aaron D. Lindstrom, Solicitor General, Matthew Schneider, Chief Legal Counsel, and John A. Janiszewski, Assistant Attorney General, for the Attorney General.
Before: Markey, P.J., and Ronayne Krause and Boonstra, JJ.
In these consolidated appeals, appellants the Association of Businesses Advocating Tariff Equity (ABATE) (Docket No. 330675), Residential Customer Group (RCG) and Michelle Rison (Docket No. 330745), and the Attorney General (Docket No. 330797) appeals a November 19, 2015 order of the Michigan Public Service Commission (PSC) approving a return on equity of 10.3% for appellee Consumers Energy Company and authorizing Consumers to continue its smart-meter program. For the reasons stated in this opinion, we affirm.
On December 5, 2014, Consumers filed an application to increase its rates for the sale of electricity. Consumers used a projected test year ending May 31, 2016, and stated that without rate relief it would experience an annual revenue deficiency of approximately $166 million. Consumers stated that its need for additional revenue was based on the following factors: (1) the purchase of a 450-megawatt natural gas plant to partially offset the projected capacity shortfall resulting from the retirement of seven coal plants in April 2016, (2) continuing investments in electric generation and distribution assets to comply with legal and environmental requirements, (3) continuing investments in electric generation and distribution assets to provide safe and reliable service, (4) ongoing investments in technology improvements, and (5) increased operating and maintenance expenses to improve reliability of service. Consumers sought approximately $166 million in rate increases and the authorization to produce a return on common equity (ROE) of 10.7%.
On June 4, 2015, Consumers self-implemented1 a rate increase of $110 million above its current rates. Consumers also eliminated a customer credit. The rate increase and the elimination of the credit raised Consumers' retail rates by $166 million.
The administrative law judge (ALJ) issued a proposal for decision (PFD) recommending that Consumers' overall rate of return be set at 6.09%, including an ROE of 10.00%. The ALJ noted that Consumers had requested a rate increase for various purposes, including continuing technology investments in its Advanced Metering Infrastructure (AMI) system,2 and concluded that recovery of the costs of the projected test year AMI investment should be allowed.
On November 19, 2015, the PSC, in a 2–1 decision, issued an order authorizing Consumers to raise its rates. The PSC rejected requests by the Attorney General and RCG to terminate the AMI program, reasoning as follows:
The Commission adopts the findings and recommendations of the ALJ. As the ALJ relates, the Commission has thoroughly vetted the underlying cost/benefit analyses and the AMI program itself and will not revisit those issues. See , November 2, 2009 and October 7, 2014 orders in Case No. U–15645; November 4, 2010 order in Case No. U–16191; June 7, 2012 order in Case No. U–16794; and June 28, 2013 order in Case No. U–17087. The AMI program is correctly characterized as a grid modernization program that cannot be replaced by renewable energy or energy efficiency measures. The Commission finds that no party provided evidence showing that conditions have changed such that the current rate base and depreciation treatment of these expenses should be changed. Consumers shall continue to provide cost/benefit analyses as long as the program is still in the implementation phase. The Commission approves Consumers' proposed test year expenditure, minus the contingency expenditure identified by the Staff.
The PSC reviewed the evidence and the parties' recommendations regarding Consumers' request for an ROE of 10.7%, noting that Consumers took the position that if the PSC did not approve an ROE of 10.7%, it should not set the rate lower than the current 10.3%. The PSC concluded:
The dissenting Commissioner concluded that approving an ROE of 10% was more reasonable given the record.
ABATE, RCG and Rison, and the Attorney General appealed the PSC's order. This Court consolidated the appeals for purposes of hearing and decision.
In In re Application of Consumers Energy Co. to Increase Electric Rates (On Remand) , 316 Mich.App. 231, 236; 891 N.W.2d 871 (2016), we explained that
The standard of review for PSC orders is narrow and well defined. Pursuant to MCL 462.25, all rates, fares, charges, classification and joint rates, regulations, practices, and services prescribed by the PSC are presumed, prima facie, to be lawful and reasonable. Mich. Consol. Gas Co. v. Pub. Serv. Comm. , 389 Mich. 624, 635–636, 209 N.W.2d 210 (1973). A party aggrieved by an order of the PSC has the burden of proving by clear and satisfactory evidence that the order is unlawful or unreasonable. MCL 462.26(8). To establish that a PSC order is unlawful, the appellant must show that the PSC failed to follow a mandatory statute or abused its discretion in the exercise of its judgment. In re MCI Telecom. Complaint , 460 Mich. 396, 427, 596 N.W.2d 164 (1999). An order is unreasonable if it is not supported by the evidence. Associated Truck Lines, Inc. v. Pub. Serv. Comm. , 377 Mich. 259, 279, 140 N.W.2d 515 (1966) [O’HARA, J., dissenting].
A final order of the PSC must be authorized by law and be supported by competent, material, and substantial evidence on the whole record. Const. 1963, art. 6, § 28 ; Attorney General v. Pub. Serv. Comm. , 165 Mich.App. 230, 235, 418 N.W.2d 660 (1987).
We give due deference to the PSC's administrative expertise and will not substitute our judgment for that of the PSC. Attorney General v. Pub. Serv. Comm. No. 2 , 237 Mich.App. 82, 88, 602 N.W.2d 225 (1999). We give respectful consideration to the PSC's construction of a statute that the PSC is empowered to execute, and this Court will not overrule that construction absent cogent reasons. In re Complaint of Rovas against SBC Mich. , 482 Mich. 90, 103, 108; 754 N.W.2d 259 (2008). If the language of a statute is vague or obscure, the PSC's construction serves as an aid in determining the legislative intent and will be given weight if it does not conflict with the language of the statute or the purpose of the Legislature. Id . at 103–104. However, the construction given to a statute by the PSC is not binding on us. Id . at 103. Whether the PSC exceeded the scope of its authority is a question of law that is reviewed de novo. In re Complaint of Pelland Against Ameritech Mich. , 254 Mich.App. 675, 682, 658 N.W.2d 849 (2003).
Appellants ABATE and the Attorney General argue that the PSC erred by approving an ROE of 10.3% for Consumers. They assert...
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