Association of Businesses Advocating Tariff Equity v. Public Service Com'n
| Decision Date | 19 March 1996 |
| Docket Number | Docket Nos. 163930,165005 and 165713 |
| Citation | 548 N.W.2d 649,216 Mich.App. 8 |
| Parties | ASSOCIATION OF BUSINESSES ADVOCATING TARIFF EQUITY, Appellant, v. PUBLIC SERVICE COMMISSION, et al., Appellees (Two Cases). ATTORNEY GENERAL, Appellant, v. PUBLIC SERVICE COMMISSION, et al., Appellees. |
| Court | Court of Appeal of Michigan — District of US |
Frank J. Kelley, Attorney General, Thomas L. Casey, Solicitor General, and Luis F. Fernandez, Larry F. Brya, and Robert L. Mol, Assistant Attorneys General, for the Attorney General.
Don L. Keskey and Henry J. Boynton, Assistant Attorneys General, for the Public Service Commission.
Loomis, Ewert, Ederer, Parsley, Davis & Gotting, P.C. by William D. Parsley, Harvey J. Messing, and Gary L. Field, Lansing, and David A. Mikelonis and Jon R. Robinson, Jackson, for Consumers Power Company.
Conner & Bentley, P.C. by Pat D. Conner, Ann Arbor, and Robert C. Evans, Okemos, for Michigan Cogeneration Partners.
Foster, Swift, Collins & Smith, P.C. by Stephen O. Schultz and Steven H. Lasher, Lansing, for Midland Cogeneration Venture Limited Partnership.
Fraser Trebilcock Davis & Foster, P.C. by David E.S. Marvin and Thomas J. Waters, Lansing, for Dow Chemical Company, Grand River Equities, Indeck Energy Services of Otsego, Inc., and Michigan Power Limited Partnership.
Before MARILYN J. KELLY, P.J., and CORRIGAN and STEPHENS, * JJ.
This dispute began more than five years ago and now occupies over 19,000 pages of testimony and more than 500 exhibits presented at hearings before the Michigan Public Service Commission (MPSC). In Docket Nos. 163930 and 165713, appellant Association of Businesses Advocating Tariff Equity (ABATE) appeals from MPSC orders entered on March 31, 1993 and May 26, 1993 deciding issues on remand and denying rehearing, respectively. In Docket No. 165005, appellant Attorney General (AG) appeals from the same orders. We affirm.
In 1978, Congress enacted the National Energy Act, which was designed to combat the nationwide energy crisis. Part of the Act is known as the Public Utility Regulatory Policies Act. Section 210 of the Act, found at 16 U.S.C. § 824a-3, was designed to ease the crisis by encouraging the development of small power production facilities. Section 210(a) directed the Federal Energy Regulatory Commission to promulgate regulations requiring utilities to buy electricity from qualifying cogeneration and small power production facilities (QFs).
Under the Commission's regulations, particularly 18 C.F.R. § 292.304, utilities are required to purchase power from QFs at full "avoided cost." Avoided cost is the cost to a utility of energy or capacity, or both, which the utility would have generated for itself or purchased from another facility but for the purchase from the QF. Avoided cost is defined as either avoided energy or avoided capacity costs. The former is the cost associated with the production of energy. The latter is the cost associated with providing the capability to deliver energy.
The Midland Cogeneration Venture (MCV) is a limited partnership formed for the purpose of constructing and operating a gas-fired cogeneration plant. On September 10, 1987, MCV filed an application with the MPSC for approval of capacity charges in a contract for the sale of electricity to Consumers Power Company (CP). The MPSC docketed MCV's application as Case No. U-8871, and consolidated it with other applications from QFs and complaints against CP.
In an interim order issued on January 31, 1989, the MPSC made the finding that CP needed a QF capacity of 1,290 megawatts (MW), but reduced that figure out of caution to 1,160 MW. The MPSC based this figure on a projected 1997 need, as determined by a coal-fired plant model, called a proxy. The MPSC determined that CP was entitled to recover from ratepayers an avoided capacity rate of 3.77 cents per kilowatt hour (kWh). The payments would be backloaded, i.e., reduced at the beginning and increased at the end of the project. The MPSC gave CP ninety days to negotiate and sign contracts with its QFs.
In the appeals before us, CP, MCV, the AG, ABATE and other parties appealed as of right from the MPSC's series of orders. In Consumers Power Co. v. Public Service Comm. 1 (Consumers Power I ), this Court affirmed in part and reversed in part the MPSC's orders. We held that the MPSC properly exercised its authority acting pursuant to M.C.L. § 460.6j; M.S.A. § 22.13(6j). It appropriately determined the avoided capacity cost which could be passed on to ratepayers, the future capacity needs, the avoided costs using a hypothetical coal-fired facility and a rate structure. We found that clear and satisfactory evidence supported the use of a hypothetical coal-fired plant to determine CP's future avoided capacity costs.
We also found that the determination that 1,160 MW of new capacity would be needed in the future was supported by the evidence. We ruled that the avoided capacity charge adopted by the MPSC was supported by the evidence. We stated that the MPSC should deny approval of CP's contract with MCV only if the negotiated rate of 4.15 cents/kWh exceeded the avoided capacity cost when the agreement was signed. We then remanded the case to the MPSC for a determination of the avoided capacity cost on the date the contract was signed. We directed that the MPSC clarify whether all factors contained in 18 C.F.R. § 292.304(e) were considered in setting avoided cost.
In March, 1990, MCV began selling power under the unapproved 1987 contract with CP. CP filed a series of annual power supply cost recovery cases. In a temporary order dated December 21, 1989, the MPSC limited CP's power supply cost recovery charges to the backloaded QF rate established in Case No. U-8871. In Consumers Power Co. v. Public Service Comm., 2 this Court affirmed the temporary order. In a series of other orders, the MPSC limited CP's authorized charges to 3.77 cents/kWh, and allowed CP to charge only for energy actually delivered, not for all available capacity. Various parties appealed as of right.
In Consumers Power Co. v. Public Service Comm. No. 1, 3 this Court affirmed those orders. We held that the MPSC was not required to accept new evidence regarding the reasonableness and prudence of the capacity charges in the contract between CP and MCV. Rather, the MPSC was entitled to rely on evidence produced in Case No. U-8871, where those issues had been litigated.
Pursuant to the remand in Consumers Power I, supra, CP, ABATE and the MPSC staff filed a joint stipulation in a number of cases, including Case No. U-8871. The MPSC rejected the stipulation on the basis that it allowed CP to pick and choose among the findings in Case No. U-8871. Following the rejection of the stipulation, the MPSC instructed its staff to attempt to negotiate a settlement. On September 8, 1992, CP, the MPSC staff and several QFs filed a revised settlement proposal. The case was docketed as Case No. U-10127.
The MPSC held a contested case hearing in Case No. U-10127. The procedure was conducted pursuant to the MPSC's Rule 333, 1992 AACS R 460.17333. Rule 333 provides:
(1) All parties to proceedings before the commission are encouraged to enter into settlements when possible and the provisions of these rules shall not be construed in any way to prohibit settlements.
(2) The parties to a proceeding may agree upon some or all of the facts. The agreement shall be evidenced by a written stipulation filed with the commission or entered upon the record. The stipulation shall be regarded and used as evidence in the proceeding.
(3) When a written settlement agreement is proposed by some of the parties, it shall be served on all parties to the proceeding. Each party shall file and serve on all parties, within 14 days after being served, its agreement, objection, or nonobjection to the settlement agreement. Failure to respond in writing within 14 days, unless a different time is set by the presiding officer for good cause, shall constitute nonobjection to the settlement agreement. A party who objects to a settlement agreement shall state those objections with particularity and shall specify how it would be adversely affected by the settlement agreement.
(4) In every proceeding, the parties to the settlement agreement shall, upon request, submit a proposed order to the presiding officer.
(5) The commission may approve a settlement agreement if all of the following conditions are met:
(a) Any party that has not agreed to the settlement has signed a statement of nonobjection or has failed to object within the 14 days provided in subrule (3) of this rule, or such other time established by the presiding officer, or the objecting party or parties under subrule (3) have been given a reasonable opportunity to present evidence and arguments in opposition to the settlement agreement.
(b) The commission finds that the public interest is adequately represented by the parties who entered into the settlement agreement.
(c) The commission finds that the settlement agreement is in the public interest, represents a fair and reasonable resolution of the proceeding, and, if the settlement is contested, is supported by substantial evidence on the record as a whole.
(6) The nature and extent of the precedential value accorded an order approving a settlement agreement shall be as specified by the parties in the settlement agreement.
The MPSC granted CP's request to incorporate the record in Case No. U-8871. MCV filed a statement indicating that it did not object to the revised settlement proposal.
In an order entered on March 31, 1993, the MPSC approved the proposal...
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