Attorney General v. PSC
| Decision Date | 19 October 2001 |
| Docket Number | Docket No. 232426.,Docket No. 231129 |
| Citation | 634 N.W.2d 710,247 Mich. App. 35 |
| Parties | ATTORNEY GENERAL, Appellant, v. Michigan PUBLIC SERVICE COMMISSION, Consumers Energy Company, Unicom Energy Company, Midland Cogeneration Venture Limited Partnership, Energy Michigan, Inc., and Chamber of Commerce, Appellees. Attorney General, Appellant, v. Michigan Public Service Commission, Consumers Energy Company, Unicom Energy, Inc., Midland Cogeneration Venture Limited Partnership, Energy Michigan, Inc., and Chamber of Commerce, Appellees. |
| Court | Court of Appeal of Michigan — District of US |
Jennifer M. Granholm, Attorney General, Thomas L. Casey, Solicitor General, and Theodore E. Hughes, J. Peter Lark, and Donald E. Erickson, Assistant Attorneys General, for the Attorney General.
Cummins Woods (by Thomas E. Woods, Special Assistant Attorney General), Lansing, for the Public Service Commission.
David A. Mikelonis, Jon R. Robinson, and John C. Shea, Jackson, for Consumers Energy Company.
Before NEFF, P.J., and O'CONNELL and R.J. DANHOF1, JJ.
In these consolidated cases, appellant Attorney General appeals as of right from financing orders entered by the Public Service Commission (PSC) pursuant to the Customer Choice and Electricity Reliability Act, M.C.L. § 460.10 et seq. We affirm in both cases.
In connection with the deregulation of the electric utility industry, the Customer Choice and Electricity Reliability Act mandated an immediate five percent reduction in electric rates in exchange for implementation of a plan to allow electric utilities to refinance certain amounts, identified as "qualified costs" in the act, through the issuance of low-interest securitization bonds. "Qualified costs" are defined by M.C.L. § 460.10h(g):
"Qualified costs" means an electric utility's regulatory assets as determined by the commission, adjusted by the applicable portion of related tax credits, plus any costs that the commission determines that the electric utility would be unlikely to collect in a competitive market, including, but not limited to, retail open access implementation costs and the costs of a commission approved restructuring, buyout or buy-down of a power purchase contract, together with the costs of issuing, supporting, and servicing securitization bonds and any costs of retiring and refunding the electric utility's existing debt and equity securities in connection with the issuance of securitization bonds. Qualified costs include taxes related to the recovery of securitization charges.
By statute, the five percent rate reduction must be funded entirely by the savings realized as a result of the refinancing of the qualified costs through the bond sale. MCL 460.10d(4). Any additional savings from securitization must also be applied toward further reductions in rates or charges. MCL 460.10d(4) and (5).
To facilitate the PSC's oversight of the process, the act requires PSC approval, through financing orders, of the evaluation of qualified costs and amount of the bonds. See, e.g., M.C.L. § 460.10i(1). In July 2000, Consumers Energy Company filed an application seeking a financing order authorizing the issuance of securitization bonds. After extensive hearings, the PSC issued the first financing order in this case on October 24, 2000, approving securitization of up to $468,592,000 of Consumers' qualified costs.
During the administrative proceedings, the Attorney General challenged Consumers' method of performing the calculation required by M.C.L. § 460.10i(1), arguing that a "cash flow" analysis was more appropriate than a "revenue requirements" approach. The PSC rejected this argument as inconsistent with the plain language of that section, which specifies that the calculation be based in part on the "net present value of the revenues to be collected under the financing order...." The PSC further found that the future income taxes that Consumers would have paid on the collected revenues could not be included in the qualified costs subject to securitization, but that such expenses were recoverable separately.
The Attorney General also argued that Consumers improperly included its Palisades Nuclear Power Plant as a regulatory asset subject to securitization. Rejecting this argument, the PSC noted that a significant portion of the utility's investment remained on the books, that the plant was an unlikely candidate for sale to another entity at or near its value, and that there was insufficient time for Consumers to recover its investment before deregulation occurred. The PSC concluded that its commitment to the full recovery of expenditures relating to nuclear power, coupled with the fact that Detroit Edison's similar Fermi II power plant had been previously designated a regulatory asset, compelled the conclusion that Consumers' Palisades plant be given the same classification.
As part of its proposal, Consumers also sought to recover the five percent reduction in rates since the June 5, 2000, effective date of the act. The PSC denied this proposal. After the financing order was issued, Consumers moved for rehearing on this issue, arguing that it should be allowed to recover the five percent rate reduction from the date of the financing order until the date of the sale of the bonds. Consumers also contended that the amount of the reduction should be considered a regulatory asset. The PSC agreed in part, stating that its intention was "that Consumers have an opportunity to recover from its securitization savings the full cost of the residential rate reduction beginning with the date that the financing order was issued." However, the PSC again declined to declare the lost revenues a regulatory asset, because such a declaration would imply that Consumers would be entitled to recover the full amount of the rate reduction retroactive to June 2000, contrary to the commission's October 24, 2000, order.
Pursuant to M.C.L. § 460.10i(8), we review the PSC's financing orders to determine whether they "conform[ ] to the constitution and laws of this state and the United States and [are] within the authority of the commission under th[e] act." Statutory interpretation presents a question of law that we review de novo. Adams Outdoor Advertising, Inc. v. Holland, 463 Mich. 675, 681, 625 N.W.2d 377 (2001). However, we afford "`due deference to the administrative expertise of the PSC'" and do not substitute our judgment for that of the commission. Attorney General v. Public Service Comm., 244 Mich. App. 401, 406, 625 N.W.2d 786 (2001), quoting Attorney General v. Public Service Comm., 231 Mich.App. 76, 78, 585 N.W.2d 310 (1998); see also Bagley Acquisition Corp. v. Detroit Edison Co., 229 Mich.App. 172, 174, 581 N.W.2d 286 (1998); City of Marshall v. Consumers Power Co. (On Remand), 206 Mich.App. 666, 676-677, 523 N.W.2d 483 (1994).
On appeal, the Attorney General argues that the PSC misapplied the formula set forth in M.C.L. § 460.10i(1) and erred in finding that the standard set forth in M.C.L. § 460.10i(2)(b) was met. Subsection 10i(1) provides:
Upon the application of an electric utility, if the commission finds that the net present value of the revenues to be collected under the financing order is less than the amount that would be recovered over the remaining life...
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