Consumers Energy Company v. Michigan Public Service Commission, No. 253316 (MI 9/13/2005)
| Decision Date | 13 September 2005 |
| Docket Number | No. 253316.,253316. |
| Parties | CONSUMERS ENERGY COMPANY, Appellant, v. MICHIGAN PUBLIC SERVICE COMMISSION, ENERGY MICHIGAN, INC., MIDLAND COGENERATION VENTURE LIMITED PARTNERSHIP, NATIONAL ENERGY MARKETERS ASSOCIATION, ATTORNEY GENERAL, ASSOCIATION OF BUSINESSES ADVOCATING TARIFF EQUITY, ADRIAN ENERGY ASSOCIATION, LLC, GENESEE POWER STATION LIMITED PARTNERSHIP, GRANGER ELECTRIC COMPANY, GRAYLING GENERATING STATION LIMITED PARTNERSHIP, HILLMAN POWER COMPANY, LLC, MICHIGAN COGENERATION SYSTEMS, INC., RIVERVIEW ENERGY SYSTEMS, SUMPTER ENERGY ASSOCIATION LIMITED PARTNERSHIP, VIKING ENERGY OF LINCOLN, INC., VIKING ENERGY OF McBAIN, INC., and CADILLAC RENEWABLE ENERGY, LLC, Appellees. |
| Court | Michigan Supreme Court |
Appeal from MPSC, LC No. 00-013380.
Before: Cooper, P.J., and Bandstra and Kelly, JJ.
Consumers Energy Company appeals as of right an opinion and order of the Public Service Commission regarding Consumers' application for determination of its net stranded costs for 2000 and 2001. We affirm in part, reverse in part, and remand for further proceedings.
This appeal involves two aspects of the PSC's decisions. First, Consumers challenges the PSC's conclusion that certain claimed costs for compliance with the federal Clean Air Act were statutorily required to be accrued and deferred for recovery rather than recovered as part of a recovery of net stranded costs for 2000 and 2001.
The second issue relates to competition in the provision of electric generation services in Michigan introduced through a retail open access (ROA) program. As background, in 2000, the Legislature enacted the Customer Choice and Electricity Reliability Act (the Act), 2000 PA 141 and 2000 PA 142, which authorized the establishment by the PSC of ROA programs under which retail electric customers could buy electric generation services from alternative suppliers as opposed to incumbent utilities such as Consumers. See generally Detroit Edison v Public Service Comm, 261 Mich App 448, 449-450; 683 NW2d 679 (2004). Essentially in connection with Consumers' ROA program and as contemplated by the Act, Consumers issued securitization bonds, with the PSC's authorization, to provide funding for certain costs and, correspondingly, assessed securitization charges to its retail electric customers. But the PSC directed in its order authorizing the bonds that Consumers' ROA customers, i.e., customers who selected an alternate electric supplier for electric generation services, were to receive a credit to offset their securitization charges. Consumers challenges the legality of the PSC's decision to continue this securitization offset for ROA customers.
The scope of appellate review of PSC orders is narrow. In re MCI Telecommunications Complaint, 255 Mich App 361, 365; 661 NW2d 611 (2003). Under MCL 462.26(8), a party challenging an order of the PSC has the burden of proving by clear and satisfactory evidence that the order is unlawful or unreasonable. Id. A PSC decision is unlawful when it involves an erroneous interpretation or application of the law. Id. An order is unreasonable if it is not supported by the evidence. Id. Also, a reviewing court should give due deference to the PSC's administrative expertise and should not substitute its judgment for that of the PSC. In re Michigan Cable Telecommunications Ass'n Complaint, 239 Mich App 686, 690; 609 NW2d 854 (2000).
Questions of statutory interpretation remain subject to de novo review. In re Michigan Cable, supra at 690. While courts should nevertheless give great weight to any reasonable construction by the PSC of a regulatory scheme that it is empowered to administer, Champion's Auto Ferry, Inc v Public Service Comm, 231 Mich App 699, 707-708; 588 NW2d 153 (1998), a court should not abandon or delegate its responsibility to determine legislative intent. Miller Bros v Public Service Comm, 180 Mich App 227, 232; 446 NW2d 640 (1989).
Consumers first argues that the PSC erred by excluding Clean Air Costs from the calculation of Consumers' stranded costs for 2000 and 2001. We disagree.
MCL 460.10d(4)1 provides:
Beginning January 1, 2004, annual return of and on capital expenditures in excess of depreciation levels incurred during and before the time period described in subsection (2), and expenses incurred as a result of changes in taxes, laws, or other state or federal governmental actions incurred by electric utilities during the period described in [MCL 460.10d(2)], shall be accrued and deferred for recovery. After notice and hearing, the commission [the PSC] shall determine the amount of reasonable and prudent costs, if any, to be recovered and the recovery period, which shall not exceed 5 years, and shall not commence until after the expiration of the period described in [MCL 460.10d(2)]. [Emphasis added.]
The term "shall" unambiguously denotes mandatory, rather than discretionary action. Roberts v Mecosta Co Gen Hosp, 466 Mich 57, 65; 642 NW2d 663 (2002). Accordingly, by the plain language of MCL 460.10d(4), Consumers' "capital expenditures in excess of depreciation levels" had to be accrued and deferred for recovery on or after January 1, 2004. It is undisputed that the Clean Air Act costs at issue were capital expenditures.2 Further, Consumers does not argue that those costs were not in excess of depreciation levels. Thus, it is manifest that the Clean Air Act costs at issue were subject to MCL 460.10d(4). It follows that, contrary to Consumers' position, those costs could not have been included in the calculation of stranded costs in the PSC order being appealed, which was entered in 2002, because MCL 460.10d(4) provides for the PSC's determination of the amounts of such costs in proceedings to begin on or after January 1, 2004. Because of this, the PSC was not obligated to determine the amount of Clean Air Act related capital expenditures attributable to 2000 and 2001 that would or might be eventually recoverable by Consumers under MCL 460.10d(4). Consumers' argument that the PSC allowed or would have allowed recovery of Clean Air Act costs of the type at issue in another case is simply immaterial.
Consumers contends that the PSC erred because its exclusion of capital expenditures for Clean Air Act costs was not limited to "generation-related capital expenditures in excess of depreciation" (emphasis added). But Consumer's position is inconsistent with the plain language of MCL 460.10d(4). The term "generation-related" does not appear in that statutory provision, but rather in relevant part it applies to all "capital expenditures in excess of depreciation," i.e., it encompasses capital expenditures regardless of whether they are "generation-related." Thus, we reject this argument as well.
In sum, given the plain language of MCL 460.10d(4), Consumers has not established any error based on the PSC's exclusion of the Clean Air Act costs at issue in its determination of Consumers' net stranded costs for 2000 and 2001.
Consumers next argues that the PSC erred in its continuation of a credit for ROA customers to offset the securitization charge imposed on those customers. We agree in part and disagree in part.
Contrary to the Attorney General's position, the doctrines of res judicata and collateral estoppel are inapplicable in this ratemaking context. The doctrine of res judicata "applies to quasi-judicial administrative decisions." Wayne Co v Detroit, 233 Mich App 275, 277; 590 NW2d 619 (1998). Similarly, the doctrine of collateral estoppel applies to "unappealed administrative determinations that are adjudicatory in nature and where . . . a method of appeal is provided." Champion's Auto Ferry, supra at 712 (emphasis added). In Pennwalt Corp v Public Service Comm, 166 Mich App 1, 7-9; 420 NW2d 156 (1988), this Court determined that the doctrines of res judicata and collateral estoppel were inapplicable to the fixing and regulating of rates by the PSC because this is a legislative function, not a judicial one.3 Thus, because the relevant determinations by the PSC regarding the securitization offset for ROA customers were part of its ratemaking function, i.e., they directly related to the overall rates to be paid by ROA customers, any prior determination of the matter by the PSC cannot be binding under the doctrines of res judicata and collateral estoppel.
Construction and application of MCL 460.10d(6)-(7)4 is critical to resolution of this issue. MCL 460.10d(6)-(7) provide:
(6) Except for savings assigned to the low-income and energy efficiency fund under subsection (7), securitization savings greater than those used to achieve the 5% rate reduction under subsection (1) [5] shall be allocated by the commission [the PSC] to further rate reductions or to reduce the level of any charges authorized by the commission to recover an electric utility's stranded costs. The commission shall allocate approved securitization, transition, stranded, and other related charges and credits in a manner that does not result in a reallocation of cost responsibility among the different customer classes.
(7) If securitization savings exceed the amount needed to achieve a 5% rate reduction for all customers, then, for a period of 6 years, 100% of the excess savings, up to 2% of the electric utility's commercial and industrial revenues, shall be allocated to the low-income and energy efficiency fund administered by the commission. The commission shall establish standards for the use of the fund to provide shut-off and other protection for low-income customers and to promote energy efficiency by all customer classes. The commission shall issue a report to the legislature and the...
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