Consumers Power Co. v. PSC
| Decision Date | 29 June 1999 |
| Docket Number | Docket No. 111486,Docket No. 111487,Docket No. 111483,Docket No. 111719-111726,Docket No. 111482,Docket No. Calendar No. 11. |
| Citation | 460 Mich. 148,596 N.W.2d 126 |
| Parties | CONSUMERS POWER COMPANY, Plaintiff-Appellant, v. MICHIGAN PUBLIC SERVICE COMMISSION, Defendant-Appellee. The Detroit Edison Company, Plaintiff-Appellant, v. Michigan Public Service Commission, Defendant-Appellee. Detroit Edison Company, Plaintiff-Appellee, and Attorney General, Plaintiff-Appellant, v. Michigan Public Service Commission, Dow Chemical Company, Michigan Electric Cooperative Association, Association of Business Advocating Tariff Equity, and Consumers Power Company, Defendants-Appellees. Dow Chemical Company, Plaintiff-Appellee, and Attorney General, Plaintiff-Appellant, v. Michigan Public Service Commission, Dow Chemical Company, Association of Business Advocating Tariff Equity, Consumers Power Company, and Detroit Edison Company, Defendants-Appellees. Consumers Power Company, Plaintiff-Appellee, and Attorney General, Plaintiff-Appellant, v. Michigan Public Service Commission, Dow Chemical Company, Detroit Edison Company, Consumers Power Company, and Dow Chemical Company, Defendants-Appellees. Association of Businesses Advocating Tariff Equity, Plaintiff-Appellee, and Attorney General, Plaintiff-Appellant, v. Michigan Public Service Commission, Association of Business Advocating Tariff Equity, Detroit Edison Company and Dow Chemical Company, Defendants-Appellees. |
| Court | Michigan Supreme Court |
David A. Mikelonis, Jon R. Robinson, and H. Richard Chambers, Jackson, and Loomis, Ewert, Parsley, Davis & Gotting (by Harvey J. Messing and Gary L. Field), Lansing, for Consumers Energy Company.
Foster, Swift, Collins & Smith, P.C. (by William K. Fahey and Stephen J. Rhodes), Lansing, and Raymond O. Sturdy, Jr. and Bruce R. Maters, Detroit, for Detroit Edison Company.
Fraser, Trebilcock, Davis & Foster, P.C. (by David E.S. Marvin and Michael L. Brady), Lansing, for Dow Chemical Company.
Clark, Hill, P.L.C. (by Robert A.W. Strong), Birmingham, for Association of Businesses Advocating Tariff Equity.
Jennifer M. Granholm, Attorney General, Thomas L. Casey, Solicitor General, J. Peter Lark, Robert L. Mol [Special Litigation Division], David A. Voges, and Henry J. Boynton, Lansing, Assistant Attorneys General, for Michigan Public Service Commission.
Cleary, Gottlieb, Steen & Hamilton (by Sara D. Schotland), Washington, D.C., and Clark, Hill, P.L.C. (by Robert A.W. Strong), Birmingham, amici curiae, for Electric Consumers Resource Council, American Iron and Steel Institute, and Chemical Manufacturers Association.
We granted leave in these cases to determine whether defendant Michigan Public Service Commission (PSC) exceeded its statutory authority in ordering the Detroit Edison Company and Consumers Power Company to engage in "retail wheeling." We hold that the PSC lacks the authority to order retail wheeling. Therefore, we reverse the Court of Appeals and vacate the PSC order implementing the experimental retail wheeling program.
In 1992, the Association of Businesses Advocating Tariff Equity (ABATE) petitioned the PSC for an experimental retail wheeling program involving industrial customers. Under retail wheeling, the customer, or "end-user," contracts for electricity with a supplier other than the utility that owns the power lines in the geographic area in which the customer is located. The other supplier, or "third-party provider," uses the local utility's system to transmit the electricity to the end-user. The local utility is compensated for the use of its system.
Retail wheeling effectively "unbundles" a local utility's production and distribution services. Traditionally, a local utility provided a "bundled" product; it generated the electricity and transmitted it to end-users connected to its system of power lines. The industry has, however, undergone changes in recent years. Local utilities have interconnected with one another to form a nationwide grid. Thus, a utility can transmit electricity to an end-user who is not directly connected to its system. When a third-party provider supplies electricity to these end-users, the intermediate utilities are said to "wheel" electricity across their systems. A retail wheeling program requires local utilities to provide these transmission services.
Acting on ABATE's petition, a referee presided over a contested case hearing and issued a proposal for decision. The referee concluded that the PSC was not preempted by federal law from authorizing retail wheeling and that retail wheeling did not unconstitutionally impair contractual obligations. The referee further determined that, while a third-party provider need not obtain a municipal franchise under Const. 1963, art. 7, § 29, it must acquire a certificate of public convenience and necessity from the PSC under M.C.L. § 460.501 et seq.; MSA 22.141 et seq.
The referee recommended that the PSC allow retail wheeling only if the end-user's local utility agreed to provide the service. After examining the statutory framework, the referee concluded that the PSC cannot compel a utility to provide retail wheeling services, but may establish tariffs setting the price, terms, and conditions of a voluntarily provided service. The referee proposed that the PSC negotiate and authorize voluntary retail wheeling programs for Consumers Power and Detroit Edison.
The PSC rejected the referee's proposed decision, concluding that it may implement a retail wheeling program under the electric transmission act, 1909 P.A. 106 (Act 106),1 the public service commission act, 1939 P.A. 3 (Act 3),2 and the railroad commission act, 1909 P.A. 300 (Act 300).3 It reasoned that the program would not intrude on a utility's authority to manage its production and procurement operations. The PSC also rejected the utilities' assertion that federal law preempts states from implementing retail wheeling. It held, however, that third-party providers must obtain a franchise from the municipality in which an end-user is located, as well as a certificate of public convenience and necessity to supply the electricity. The PSC then remanded the case to the referee to determine rates and charges for retail delivery services.
The PSC established the rates and charges for retail delivery services in its decision after remand. After the PSC modified its order on rehearing, Detroit Edison, Consumers Power, and ABATE appealed. The Attorney General cross appealed.
The Court of Appeals affirmed the PSC order in all respects.4 It determined that the PSC has statutory authority to implement an experimental retail wheeling program, reasoning as follows:
While the PSC has only those powers conferred on it by the Legislature, [Union Carbide Corp. v. Public Service Comm., 431 Mich. 135, 146, 428 N.W.2d 322 (1988) ], the interpretation given to statutes by the agency charged with applying them is entitled to great deference. In re Quality of Service Standards for Regulated Telecommunication Services, 204 Mich.App. 607, 612, 516 N.W.2d 142 (1994). The PSC did not cite specific sections of Act 106, Act 3, or Act 300 when concluding that those statutes authorize it to implement an experimental retail wheeling program; however, an examination of various provisions of those statutes demonstrates that they support the PSC's decision. Section 2 of Act 106, M.C.L. § 460.552; MSA 22.152, gives the PSC "control and supervision of the business of transmitting and supplying electricity...." Supplying electricity must be deemed to include the act of delivering electricity to a customer. Section 6 of Act 106, M.C.L. § 460.556; MSA 22.156, allows the PSC to order service to be rendered in any case in which such an order is reasonable. Section 6 of Act 3, M.C.L. § 460.6; MSA 22.13(6), authorizes the PSC to regulate services and conditions of service. While this section does not contain a grant of specific powers, it construes the extent of the PSC's jurisdiction and grants the PSC broad authority. Attorney General v. Public Service Comm., 122 Mich.App. 777, 786-787, 333 N.W.2d 131 (1983). Under Act 300, the PSC possesses the same authority over utilities as did the Railroad Commission over railroads. Union Carbide, supra at 156, 428 N.W.2d 322. Section 22 of Act 300, M.C.L. § 462.22; MSA 22.41, authorizes the PSC to investigate and order adequate service to be rendered. [227 Mich.App. at 451-452, 575 N.W.2d 808.]
The Court further determined that the PSC order does not infringe the utilities' right to control their management activities. The Court reasoned that utilities are not required to construct new facilities, compelled to engage in a specific management practice, or required to enter into any particular contract. Thus, the Court concluded, the PSC order is lawful and reasonable because it does not dictate the substance of management decisions. The Court of Appeals rejected the parties' other challenges to the PSC order.
This Court granted plaintiffs Consumers Power Company, Detroit Edison Company, and the Attorney General their respective applications for leave to appeal, limited to whether the PSC exceeded its authority in ordering the electric utilities to transmit electricity produced and sold by other suppliers to customers in the service area of the utility.5
The Public Service Commission has no common-law powers. It possesses only that authority granted by the Legislature. Union Carbide, supra at 146, 428 N.W.2d 322. Moreover, this Court strictly construes the statutes which confer power on the PSC. As this Court explained in Union Carbide, supra at 151, 428 N.W.2d 322, quoting Mason Co. Civic Research Council v. Mason Co., 343 Mich. 313, 326-327, 72 N.W.2d 292 (1955):
"The power and authority to be exercised by boards or commissions must be conferred by clear and unmistakable language, since a doubtful power does not exist."
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