Great Wolf Lodge of Traverse City Llc v. Pub. Serv. Comm'n

• Decision Date: 09 May 2011
• Docket Number: 139544,139542,Docket Nos. 139541,139545.
• Citation: 489 Mich. 27,799 N.W.2d 155
• Parties: GREAT WOLF LODGE OF TRAVERSE CITY, LLC, Plaintiff–Appellee,v.PUBLIC SERVICE COMMISSION, Defendant–Appellant,andCherryland Electric Cooperative, Defendant–Appellee.Great Wolf Lodge of Traverse City, LLC, Plaintiff–Appellee,v.Public Service Commission, Defendant–Appellee,andCherryland Electric Cooperative, Defendant–Appellant.
• Court: Michigan Supreme Court

489 Mich. 27

799 N.W.2d 155

GREAT WOLF LODGE OF TRAVERSE CITY, LLC, Plaintiff–Appellee,

v.PUBLIC SERVICE COMMISSION, Defendant–Appellant,andCherryland Electric Cooperative, Defendant–Appellee.Great Wolf Lodge of Traverse City, LLC, Plaintiff–Appellee,

v.Public Service Commission, Defendant–Appellee,andCherryland Electric Cooperative, Defendant–Appellant.

Docket Nos. 139541

139542

139544

139545.

Supreme Court of Michigan.

Argued Nov. 4, 2010.Decided May 9, 2011.

Clark Hill PLC (by Roderick S. Coy and Leland R. Rosier), Lansing, for petitioner.Bill Schuette, Attorney General, John J. Bursch, Solicitor General, and Steven D. Hughey, Vincent J. Leone, and Anne M. Uitvlugt, Assistant Attorneys General, for the Public Service Commission.Dickinson Wright PLLC (by Peter H. Ellsworth and Jeffery V. Stuckey), Lansing, Jim B. Weeks for the Michigan Municipal Electric Association.Clark Hill PLC (by Robert A. W. Strong), Birmingham, for the Association of Businesses Advocating Tariff Equity.Dykema Gossett PLLC (by Shaun M. Johnson and Joseph J. Baumann), Lansing, for the Michigan Electrical Cooperative Association. James A. Ault for Michigan Electric & Gas Association.

Opinion

MARILYN KELLY, J.

This case requires us to resolve three issues. First, whether a utility's right of first entitlement to provide electrical service to “the entire electric load on the premises” of a “customer” ceases when the “customer” on the property changes.¹ Second, whether the Public Service Commission (PSC) is required to impose interest on a refund it awards when it determines that a utility has overcharged a consumer. Third, whether the PSC is required to impose a fine whenever a utility “neglects” to comply with one of its orders.²

We conclude that a utility's right of first entitlement set forth in Rule 460.3411 (Rule 411) of the Michigan Administrative Code extends to the entire premises initially served. And the right is not extinguished when a customer is no longer present on the premises. We also conclude that the PSC is not required to impose interest on a refund it awards to an overcharged utility consumer. Finally, we hold that the PSC is required to impose a fine pursuant to MCL 460.558 only when a utility “wilfully or knowingly” neglects to comply with a PSC order. Therefore, we reverse the judgment of the Court of Appeals and reinstate the decision of the PSC.

FACTS AND PROCEDURAL HISTORY

Plaintiff, Great Wolf Lodge of Traverse City, LLC, owns a water-park resort on 48 acres near Traverse City. The resort sits on part of a 120–acre parcel once farmed by the Oleson family. On July 14, 2000, plaintiff entered into an option agreement to buy a portion of the property from GDO Investments (GDO), which acquired it after Mr. Oleson's death.

Defendant Cherryland Electric Cooperative claims that it provided electricity to the Oleson property beginning in the 1940s. Cherryland ran an electric line, known as a “service drop,” to the property. At one time or another over the years, Cherryland, Consumers Energy Company, and Traverse City Light & Power (TCLP) serviced farm buildings on the property.

After the last farming tenant vacated the premises in September 2001, the electricity was turned off. However, according to a GDO employee, GDO continued to pay a minimum monthly bill from Cherryland so that it had the option to have the electricity turned back on.

Later, when plaintiff was planning new construction on the property, it solicited bids for electric service from Cherryland, Consumers Energy, and TCLP. At that time, Cherryland did not claim that it had the sole right to provide electric service to the property. TCLP was the winning bidder, and in December 2001, plaintiff contracted with TCLP to provide electricity to its planned resort.

By January 2002, the farm buildings were scheduled to be demolished. GDO asked Cherryland to remove its service line so that the building it was attached to could be taken down. But Cherryland made it a condition for removing the service drop that it would be the electricity provider. Plaintiff claims that it agreed in order to keep the project on schedule. Thus, plaintiff asserts, Cherryland coerced it to rescind its contract with TCLP and contract with Cherryland to avoid construction delays, loss of revenue, or litigation.³

In May 2002, plaintiff entered into a three-year contract for electrical service with Cherryland. Under the contract's terms, Cherryland charged plaintiff $0.0496 a kilowatt-hour. This was the large resort service (LRS) rate set by the PSC. In February 2003, Cherryland applied to the PSC for formal approval to charge plaintiff the LRS rate.

This rate is available to consumers with a load factor greater than 50 percent and at least a 1500–kilowatt load. The application Cherryland signed recited these conditions. It also stated that, if plaintiff did not meet them, a different rate would apply. Shortly thereafter, in March 2003, plaintiff and Cherryland replaced their May 2002 contract with another that expressly provided for service at the LRS rate.

In July 2004, the PSC rejected Cherryland's application. It expressed concern that plaintiff was the only customer that Cherryland charged the LRS rate and questioned whether plaintiff's electrical needs were typical for a large resort. The PSC directed Cherryland to apply instead for a “special contract” to serve plaintiff. It also concluded that Cherryland had violated MCL 600.552 by implementing the LRS rate without PSC approval and fined Cherryland $10,000 pursuant to MCL 460.558. However, the PSC approved the LRS rate “for up to one year or until a special contract is approved.” ⁴

Plaintiff and Cherryland attempted to negotiate a special contract but were unable to reach an agreement. In August 2004, Cherryland filed an application with the PSC for approval of a special contract with plaintiff. The contract had not yet been agreed to, but Cherryland indicated that plaintiff was reviewing it. However, plaintiff intervened before the PSC and expressed concerns about the proposed special contract. According to plaintiff, it imposed unconscionable late charges and required plaintiff to forever bind itself to Cherryland. The PSC dismissed Cherryland's application in October 2004, indicating that it could be refiled once the parties reached an agreement. It also indicated that the parties could petition the PSC to resolve any disputes to the extent that the PSC had jurisdiction to hear those disputes.

In November 2004, Cherryland began unilaterally charging plaintiff for electricity at the large commercial and industrial (LCI) rate. Cherryland claimed that it made the change because plaintiff almost never used enough electricity to satisfy the minimum requirements of the LRS rate. Therefore, Cherryland feared that the PSC would again fine it for charging an improper rate.

In July 2005, plaintiff filed a two-count complaint against Cherryland in the PSC. Count I alleged that Cherryland had violated MCL 460.552 and the PSC's 2004 order by charging plaintiff the LCI rate rather than the LRS rate. Plaintiff sought a refund of the amounts that it had paid in excess of the LRS rate. Finally, plaintiff asked that the PSC fine Cherryland for violating its order and require Cherryland to stop charging plaintiff the LCI rate and return to the LRS rate. In count II, plaintiff asked the PSC to declare that plaintiff could receive all components of its electrical service from any provider of its choosing. Plaintiff also asked the PSC to order Cherryland to transfer its distribution facilities to any new provider chosen by plaintiff and to remove any unnecessary facilities on its property.

Cherryland moved for summary disposition. A hearing referee ruled for plaintiff on count I and for Cherryland on count II. The referee concluded that Cherryland's conduct was a “purposeful and flagrant violation” of the PSC's 2004 order. He determined that plaintiff was entitled to a refund of $72,550.16 plus interest and recommended that Cherryland be fined $44,250. Regarding count II, he agreed that plaintiff could choose its electric supplier, but added that no authority permitted plaintiff a full choice of providers for all components of its electric service.

The PSC agreed that plaintiff was entitled to summary disposition on count I and with the amount of the refund to which it was entitled. However, the PSC declined to impose a fine or interest on Cherryland. Although the PSC concluded that Cherryland “should have sought clarification” of its 2004 order, it stated that “Cherryland's interpretation of the July 22 order was not so clearly unreasonable as to justify the imposition of a fine or interest on the refund to [plaintiff].” ⁵ Finally, the PSC agreed with the hearing referee that count II should be dismissed.

The circuit court affirmed the PSC's order in large part. It concluded that plaintiff was an existing customer of Cherryland under Rule 411 because the property (the Oleson farm) was the customer, not the entity that owned the property. Therefore, Cherryland had the right to continue providing electric service to the property. However, the circuit court reversed the decision not to impose a fine and interest on Cherryland. It ruled that the language of the PSC's 2004 order was clear and unambiguous and concluded, contrary to the PSC, that Cherryland's misinterpretation of the order was clearly unreasonable.

Plaintiff and the PSC both appealed. The Court of Appeals consolidated the appeals and, in a published opinion, affirmed in part, reversed in part, and remanded to the PSC for further proceedings.⁶ The Court of Appeals affirmed the circuit court's ruling that the PSC was required to impose a fine and interest on Cherryland. However, the Court of Appeals concluded that plaintiff was free to choose its electric distributor if there was no customer governed by the restrictions of Rule 411. It held that the plain language...