In re Application of Ind. Mich. Power Co. to Increase Rates
| Decision Date | 10 July 2012 |
| Docket Number | 299591.,Docket Nos. 299590 |
| Citation | 297 Mich.App. 332,824 N.W.2d 246 |
| Parties | In re APPLICATION OF INDIANA MICHIGAN POWER COMPANY TO INCREASE RATES. In re Application Of Consumers Energy Company To Increase Rates. |
| Court | Court of Appeal of Michigan — District of US |
OPINION TEXT STARTS HERE
Warner Norcross & Judd LLP, Lansing (by Richard J. Aaron), for Indiana Michigan Power Company.
Bill Schuette, Attorney General, and S. Peter Manning and Donald E. Erickson, Assistant Attorneys General, for the Attorney General in Indiana Michigan Power.
Bill Schuette, Attorney General, John J. Bursch, Solicitor General, and Steven D. Hughey and Anne M. Uitvlugt, Assistant Attorneys General, for the Public Service Commission in Indiana Michigan Power.
Jon R. Robinson, H. Richard Chambers, and Eric V. Luoma, Jackson, for Consumers Energy Company.
Bill Schuette, Attorney General, and S. Peter Manning, Michael E. Moody, and Donald E. Erickson, Assistant Attorneys General, for the Attorney General in Consumers Energy.
Bill Schuette, Attorney General, John J. Bursch, Solicitor General, and
Steven D. Hughey and Spencer A. Sattler, Assistant Attorneys General, for the Public Service Commission in Consumers Energy.
Before: FITZGERALD, P.J., and WILDER and MURRAY, JJ.
In Docket No. 299590, the Michigan Public Service Commission (“PSC” or “the Commission”) issued an order holding that Indiana Michigan Power Company (“Indiana Michigan”) could self-implement a temporary rate increase by applying different percentage increases to different base rates instead of applying equal-percentage increases to all base rates as provided for by MCL 460.6a(1). In Docket No. 299591, the PSC issued an order holding that Consumers Energy Company (“Consumers Energy”) could also self-implement a temporary rate increase using varying percentage increases for different base rates. The Attorney General appeals by right in both cases, arguing that equal-percentage increases for all base rates were required. We affirm.
MCL 460.6a(1) provides in relevant part:
A gas or electric utility shall not increase its rates and charges or alter, change, or amend any rate or rate schedules, the effect of which will be to increase the cost of services to its customers, without first receiving commission approval as provided in this section.... The commission shall notify the utility within 30 days of filing, whether the utility's petition or application is complete.... If the application is not complete, the commission shall notify the utility of all information necessary to make that filing complete. If the commission has not notified the utility within 30 days of whether the utility's petition or application is complete, the application is considered complete. If the commission has not issued an order within 180 days of the filing of a complete application, the utility may implement up to the amount of the proposed annual rate request through equal percentage increases or decreases applied to all base rates. For a petition or application pending before the commission prior to the effective date of the amendatory act that added this sentence, the 180–day period commences on the effective date of the amendatory act that added this sentence. If the utility uses projected costs and revenues for a future period in developing its requested rates and charges, the utility may not implement the equal percentage increases or decreases prior to the calendar date corresponding to the start of the projected 12–month period. For good cause, the commission may issue a temporary order preventing or delaying a utility from implementing its proposed rates or charges. If a utility implements increased rates or charges under this subsection before the commission issues a final order, that utility shall refund to customers, with interest, any portion of the total revenues collected through application of the equal percentage increase that exceed the total that would have been produced by the rates or charges subsequently ordered by the commission in its final order. [Emphasis added.]
This version of § 6a(1) was enacted by 2008 PA 286, which also added § 11(1), MCL 460.11(1). Section 11(1) provides:
This subsection applies beginning January 1, 2009. Except as otherwise provided in this subsection, the commission shall phase in electric rates equal to the cost of providing service to each customer class over a period of 5 years from the effective date of the amendatory act that added this section. If the commission determines that the rate impact on industrial metal melting customers will exceed the 2.5% limit in subsection (2), the commission may phase in cost-based rates for that class over a longer period. The cost of providing service to each customer class shall be based on the allocation of production-related and transmission costs based on using the 50–25–25 method of cost allocation. The commission may modify this method to better ensure rates are equal to the cost of service if this method does not result in a greater amount of production-related and transmission costs allocated to primary customers.
In these cases, the PSC determined that interim, self-implemented, equal-percentage increases would frustratethe phase-in of cost-based rates. Accordingly, it allowed for interim, self-implemented rate increases but required that they be of varying percentages for different base rates.
On January 27, 2010, Indiana Michigan filed an application seeking authority to amend its electric rates to increase annual jurisdictional operating revenues by approximately $62.5 million. Noting that a self-implemented rate increase could be applied as of July 26, 2010, in the absence of an order preventing or delaying self-implementation for good cause, the PSC issued an order on April 13, 2010, in which it determined that it needed information on the new rates before it could make a decision on such an order. It therefore directed Indiana Michigan to file the tariffs it proposed to implement during the interim period. Further, it required that a witness “support the reasonableness of the proposed tariffs and ... provide evidence regarding the effect of the statutory rate design option [i.e., equal percentage increases or decreases applied to all base rates] and reasonable alternatives thereto.” David M. Roush, the Director of Regulated Pricing and Analysis at Indiana Michigan's parent company, subsequently explained that Indiana Michigan was proposing to apply a surcharge rider to existing tariffs and rates that would apply as a percentage of the total monthly charges under the existing rates. With certain exclusions, the applicable percentage was to vary by tariff and would maintain the same relationships as the requested first-year rate increase. While this was inconsistent with § 6a(1), Roush noted that a uniform percentage increase would significantly raise the increases for some classes; he asserted that the proposed increases would be consistent with § 11(1).
The PSC adopted the alternative proposed by Roush. It noted that in a May 12, 2009 order in an unrelated case, In re Application of Consumers Energy Co. (PSC Case No. U–15645), 2009 WL 3517889, it had previously ruled as follows:
Public Act 286 of 2008 contains two conflicting sections (Section 6a(1) and Section 11(1)) regarding rate design which require reconciliation by the Commission. In the present filing, this conflict would result in a percentage increase for some rate classes that is greater than what Consumers proposes for its final rate structure, including rate classes that have been identified as having rates in excess of the cost of providing service. Although the Act provides for a refund of amounts charged that are greater than what is approved in the final order, the rate refund mechanism may not necessarily result in a refund that equals the amount of any overcharge for these identified rate classes. This result would be in direct conflict with the Commission's statutory mandate under Section 11(1). * * *
Statutes that relate to the same subject are in pari materia and are thus read together, even if each provision does not reference the other. Michigan Electric Cooperative Ass'n v. Public Service Comm., 267 Mich.App. 608, 616, 705 N.W.2d 709 (2005). The goal of statutory interpretation remains that of discerning and applying the Legislature's intent as expressed in the words of the statute. Id.
In reaching this conclusion, the Commission is mindful of its duty to the public interest. It thus understands Section 6a(1) as addressing situations in which existing rate classes are not subject to structural realignments of the kind explicitly required in Section 11(1). The Commission does not accept the conclusion that the Legislature intended to create a scheme in the statute to produce outcomes that, as ABATE suggests, could verge upon the absurd. This is illustrated by the present case, in which Consumers' proposal, as is, would produce volatile rate swings from existing rates to self-implemented rates to the rates implemented by the final order. It would require commercial and industrial customers to absorb millions of dollars in temporary rate hikes, with no apparent cost justification, at a time when Michigan's business climate is a matter of national focus. Such an outcome would be far removed from any reasonable person's conception of the public interest.
In the Indiana Michigan case, the PSC similarly concluded “that a rate change based on an equal percentage increase would lead to a result where [Indiana Michigan's] rates became more, rather than less, skewed.”
On January 22, 2010, Consumers Energy filed an application seeking authorization to increase its electric rates to produce additional revenues of approximately $178 million annually. The PSC again directed the utility to file the tariffs it proposed to self-implement and...
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