In re Detroit Edison Application
| Decision Date | 03 July 2007 |
| Docket Number | Docket No. 264131.,Docket No. 264099.,Docket No. 264191.,Docket No. 264156.,Docket No. 259845. |
| Citation | 276 Mich. App. 216,740 N.W.2d 685 |
| Parties | In re APPLICATION of DETROIT EDISON Company. Attorney General, Appellant, v. Michigan Public Service Commission, Detroit Edison Co., and Constellation Newenergy, Inc., Appellees. In re Application of Detroit Edison Company. Detroit Edison Company, Appellant, v. Michigan Public Service Commission, Association of Businesses Advocating Tariff Equity, Michigan Environmental Council, Public Interest Research Group in Michigan, Constellation Newenergy, Inc., and Attorney General, Appellees. In re Application of Detroit Edison Company. Michigan Environmental Council and Public Interest Research Group, Appellants, v. Michigan Public Service Commission, Detroit Edison Co., and Constellation Newenergy, Inc., Appellees. In re Application of Detroit Edison Company. Association of Businesses Advocating Tariff Equity, Appellant, v. Michigan Public Service Commission, Detroit Edison Co., Energy Michigan, Inc., Constellation Newenergy, Inc., and Attorney General, Appellees. In re Application of Detroit Edison Company. Attorney General, Appellant, v. Michigan Public Service Commission, Detroit Edison Co., Energy Michigan, Inc., Constellation Newenergy, Inc., and Association of Businesses Advocating Tariff Equity, Appellees. |
| Court | Court of Appeal of Michigan — District of US |
Before: MARKEY, P.J., and SAAD and WILDER, JJ.
On June 20, 2003, the Detroit Edison Company (Edison) filed its application for an increase in its rate schedules that govern the distribution and supply of electric energy. The hearings before the Michigan Public Service Commission (PSC) were extensive.1 And, as the PSC noted, the proceedings before it were "among the most complex cases ever considered by the Commission."2 Indeed, as the PSC opined in its November 23, 2004, opinion and order, this case "affects not only the operations of the utility, but also the finances of over two million of its residential and business customers in ways that no proceeding brought before this agency has ever done."3
Many of the issues decided by the PSC in this rate case have not been appealed by any party,4 but those issues appealed by Edison, the Attorney General, the Michigan Environmental Council and the Public Interest Research Group in Michigan (MEC/PIRGIM), and the Association of Businesses Advocating Tariff Equity (ABATE), were fully explored at a special three-hour hearing before this Court on February 21, 2007, wherein all parties presented their respective positions.
In Docket Nos. 259845, 264099, 264131, and 265156, the Attorney General of Michigan (AG), Edison, MEC/PIRGIM, and ABATE appeal the PSC's November 23, 2004, order regarding Edison's application for a rate increase. In Docket No. 264191, the AG appeals from the PSC's order of June 30, 2005, granting in part and denying in part Edison's petition for rehearing. These appeals have been consolidated for purposes of hearing and decision. We affirm in part and reverse in part.
The Michigan Legislature enacted 2000 PA 141, the Customer Choice and Electricity Reliability Act (Act 141), MCL 460.10 et seq., as part of its decision to restructure and deregulate the electric utility industry in Michigan. Attorney General v. Pub. Service Comm., 249 Mich.App. 424, 426, 642 N.W.2d 691 (2002). Among other things, Act 141 reduced rates and imposed caps on the rates that an electric utility could charge its customers. MCL 460.10d provides in pertinent part:
(1) Except as otherwise provided under subsection (3) or unless otherwise reduced by the commission ... the commission shall establish the residential rates for each electric utility with 1,000,000 or more retail customers in this state as of May 1, 2000[5] that will result in a 5% rate reduction from the rates that were authorized or in effect on May 1, 2000. Notwithstanding any other provision of law or commission order, rates for each electric utility with 1,000,000 or more retail customers established under this subsection become effective on June 5, 2000 and remain in effect until December 31, 2003 and all other electric retail rates of an electric utility with 1,000,000 or more retail customers authorized or in effect as of May 1, 2000 shall remain in effect until December 31, 2003.
(2) On and after December 31, 2003, rates for an electric utility with 1,000,000 or more retail customers in this state as of May 1, 2000 shall not be increased until the earlier of December 31, 2013 or until the commission determines, after notice and hearing, that the utility meets the market test under [MCL 460.10f] and has completed the transmission expansion provided for in the plan required under [MCL 460.10v]. The rates for commercial or manufacturing customers of an electric utility with 1,000,000 or more retail customers with annual peak demands of less than 15 kilowatts shall not be increased before January 1, 2005. There shall be no cost shifting from customers with capped rates to customers without capped rates as a result of this section. In no event shall residential rates be increased before January 1, 2006 above the rates established under subsection (1).
Edison's rates had not been comprehensively reviewed and set by the PSC since 1994, before Act 141 was enacted. Because of an expressed need to increase its rates and in anticipation of the expiration of the Act 141 caps, on June 20, 2003, Edison filed an application for a general rate case to increase its rates6 and to implement a power supply cost recovery (PSCR)7 plan and five-year forecast. MCL 460.6j(18) permits an electric utility to conduct a PSCR proceeding in the context of a general rate case. Edison sought an increase in its rates on both an interim and a permanent basis, approval of a regulatory asset recovery surcharge, reinstatement of its PSCR clause, a determination of its stranded costs,8 implementation of a mitigation adjustment mechanism, approval of an earnings-sharing mechanism, termination of its securitization and transition charges for choice customers, and authorization to use excess securitization savings to recover stranded costs.
The PSC entered interim orders on December 18, 2003, and February 20, 2004, that required Edison to reinstate its PSCR clause as of January 1, 2004,9 and granted Edison interim relief in the amount of $248,430,000, respectively.
On November 23, 2004, the PSC granted in part and denied in part Edison's request for relief.10 In an order entered on June 30, 2005, the PSC granted Edison's petition for rehearing in part and denied it in part.11 The PSC reaffirmed its holdings regarding Edison's capital structure, rate base, and capitalization; denied Edison's request to include the control premium paid in the acquisition of MCN in Edison's rates; and reaffirmed its holdings regarding the adjustment for inflation of the base rate and the availability of the low-income and energy efficiency fund (LIEEF) for customers throughout the state. More specifically, regarding Edison's assertion that the PSC rejected its PSCR proposal pursuant to MCL 460.6j(18), the PSC concluded that it should treat Edison's request for PSCR reinstatement and establishment of a PSCR base as having been raised under MCL 460.6j(3) through (7), which provide for the filing of annual PSCR plan and reconciliation cases.
The standard of review for PSC orders is narrow and well-defined. Pursuant to MCL 462.25, all rates, fares, charges, classification and joint rates, regulations, practices, and services prescribed by the PSC are presumed, prima facie, to be lawful and reasonable. Michigan Consolidated Gas Co. v. Pub. Service Comm., 389 Mich. 624, 635-636, 209 N.W.2d 210 (1973). A party aggrieved by an order of the PSC has the burden of proving by clear and satisfactory evidence that the order is unlawful or unreasonable. MCL 462.26(8). To establish that a PSC order is unlawful, the appellant must show that the PSC failed to follow a mandatory statute or abused its discretion in the exercise of its judgment. In re MCI Telecom Complaint, 460 Mich. 396, 427, 596 N.W.2d 164 (1999). And, of course, an order is unreasonable if it is not supported by the evidence. Associated Truck Lines, Inc. v. Pub. Service Comm., 377 Mich. 259, 279, 140 N.W.2d 515 (1966). In sum, a final order of the PSC must be authorized by law and supported by competent, material, and substantial evidence on the whole record. Const. 1963, art. 6, § 28; Attorney General v. Pub. Service Comm., 165 Mich. App. 230, 235, 418 N.W.2d 660 (1987).
Consistently with the law regarding appellate review of an administrative agency's decisions, we give due deference to the PSC's administrative expertise and will not substitute our judgment for that of the PSC. Attorney General v. Pub. Service Comm. No. 2, 237 Mich.App. 82, 88, 602 N.W.2d 225 (1999). Importantly, we "give great weight to any reasonable construction of a regulatory scheme...
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