Retail Wheeling Tariffs, In re
| Citation | 227 Mich.App. 442,575 N.W.2d 808 |
| Decision Date | 20 January 1998 |
| Docket Number | 189481,189396,187388,189503 and 189504,189480,Docket Nos. 187387,187397 |
| Parties | , Util. L. Rep. P 26,645 In re RETAIL WHEELING TARIFFS. In re APPROVAL OF EXPERIMENTAL RETAIL WHEELING TARIFFS. DETROIT EDISON COMPANY, Appellant/Cross-Appellee, and Attorney General, Appellee/Cross-Appellant, v. MICHIGAN PUBLIC SERVICE COMMISSION, Appellee/Cross-Appellant, and Dow Chemical Company, Michigan Electonic Cooperative Association, Association of Businesses Advocating Tariff Equity, and Consumers Power, Appellees. DOW CHEMICAL COMPANY, Appellant, v. MICHIGAN PUBLIC SERVICE COMMISSION, Attorney General, Association of Businesses Advocating Tariff Equity, Comsumers Power Company, and Detroit Edison Company, Appellees. CONSUMERS POWER COMPANY, Appellant, v. MICHIGAN PUBLIC SERVICE COMMISSION, Attorney General, Association of Businesses Advocating Tariff Equity, Detroit Edison Company, and Dow Chemical Company, Appellees. ASSOCIATION OF BUSINESSES ADVOCATING TARIFF EQUITY, Appellant, v. MICHIGAN PUBLIC SERVICE COMMISSION, Attorney General, Detroit Edison Company, consumers Power Company, and Dow Chemical Company, Appellees. |
| Court | Court of Appeal of Michigan (US) |
Frank J Kelley, Attorney General, Thomas L. Casey, Solicitor General, J. Peter Lark, Assistant in Charge, and Robert L. Mol, Assistant Attorney General, for Attorney General.
Foster, Swift, Collins & Smith, P.C. by Theodore W. Swift, William K. Fahey, and Stephen J. Rhodes, Lansing, and Christopher C. Nern, Thomas A. Hughes, and Raymond O. Sturdy, Jr., Detroit, for Detroit Edison Company.
Clark Hill, P.L.C. by Robert A.W. Strong and John M. Ketcham, Birmingham, for Association of Businesses Advocating Tariff Equity.
Don L. Keskey, David A. Voges, and Henry J. Boynton, Assistant Attorneys General, Lansing, for Public Service Commission.
Fraser Trebilcock Davis & Foster, P.C. by David E.S. Marvin and Michael S. Ashton, Lansing, for Dow Chemical Company.
David A. Mikelonis, Jon R. Robinson, H. Richard Chambers, and Kelly M. Hall, Jackson, for Consumers Power Company.
Clark Hill, P.L.C. by Robert A.W. Strong and John M. Ketcham, Birmingham, and Cleary, Gottlieb, Steen & Hamilton by Sara D. Schotland, Washington, DC, for Electricity Consumers Resource Council, the American Iron and Steel Institute, the Chemical Manufacturers Association, and the American Forest & Paper Association.
Before MICHAEL J. KELLY, P.J., and REILLY and JANSEN, JJ.
In these consolidated cases, appellants Detroit Edison Company, Dow Chemical Company, Consumers Power Company, and the Association of Businesses Advocating Tariff Equity (ABATE) claim appeals from an order entered on June 19, 1995, by the Michigan Public Service Commission establishing a framework for an experimental retail wheeling program for Edison and Consumers. The Attorney General has filed a claim of cross-appeal in Edison's appeal. We affirm in all respects.
In 1992, ABATE sought approval of an experimental retail wheeling tariff for Consumers. The term "retail wheeling" refers to a local utility's delivery of power to a customer, also referred to as an end-user, in its service territory. Retail wheeling differs from traditional, full service electric service in that the customer arranges for the purchase of its own power. That power is transmitted to the customer through the local utility's system. The entity that sells the power to the customer is known as a third-party provider.
A contested case hearing was held concerning the application, and on August 27, 1993, the hearing referee issued a proposal for decision. The hearing referee recommended that retail wheeling programs be allowed to go forward only if the customer's local utility voluntarily agreed to provide retail wheeling services. The hearing referee concluded that although the PSC's statutory authority to regulate electric service did not include the power to compel a utility to provide retail wheeling service, the PSC had the authority to approve rates, terms, and conditions of retail wheeling service. In addition the hearing referee rejected the contention that the PSC's authority over retail wheeling activities had been preempted by federal law.
In an interim order entered on April 11, 1994, the PSC addressed substantive issues and approved certain terms and conditions of an experimental retail wheeling program for customers located in the territories served by Consumers and Edison. The PSC reopened the record and remanded the case to thehearing referee for the limited purpose of determining rates and charges.
The PSC concluded that existing state law allowed it to authorize the utilities' participation in a retail wheeling program. The PSC relied on the electric transmission act, 1909 P.A. 106, M.C.L. § 460.551 et seq.; M.S.A. § 22.151 et seq. (Act 106), the public service commission act, 1939 P.A. 3, M.C.L. § 460.1 et seq.; M.S.A. § 22.13(1) et seq. (Act 3), and the railroad commission act, 1909 P.A. 300, M.C.L. § 462.2 et seq.; M.S.A. § 22.21 et seq. (Act 300), which it found provides comprehensive authority to establish rates, terms, and conditions of retail service. The PSC concluded that approval of an experimental program would not intrude on a utility's authority to manage its operations related to power production and procurement.
The PSC rejected the assertion that its authority to implement an experimental retail wheeling program was preempted by federal law. Noting that the Federal Power Act (FPA), 16 U.S.C. § 791a et seq., administered by the Federal Energy Regulatory Commission (FERC), established the basis for federal authority over the transmission and wholesale sale of electric power in interstate commerce, the PSC concluded that while § 201(b)(1) of the FPA, 16 U.S.C. § 824(b)(1), provided for FERC jurisdiction over the transmission and sale of electric energy in interstate commerce and over all facilities for such transmission and sale, it did not give FERC jurisdiction over facilities used for generation of electric power or facilities used in local distribution or only for the transmission of electric energy in intrastate commerce. The PSC concluded that under this framework, the regulation of rates, terms, and conditions of retail electric service provided by a local utility to a customer within its territory was a function of local distribution. Furthermore, the PSC found that amendments of the FPA, added by the Energy Policy Act of 1992, further clarified the jurisdictional framework. Section 212(g), 16 U.S.C. § 824k(g), provides that no FERC order could be inconsistent with a state law governing the retail marketing areas of electric service. The PSC found that by enacting § 212(g), Congress intended that states would have the final word on whether a retail wheeling program would be authorized. Section 212(h), 16 U.S.C. § 824k(h), prohibits the FERC from issuing an order requiring the transmission of electric energy directly to an ultimate consumer. The PSC concluded that under § 212(h), the FERC could not mandate a retail wheeling program.
The PSC concluded that third-party providers engaging in sales of power to retail wheeling customers would be required to obtain a certificate of public convenience and necessity (CPCN) pursuant to 1929 P.A. 69 (Act 69), M.C.L. § 460.501 et seq.; M.S.A. § 22.141 et seq., before a transaction could occur. The PSC observed that the purpose of Act 69 was to determine that any duplication of services was in the public interest. The PSC rejected the assertion that the definition of "public utility" encompassed only entities with facilities located in Michigan.
The PSC concluded that a third-party provider would be required to obtain a franchise from the municipality in which the customer was located. The PSC based its conclusion on the language of Const. 1963, art. 7, § 29, which states that a party operating a public utility must obtain a franchise if it seeks to use the highways, streets, alleys, or other public places in themunicipality, or if it seeks to transact a local business within the municipality.
In a decision after remand entered on June 19, 1995, the PSC established rates and addressed issues raised on rehearing and during the remand phase. The PSC determined that the experiment should go forward under the framework established in the interim order and concluded that the various rate determinations, viewed individually or as a whole, were just and reasonable. The PSC specifically concluded that capacity reservation charges, which recover the costs of using the local utility's transmission and distribution facilities to provide retail delivery service, were to be calculated using an embedded-cost approach.
The PSC concluded that it did not err in holding that Act 69 and franchise requirements would apply to third-party providers during the retail wheeling experiment. The PSC rejected the assertion made on rehearing by ABATE and Dow that Nat'l Steel Corp. v. Public Service Comm., 204 Mich.App. 630, 516 N.W.2d 139 (1994), established that Act 69 did not apply to private, voluntary purchases involving one or only a few buyers. The PSC distinguished Nat'l Steel Corp., on the ground that in that case the customer, National Steel, owned the pipeline that was used to transport the gas. The provider was not a public utility. In addition, the PSC also rejected ABATE's attempt to analogize retail wheeling to the natural gas industry. The preexisting structure of the gas industry made unbundling of services easier, whereas competition in the electricity business could lead to wasteful duplication and uneconomic investment. Such risk would be addressed under Act 69. Recognizing that complying with Act 69 could pose practical difficulties,especially in the context of a limited experiment, the PSC determined that it...
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