S T A T E O F M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

Transcription

1 S T A T E O F M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter, on the Commission s own motion, ) to implement the provisions of Section 173(1) of ) Case No. U PA 295. ) ) ) In the matter, on the Commission s own motion, ) to promulgate rules governing interconnection and ) Case No. U net metering. ) ) ) In the matter, on the Commission s own motion, ) Case No. U to approve procedures and form for use with the ) interconnection and net metering programs. ) ) THE DETROIT EDISO COMPA Y, CO SUMERS E ERGY COMPA Y, MICHIGA ELECTRIC COOPERATIVE ASSOCIATIO, A D MICHIGA ELECTRIC A D GAS ASSOCIATIO S PETITIO FOR REHEARI G A D CLARIFICATIO Dated: April 17, 2009

2 TABLE OF CO TE TS I. INTRODUCTION... 1 II. DISCUSSION... 1 A. The Commission Should Reconsider R s Exclusion of Standby Charges for facilities larger than 20 kw up to 150 kw Net Metering Customers B. The Commission Should Clarify its Decision that Unrecovered Transmission and Distribution Costs are Program Costs C. The Commission Should Clarify its Decision With Respect to Petitioners Recovery of Surcharges From Net Metering Customers III. REQUEST FOR RELIEF ii

3 I. I TRODUCTIO On March 18, 2008, the Commission issued an Order in Case Nos. U and U , and an Order Approving Rules in Case No. U The Detroit Edison Company ( Detroit Edison, Edison ), Consumers Energy Company ( Consumers ), Michigan Electric Cooperative Association ( MECA ), and Michigan Electric and Gas Association ( MECA ) (collectively Petitioners or Electric Providers ) now seek rehearing pursuant to Rule 403 of the Commission s Rules of Practice and Procedure, R , which provides: (1) A petition for rehearing after a decision or order of the commission shall be filed with the commission within 30 days after service of the decision or order of the commission unless otherwise specified by statute. A petition for rehearing based on a claim of error shall specify all findings of fact and conclusions of law claimed to be erroneous with a brief statement of the basis of the error. A petition for rehearing based on a claim of newlydiscovered evidence, on facts or circumstances arising subsequent to the close of the record, or on unintended consequences resulting from compliance with the decision or order shall specifically set forth the matters relied upon. The petition shall be accompanied by proof of service on all other parties to the proceeding. II. DISCUSSIO A. The Commission Should Reconsider R s Exclusion of Standby Charges for facilities larger than 20 kw up to 150 kw et Metering Customers. Proposed Rule relevantly states: Standby charges shall not be applied to customers with systems capable of generating 150 kw or less. The Commission disagreed with the Electric Providers comment that all net metering customers with systems generating more than 20 kw should be required to pay standby charges. The Commission reasoned: Although the definition for modified net metering includes a definition of standby charges, MCL provides, A customer with a system capable of generating more than 150 kilowatts shall pay standby costs. Applying the principle of statutory construction, expressio unius est exclusion alterius (the 1

4 expression of one thing is the exclusion of another) the explicit requirement that a customer with a system capable of generating 150 kw or greater shall pay standby charges contains the reasonable inference that customers with systems capable of generating less than 150 kw shall be excluded. Furthermore, Act 295 must be read in pari materia, and it is a fundamental rule of construction that every word of a statute should be given meaning and no word should be treated as surplusage or rendered nugatory if at all possible. [citation omitted]. If the Commission were to require standby charges to be applied to all systems capable of generating 20 kw or more, the requirement in MCL that systems capable of generating more than 150 kw shall pay standby costs would be meaningless. (Order Approving Rules in case No. U-15787, p 21; see also, Order in Case Nos. U and U-15919, p 21). The Commission s Rule will result in unintended consequences, so the Commission should grant rehearing to correct it. Under the proposed rule, standby charges, as defined in 2008 PA 295 ( Act 295 ), can only be applied to Category 3 net metering customers. This will create the significant (and presumably unintended) consequence of prohibiting the billing and collection of all non-power supply components of rates for any site inside the meter activities of Category 2 (above 20 kw and up to 150kW) modified net metering customers. More specifically, R b(e) is identical to the first sentence of MCL (j). 1 The balance of the language from MCL (j), including all of the standby charge 1 MCL (j) defines modified net metering as follows: (j) Modified net metering means a utility billing method that applies the power supply component of the full retail rate to the net of the bidirectional flow of kilowatt hours across the customer interconnection with the utility distribution system, during a billing period or time-of-use pricing period. A negative net metered quantity during the billing period or during each time-of-use pricing period within the billing period reflects net excess generation for which the customer is entitled to receive credit under section 177(4). Standby charges for modified net metering customers on an energy rate schedule shall be equal to the retail distribution charge applied to the imputed customer usage during 2

5 language, was moved to proposed Rule , which states that standby charges shall not be applied to customers with systems capable of generating 150 kw or less. The resulting - and presumably unintended - practical application of this language is that a utility can only charge Category 2 modified net metering customers for net power supply purchased from the utility, and the utility is prohibited from charging the customers costs related to distribution service or other non-power supply retail services. Act 295 defines modified net metering as a new billing method that applies only the power supply component of the full retail rate to the net of the bidirectional flow of kilowatt hours across the interconnection interface regardless of whether the flow is net out to the utility or net in to the modified net metering customer. Thus, in situations when a modified net metering customer is a net purchaser from a utility, the Act specifically requires that the modified net metering customer be billed only the power supply component of the full retail rate for the customer s net usage. Act 295 also constructed a new and unique definition of standby charges that is based entirely on the application of the retail distribution charge to the imputed customer site usage to ensure full collection of distribution related revenues from R b(e) states: the billing period. The imputed customer usage is calculated as the sum of the metered on-site generation and the net of the bidirectional flow of power across the customer interconnection during the billing period. The commission shall establish standby charges for modified net metering customers on demand-based rate schedules that provide an equivalent contribution to utility system costs. Modified net metering means a utility billing method that applies the power supply component of the full retail rate to the net of the bidirectional flow of kilowatt hours across the customer interconnection with the utility distribution system, during a billing period or time-of-use pricing period. 3

6 modified net metering customers. By using the complete definition contained in the Act, a utility would be properly compensated for net power supply sold to the customer and full distribution revenues for use of its distribution system. The Commission has eliminated the requirement for Category 2 modified net metering customers to pay standby charges (as defined in MCL (j)). By doing so, the Commission has effectively limited a utility to billing a Category 2 modified net metering customer only for net power supply purchases, regardless of whether that customer is using energy or demand meters. This means that, as a (presumably unintended) consequence, Category 2 customers will be able to completely avoid all distribution charges, surcharges, and nonbypassable charges for both net purchases from the utility, and for use of the utility distribution system. This consequence departs sharply from traditional standby tariff applications, as approved by the Commission, which typically allow the utility to fully recover distribution costs from customers with onsite generation. These traditional tariff applications are appropriate, and should be applied to Category 2 net metering customers, because the distribution system provides a service to those customers so long as they remain interconnected with the utility (which they will be, requiring the utility to be prepared to serve their maximum site load), and those customers should pay for that service. The unintended consequences of the proposed Rule are further illustrated by considering the following possibility: A Category 2 customer can game the system and avoid paying for distribution costs, by signing up for modified net metering, sizing its generation to get into Category 2, and never running it. In that situation, a Category 2 customer could purchase its entire site load from the utility and only be charged for power supply as defined by R b(e). 4

7 The Commission should also grant rehearing because, with all due respect, the Commission s legal reasoning is unsound. First, the Commission s reasoning suggests that the Commission believes that it lacks authority to rule that customers with systems capable of generating more than 20 kw must pay standby charges. Any such belief is unfounded. The Legislature foreclosed the Commission s authority only with respect to customers with systems capable of generating more than 150 kw, mandating that such customers shall pay standby costs. That - and nothing more - is the plain meaning of the Legislature s directive. 2 Contrary to the Commission s reasoning, the Legislature s directive is not rendered meaningless unless it is expanded by reasonable inference to further exclude standby charges for customers with systems capable of generating more than 20 kw and up to 150 kw. If the Legislature had wanted to preclude standby charges for those customers, then the Legislature could easily have said so but did not. 3 2 The statutory language is clear, and must be applied according to its plain meaning. Lorencz v Ford Motor Co, 439 Mich 370, 376; 483 NW2d 844 (1992). The Legislature is presumed to have intended the plain meaning of its provisions, which should not be treated as surplusage nor rendered nugatory. Attorney General v Sanilac County Drain Comm r, 173 Mich App 526, 531; 434 NW2d 181 (1988). See also, People v Houston, 473 Mich 399, 409; 702 NW2d 530 (2005) ( We consistently look to and enforce the plain language of statutes rather than some imagined legislative purpose supposedly lurking behind that language ). 3 Courts and agencies may not, under the guise of statutory interpretation, either add words to a statute or rewrite a statute. Hanson v Mecosta Co Road Comm rs, 465 Mich 492, 504; 638 NW2d 326 (2002); Omelenchuk v City of Warren, 461 Mich 567, 575; 609 NW2d 177 (2000), overruled in part on other grds, 469 Mich 642; 677 NW2d 813 (2004) (proffered interpretations that rewrite statutes must be rejected); Ambs v Kalamazoo County Road Comm, 255 Mich App 637, 650; 662 NW2d 424 (2003) ( a court s constitutional obligation is to interpret, not rewrite, the law ). Moreover, the Commission's jurisdiction and authority have been recognized to be sufficient for the Commission to carry out its duties. Dominion Reserves Inc v Michigan Consolidated Gas Co, 240 Mich App 216, 221; 610 NW2d 282 (2000). See also, for example, Attorney General v Public Service Comm, 231 Mich App 76, 79; 585 NW2d 310 (1998) (holding that the Commission has the implicit power to suspend a PSCR clause, where no statute grants that 5

8 Second, as the Commission observed, the definition of modified net metering includes a definition of standby charges. The Commission appears to have neglected to recognize, however, that the statutory provision defining standby charges further provides: The commission shall establish standby charges for modified net metering customers on demand-based rate schedules that provide an equivalent contribution to utility system costs. MCL (j) (emphasis added). 4 MCL (5)(e) further provides: Net metering customers with a system capable of generating more than 20 kilowatts qualify for modified net metering. In other words, the Commission shall establish standby charges for... customers with a system capable of generating more than 20 kilowatts. The Commission instead ruled that customers with systems generating 150 kw or less shall not pay standby charges, violating the Legislature s directive, as well as the in pari materia principle referenced in the Commission s order. Third, the Commission apparently reasoned that MCL (j) merely provides how standby charges are to be calculated, but not who pays them. Such reasoning improperly presumes that the Legislature intended to do a useless act dictate how standby charges are to be calculated for customers who do not pay them. See, e.g., Anderson v Brown Bros, Inc., 65 Mich App 409, 418; 237 NW2d 528 (1975). Fourth, Act 295 mandates: power specifically); Verizon orth, Inc v Public Service Comm, 263 Mich App 567, 569; 689 NW2d 709 (2001) ("Although statutes granting authority to administrative agencies generally are strictly construed, due regard must be given to legislative intent and powers necessary to a full effectuation of authority expressly granted will be recognized"). 4 The term "shall" denotes a mandatory duty imposed by the Legislature, and excludes the idea of administrative discretion. Macomb Co Rd Comm'n v Fisher, 170 Mich App 697, 700; 428 NW2d 744 (1988); Southfield Twp v Drainage Bd, 357 Mich 59, 76-77; 97 NW2d 281 (1959) ("the word 'shall' is mandatory and imperative and, when used in a command to a public official, it excludes the idea of discretion"). 6

9 otwithstanding any law or regulation, net metering customers shall not receive credits for electric utility transmission or distribution charges. MCL (4) (emphasis added). Under the Commission s rules, however, Category 2 net metering customers continue to be connected to and use distribution facilities, but they do not have to pay for them, which is essentially an unlawful credit for distribution charges. In addition to being illegal, the Commission s decision also has the presumably unintended consequence of subsidizing customers with generating capacity greater than 20 kw and up to 150 kw. Excluding customers from paying a cost does not make the cost disappear. It just shifts the burden of paying the cost onto somebody else, which cannot lawfully be utilities since well-established ratemaking law requires that utilities be given the opportunity to earn a fair and commensurate return on their investments made to provide public service. 5 The Electric Providers respectfully request that the Commission grant rehearing and correct its proposed rule as discussed above, or in the alternative, explain how the costs discussed above are to be recovered from Category 2 modified net metering customers. B. The Commission Should Clarify its Decision that Unrecovered Transmission and Distribution Costs are Program Costs. Within certain sections of the Commission s rules net metering customers are either being credited for the cost of transmission and distribution facilities or are not required to compensate the utility for the use of these facilities (which they continue to be connected to and use). The Rules provide: 5 See Bluefield Waterworks Improvement Co v Public Service Commission of West Virginia, 262 US 679, ; 43 S Ct 675; 67 L Ed 1176 (1923); Federal Power Comm v Hope atural Gas Co, 320 US 591, 603; 64 S Ct 281; 88 L Ed 333 (1944). See also, Permian Basin Area Rate Cases, 390 US 747, ; 88 S Ct 1344; 20 L Ed 2d 312 (1968); FPC v Memphis Light, Gas and Water Division, 411 US 458; 43 S Ct 1723; 36 L Ed 2d 426 (1973); General Telephone Co v Public Service Comm, 341 Mich 620; 67 NW2d 882 (1954); Michigan Consolidated Gas Co v Public Service Comm, 389 Mich 624; 209 NW2d 210 (1973). 7

10 (1) Net metering customers with a system capable of generating 20 kw or less shall qualify for true net metering. For customers who qualify for true net metering, the net of the bidirectional flow of kwh across the customer interconnection with the utility distribution system during the billing period or during each timeof-use pricing period within the billing period, including excess generation, shall be credited at the full retail rate. R (1) (emphasis added). and (n) True net metering means a utility billing method that applies the full retail rate to the net of the bidirectional flow of kw hours across the customer interconnection with the utility distribution system, during a billing period or time-of-use period. R b(n) (emphasis added). and (v) Full retail rate means the power supply and distribution components of the cost of electric service. Full retail rate does not include a system access charge, service charge, or other charge that is assessed on a per meter basis. R a(v) (emphasis added). and (1) Net metering customers with a system capable of generating more than 20 kw qualify for modified net metering. R (1) (emphasis added). and (e) Modified net metering means a utility billing method that applies the power supply component of the full retail rate to the net of the bidirectional flow of kwh across the customer interconnection with the utility distribution system, during a billing period or time-of-use pricing period. R b(e) (emphasis added). 8

11 The Legislature 6 and the Commission promoted the divestiture of utility-owned transmission facilities in Michigan, so most Michigan electric customers are now charged for transmission services in their power supply charges. Thus, the crediting to Category 2 and 3 net metering customers the power supply component of the full retail rate without clarifying (consistent with MCL (4)) that the power supply component excludes transmissionrelated charges), almost universally would result in Michigan Category 2 and 3 net metered electric customers receiving a credit for transmission costs in direct contradiction of the explicit prohibition against that practice in MCL (4). Detroit Edison and Consumers Energy seek clarification that the power supply component of rates, as defined in the Rules for Category 2 and 3 modified net metering customers, excludes transmission costs. Secondly, Petitioners recognize that for Category 1 True Net Metering customers, both the Act and Commission Rules require that the full retail rate be applied to the net of the bidirectional flow of kilowatt-hours across the customer interconnection with the utility. This in fact means that Category 1 true net metering customers will receive a credit for transmission and distribution costs for any net kilowatt-hours delivered across the interface to the utility system by the customer. Petitioners seek further clarification that to the extent these transactions occur, those transmission and distribution costs credited to these Category 1 net metering customers will be considered a program cost as defined in MCL (1), and will be fully recovered by electric providers from the net metering customer class or all other customer classes. C. The Commission Should Clarify its Decision With Respect to Petitioners Recovery of Surcharges From et Metering Customers. 6 See, 2000 PA 141, MCL w (1), which states Each investor-owned electric utility in this state shall, at the utility s option, either join a FERC approved multistate regional transmission system organization or other FERC approved multistate independent transmission organization or divest its interest in its transmission facilities to an independent transmission owner. 9

12 The Commission s statewide net metering program and rules must comply with 2000 PA 142 which, among other things, prevents avoidance of non-bypassable securitization surcharges and costs. See, MCL h-10(o). 7 Edison and Consumers continue to have active securitization surcharges pursuant to the Commission s financing orders in Case Nos. U and U-12505, as well as other surcharges, which must be recovered from all customers. The Commission s rules provide no clear means to recover such charges from net metering customers, and leave the utilities in a difficult position as they strive to comply with timelines for filing tariffs, without knowing how (or even if) the tariffs should collect the charges. 8 7 (f) Nonbypassable charge means a charge in a financing order payable by a customer to an electric utility or its assignees or successors regardless of the identity of the customer s electric generation supplier h(f). (i) Securitization charges means nonbypassable amounts to be charged for the use or availability of electric services, approved by the commission under a financing order to fully recover qualified costs, that shall be collected by an electric utility, its successors, an assignee, or other collection agents as provided for in the financing order. MCL h(i). (n) The state pledges, for the benefit and protection of the financing parties and the electric utility, that it will not take or permit any action that would impair the value of securitization property, reduce or alter, except as allowed under section 10k(3), or impair the securitization charges to be imposed, collected, and remitted to financing parties, until the principal, interest and premium, and any other charges incurred and contracts to be performed in connection with the related securitization bonds have been paid and performed in full. MCL h(n). 8 R (2) states: An electric provider or alternative electric supplier shall provide to net metering customers electric service at non-discriminatory rates that are identical, with respect to rate structure, retail rate components and any monthly charges, to the rates that the net metering customer would be charged if the net metering customer were not participating in the net metering program. This arguably provides some direction, but it is certainly not absolutely clear that the proposed administrative rules intend for utilities to collect these important surcharges. If the Commission intends this provision to mean that net metering customers will pay all utility surcharges like other electric customers, then Commission should make this intent clear by adding a sentence to that effect. 10

13 Petitioners seek clarification because there is no provision in the proposed administrative rules that protects the securitization bondholder rights under 2000 PA 142. Other separately- surcharged Michigan electric utility costs are also put in jeopardy by the Commission s rules, contrary to fundamental ratemaking as outlined above. The Commission presumably did not intend such consequences. Accordingly, the Commission should provide guidance regarding how these charges are to be collected, and whether they should be included in the tariffs that soon must be filed. III. REQUEST FOR RELIEF The Electric Providers respectfully request that the Commission grant rehearing and provide the additional relief described above. Respectfully submitted, THE DETROIT EDISON COMPANY Dated: April 17, 2009 By: Legal Department Bruce R. Maters (P28080) Jon P. Christinidis (P47352) Richard P. Middleton (P41278) Michael J. Solo, Jr. (P57092) One Energy Plaza, 688 WCB Detroit, MI (313)

14 CONSUMERS ENERGY COMPANY Dated: April 17, 2009 By: Jon R. Robinson (P27953) Attorney for Consumers Energy Company One Energy Plaza Jackson, MI (517) MICHIGAN ELECTRIC COOPERATIVE ASSOCIATION Dated: April 17, 2009 By: Albert Ernst (P24095) Joseph J. Baumann (P69261) DYKEMA GOSSETT PLLC 210 Townsend, Suite 900 Lansing, MI (517) MICHIGAN ELECTRIC AND GAS ASSOCIATION Dated: April 17, 2009 By: James A. Ault (P30201) Michigan Electric and Gas Association 110 W. Michigan Avenue, Suite 1000B Lansing, MI (517)

15 PROOF OF SERVICE STATE OF MICHIGAN ) Case No. U-15803/15787/15919 County of Ingham ) James Ault being duly sworn, deposes and says that on April 17, 2009 he served a copy of the attached Petition for Rehearing and Clarification, to the persons shown on the attached service list by first class U.S. mail. James A Ault Subscribed and sworn to before me this 17 th day of April Susan J. Denison Notary Public, Ingham County, MI My Commission Expires April 10, 2013

16 SERVICE LIST Roderick S. Coy 212 East Grand River Avenue Lansing, MI Bradley D. Klein Environmental Law & Policy Center 35 E. Wacker Drive, Suite 1300 Chicago, IL Michael A. Nickerson 6545 Mercantile Way, Suite 15 Lansing, MI Andrew J. Such Michigan Sustainable Energy Coalition 124 W. Allegan, Suite 1210 Lansing, MI Jason B. Keyes Interstate Renewable Energy Council st Avenue East Seattle, WA Eric J. Schneidewind Energy Michigan, Inc. Victor Center, Suite N. Washington Square Lansing, MI Donald W. Johns MIPPA 1845 S. Cedar Street Building B, Suite 100 Holt, MI Jennifer Alvarado GLREA PO Box S. Bridge Street Dimondale, MI Andrew Brix City of Ann Arbor Energy Office PO Box 8647 Ann Arbor, MI John M. Dempsey Dickinson Wright 215 S. Washington Square Suite 200 Lansing, MI Hon. Paul E. Opsommer 93 rd District State Capitol PO Box Lansing, MI