October 22, 2015, Introduced by Reps. Glenn, Cole, Irwin, Dianda, Barrett and McBroom and referred to the Committee on Energy Policy.
A bill to amend 1939 PA 3, entitled
"An act to provide for the regulation and control of public and
certain private utilities and other services affected with a public
interest within this state; to provide for alternative energy
suppliers; to provide for licensing; to include municipally owned
utilities and other providers of energy under certain provisions of
this act; to create a public service commission and to prescribe
and define its powers and duties; to abolish the Michigan public
utilities commission and to confer the powers and duties vested by
law on the public service commission; to provide for the
continuance, transfer, and completion of certain matters and
proceedings; to abolish automatic adjustment clauses; to prohibit
certain rate increases without notice and hearing; to qualify
residential energy conservation programs permitted under state law
for certain federal exemption; to create a fund; to provide for a
restructuring of the manner in which energy is provided in this
state; to encourage the utilization of resource recovery
facilities; to prohibit certain acts and practices of providers of
energy; to allow for the securitization of stranded costs; to
reduce rates; to provide for appeals; to provide appropriations; to
declare the effect and purpose of this act; to prescribe remedies
and penalties; and to repeal acts and parts of acts,"
by amending section 6j (MCL 460.6j), as amended by 1987 PA 81, and
by adding section 6u.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 6j. (1) As used in this act:
(a) "Power supply cost recovery clause" means a clause in the
electric
rates or rate schedule of a an
electric utility which that
permits the monthly adjustment of rates for power supply to allow
the utility to recover the booked costs, including transportation
costs, reclamation costs, and disposal and reprocessing costs, of
fuel burned by the utility for electric generation and the booked
costs of purchased and net interchanged power transactions by the
utility incurred under reasonable and prudent policies and
practices.
(b) "Power supply cost recovery factor" means that element of
the rates to be charged for electric service to reflect power
supply costs incurred by an electric utility and made pursuant to a
power supply cost recovery clause incorporated in the rates or rate
schedule of an electric utility.
(2)
Pursuant to its authority under this act, the The public
service commission may incorporate a power supply cost recovery
clause
in the electric rates or rate schedule of a an electric
utility. ,
but is not required to do so. Any
order incorporating a
power supply cost recovery clause shall be as a result of a hearing
solely on the question of the inclusion of the clause in the rates
or
rate schedule. , which A
hearing under this subsection shall
be
conducted as a contested case pursuant to chapter 4 of the
administrative
procedures act of 1969, Act No. 306 of the Public
Acts
of 1969, being sections 24.271 to 24.287 of the Michigan
Compiled
Laws, 1969 PA 306, MCL 24.271
to 24.287, or, pursuant to
subsection (18), as a result of a general rate case. Any order
incorporating a power supply cost recovery clause shall replace and
rescind any previous fuel cost adjustment clause or purchased and
net interchanged power adjustment clause incorporated in the
electric rates of the utility upon the effective date of the first
power supply cost recovery factor authorized for the utility under
its power supply cost recovery clause.
(3) In order to implement the power supply cost recovery
clause
established pursuant to under
subsection (2), a an electric
utility annually shall file, pursuant to procedures established by
the commission, if any, a complete power supply cost recovery plan
describing the expected sources of electric power supply and
changes in the cost of power supply anticipated over a future 12-
month period specified by the commission and requesting for each of
those 12 months a specific power supply cost recovery factor. The
plan
shall be filed not less later
than 3 months before the
beginning of the 12-month period covered by the plan. The plan
shall describe all major contracts and power supply arrangements
entered into by the utility for providing power supply during the
specified 12-month period. The description of the major contracts
and arrangements shall include the price of fuel, the duration of
the contract or arrangement, and an explanation or description of
any other term or provision as required by the commission. The plan
shall also include the utility's evaluation of the reasonableness
and prudence of its decisions to provide power supply in the manner
described in the plan, in light of its existing sources of
electrical generation, and an explanation of the actions taken by
the utility to minimize the cost of fuel to the utility.
(4)
In order to implement the a
power supply cost recovery
clause
established pursuant to under
subsection (2), a an electric
utility shall file, contemporaneously with the power supply cost
recovery plan required by subsection (3), a 5-year forecast of the
power supply requirements of its customers, its anticipated sources
of supply, and projections of power supply costs, in light of its
existing sources of electrical generation and sources of electrical
generation under construction. The forecast shall include a
description of all relevant major contracts and power supply
arrangements
entered into or contemplated by the utility, and such
any
other information as the
commission may require.
(5)
If a an electric utility files a power supply cost
recovery plan and a 5-year forecast as provided in subsections (3)
and (4), the commission shall conduct a proceeding, to be known as
a power supply and cost review, for the purpose of evaluating the
reasonableness and prudence of the power supply cost recovery plan
filed
by a utility pursuant to under
subsection (3), and
establishing the power supply cost recovery factors to implement a
power supply cost recovery clause incorporated in the electric
rates or rate schedule of the utility. The power supply and cost
review shall be conducted as a contested case pursuant to chapter 4
of
the administrative procedures act of 1969, Act No. 306 of the
Public
Acts of 1969.1969 PA 306, MCL
24.271 to 24.287.
(6) In its final order in a power supply and cost review, the
commission shall evaluate the reasonableness and prudence of the
decisions underlying the power supply cost recovery plan filed by
the
an electric utility pursuant to under subsection
(3) , and
shall approve, disapprove, or amend the power supply cost recovery
plan accordingly. In evaluating the decisions underlying the power
supply cost recovery plan, the commission shall consider the cost
and availability of the electrical generation available to the
utility; the cost of short-term firm purchases available to the
utility; the availability of interruptible service; the ability of
the utility to reduce or to eliminate any firm sales to out-of-
state customers if the utility is not a multi-state utility whose
firm sales are subject to other regulatory authority; whether the
utility has taken all appropriate actions to minimize the cost of
fuel; and other relevant factors. The commission shall approve,
reject, or amend the 12 monthly power supply cost recovery factors
requested by the utility in its power supply cost recovery plan.
The factors shall not reflect items the commission could reasonably
anticipate would be disallowed under subsection (13). The factors
ordered shall be described in fixed dollar amounts per unit of
electricity, but may include specific amounts contingent on future
events.
(7) In its final order in a power supply and cost review, the
commission shall evaluate the decisions underlying the 5-year
forecast
filed by a an electric utility pursuant to under
subsection (4). The commission may also indicate any cost items in
the 5-year forecast that, on the basis of present evidence, the
commission would be unlikely to permit the utility to recover from
its customers in rates, rate schedules, or power supply cost
recovery factors established in the future.
(8) The commission, on its own motion or the motion of any
party, may make a finding and enter a temporary order granting
approval or partial approval of a power supply cost recovery plan
in a power supply and cost recovery review, after first having
given notice to the parties to the review, and after having
afforded to the parties to the review a reasonable opportunity for
a
full and complete hearing. A temporary order made pursuant to
under
this subsection shall be is considered
a final order for
purposes of judicial review.
(9) If the commission has made a final or temporary order in a
power
supply and cost review, the an
electric utility may each
month incorporate in its rates for the period covered by the order
any amounts up to the power supply cost recovery factors permitted
in that order. If the commission has not made a final or temporary
order
within 3 months of after the submission of a complete power
supply cost recovery plan, or by the beginning of the period
covered in the plan, whichever comes later, or if a temporary order
has expired without being extended or replaced, then pending an
order
which that determines the power supply cost recovery factors,
a utility may each month adjust its rates to incorporate all or a
part of the power supply cost recovery factors requested in its
plan. Any amounts collected under the power supply cost recovery
factors before the commission makes its final order shall be
subject to prompt refund with interest to the extent that the total
amounts collected exceed the total amounts determined in the
commission's final order to be reasonable and prudent for the same
period of time.
(10)
Not less later than 3 months before the beginning of the
third
quarter of the 12-month period , the described
in subsection
(3), an electric utility may file a revised power supply cost
recovery
plan which shall cover that
covers the remainder of the
12-month period. Upon receipt of the revised power supply cost
recovery plan, the commission shall reopen the power supply and
cost review. In addition, the commission may reopen the power
supply and cost review on its own motion or on the showing of good
cause by any party if at least 6 months have elapsed since the
utility submitted its complete filing and if there are at least 60
days remaining in the 12-month period under consideration. A
reopened power supply and cost review shall be conducted as a
contested case pursuant to chapter 4 of the administrative
procedures
act of 1969, Act No. 306 of the Public Acts of 1969,
1969 PA 306, MCL 23.271 to 24.287, and in accordance with
subsections (3), (6), (8), and (9).
(11)
Not more later than 45 days following after the
last day
of each billing month in which a power supply cost recovery factor
has
been applied to customers' bills, the an electric utility shall
file with the commission a detailed statement for that month of the
revenues recorded pursuant to the power supply cost recovery factor
and the allowance for cost of power supply included in the base
rates established in the latest commission order for the utility,
and the cost of power supply. The detailed statement shall be in
the manner and form prescribed by the commission. The commission
shall establish procedures for insuring that the detailed statement
is promptly verified and corrected if necessary.
(12) Not less than once a year, and not later than 3 months
after
the end of the 12-month period covered by a an electric
utility's power supply cost recovery plan, the commission shall
commence a proceeding, to be known as a power supply cost
reconciliation, as a contested case pursuant to chapter 4 of the
administrative
procedures act of 1969, Act No. 306 of the Public
Acts
of 1969. Reasonable 1969 PA
306, MCL 24.271 to 24.287. The
commission
shall permit reasonable discovery shall
be permitted
before and during the reconciliation proceeding in order to assist
parties and interested persons in obtaining evidence concerning
reconciliation issues including, but not limited to, the
reasonableness and prudence of expenditures and the amounts
collected pursuant to the clause. At the power supply cost
reconciliation, the commission shall reconcile the revenues
recorded pursuant to the power supply cost recovery factors and the
allowance for cost of power supply included in the base rates
established in the latest commission order for the utility with the
amounts actually expensed and included in the cost of power supply
by the utility. The commission shall consider any issue regarding
the reasonableness and prudence of expenses for which customers
were charged if the issue was not considered adequately at a
previously conducted power supply and cost review.
(13) In its order in a power supply cost reconciliation, the
commission shall do all of the following:
(a) Disallow cost increases resulting from changes in
accounting or rate-making expense treatment not previously approved
by the commission. The commission may order the utility to pay a
penalty
of not to exceed more
than 25% of the amount improperly
collected. Costs incurred by the utility for penalty payments shall
not be charged to customers.
(b) Disallow any capacity charges associated with power
purchased for periods in excess of 6 months unless the utility has
obtained the prior approval of the commission. If the commission
has approved capacity charges in a contract with a qualifying
facility,
as that term is defined by the federal energy regulatory
commission
Federal Energy Regulatory
Commission pursuant to the
public utilities regulatory policies act of 1978, Public Law 95-
617,
92 Stat. Stat 3117, the commission shall not disallow the
capacity charges for the facility in the power supply cost
reconciliation unless the commission has ordered revised capacity
charges
upon reconsideration pursuant to under this subsection. A
contract shall be valid and binding in accordance with its terms
and capacity charges paid pursuant to such a contract shall be
recoverable costs of the utility for rate-making purposes
notwithstanding that the order approving such a contract is later
vacated, modified, or otherwise held to be invalid in whole or in
part if the order approving the contract has not been stayed or
suspended by a competent court within 30 days after the date of the
order,
or within 30 days of the effective date of the 1987
amendatory
act that added subsection (19) by
July 29, 1987 if the
order
was issued after September 1, 1986
, and before the effective
date
of the 1987 amendatory act that added subsection (19). June
29, 1987. The scope and manner of the review of capacity charges
for a qualifying facility shall be determined by the commission in
accordance with an order issued under section 6u. Except as to
approvals
for qualifying facilities granted by the commission prior
to
before June 1, 1987, proceedings before the commission
seeking
such
those approvals shall be conducted as a contested case
pursuant to chapter 4 of the administrative procedures act of 1969,
Act
No. 306 of the Public Acts of 1969. 1969 PA 306, MCL 24.271 to
24.287. The commission, upon its own motion or upon application of
any person, may reconsider its approval of capacity charges in a
contested case hearing after passage of a period necessary for
financing
the qualifying facility, provided that:if both of the
following apply:
(i) The commission has first issued an order making a finding
based on evidence presented in a contested case that there has been
a substantial change in circumstances since the commission's
initial
approval. ; and
(ii) Such a The commission finding shall
be is set forth in a
commission order subject to immediate judicial review.
The financing period for a qualifying facility during which
previously
approved capacity charges shall are
not be subject to
commission reconsideration shall be 17.5 years, beginning with the
date of commercial operation, for all qualifying facilities, except
that the minimum financing period before reconsideration of the
previously approved capacity charges shall be for the duration of
the
financing for a qualifying facility which that produces
electric energy by the use of biomass, waste, wood, hydroelectric,
wind, and other renewable resources, or any combination of
renewable resources, as the primary energy source.
(c) Disallow net increased costs attributable to a generating
plant outage of more than 90 days in duration unless the utility
demonstrates by clear and satisfactory evidence that the outage, or
any part of the outage, was not caused or prolonged by the
utility's negligence or by unreasonable or imprudent management.
(d) Disallow transportation costs attributable to capital
investments to develop a utility's capability to transport fuel or
relocate fuel at the utility's facilities and disallow unloading
and handling expenses incurred after receipt of fuel by the
utility.
(e) Disallow the cost of fuel purchased from an affiliated
company
to the extent that such the
fuel is more costly than fuel
of requisite quality available at or about the same time from other
suppliers with whom it would be comparably cost beneficial to deal.
(f) Disallow charges unreasonably or imprudently incurred for
fuel not taken.
(g) Disallow additional costs resulting from unreasonably or
imprudently renegotiated fuel contracts.
(h) Disallow penalty charges unreasonably or imprudently
incurred.
(i) Disallow demurrage charges.
(j) Disallow increases in charges for nuclear fuel disposal
unless the utility has received the prior approval of the
commission.
(14) In its order in a power supply cost reconciliation, the
commission
shall require a an
electric utility to refund to
customers or credit to customers' bills any net amount determined
to have been recovered over the period covered in excess of the
amounts determined to have been actually expensed by the utility
for power supply, and to have been incurred through reasonable and
prudent actions not precluded by the commission order in the power
supply
and cost review. Such The
commission shall apportion the
refunds
or credits shall be apportioned among the customers of the
utility utilizing procedures that the commission determines to be
reasonable. The commission may adopt different procedures with
respect to customers served under the various rate schedules of the
utility and may, in appropriate circumstances, order refunds or
credits in proportion to the excess amounts actually collected from
each such customer during the period covered.
(15) In its order in a power supply cost reconciliation, the
commission
shall authorize a an
electric utility to recover from
customers any net amount by which the amount determined to have
been recovered over the period covered was less than the amount
determined to have been actually expensed by the utility for power
supply, and to have been incurred through reasonable and prudent
actions not precluded by the commission order in the power supply
and cost review. For excess costs incurred through management
actions contrary to the commission's power supply and cost review
order, the commission shall authorize a utility to recover costs
incurred for power supply in the reconciliation period in excess of
the amount recovered over the period only if the utility
demonstrates by clear and convincing evidence that the excess
expenses were beyond the ability of the utility to control through
reasonable and prudent actions. For excess costs incurred through
management actions consistent with the commission's power supply
and cost review order, the commission shall authorize a utility to
recover costs incurred for power supply in the reconciliation
period in excess of the amount recovered over the period only if
the
utility demonstrates that the level of such those expenses
resulted
from reasonable and prudent management actions. Such The
amounts in excess of the amounts actually recovered by the utility
for power supply shall be apportioned among and charged to the
customers of the utility utilizing procedures that the commission
determines to be reasonable. The commission may adopt different
procedures with respect to customers served under the various rate
schedules of the utility and may, in appropriate circumstances,
order
charges to be made in proportion to the amounts which that
would
have been paid by such those
customers if the amounts in
excess of the amounts actually recovered by the utility for cost of
power supply had been included in the power supply cost recovery
factors
with respect to such the customers during the period
covered. Charges for such excess amounts shall be spread over a
period that the commission determines to be appropriate.
(16)
If the commission orders refunds or credits pursuant to
under
subsection (14), or additional charges
to customers pursuant
to
under subsection (15), in its final order in a power
supply cost
reconciliation, the refunds, credits, or additional charges shall
include interest. In determining the interest included in a refund,
credit,
or additional charge pursuant to under this subsection, the
commission shall consider, to the extent material and practicable,
the time at which the excess recoveries or insufficient recoveries,
or both occurred. The commission shall determine a rate of interest
for excess recoveries, refunds, and credits equal to the greater of
the average short-term borrowing rate available to the utility
during the appropriate period, or the authorized rate of return on
the common stock of the utility during that same period. Costs
incurred by the utility for refunds and interest on refunds shall
not be charged to customers. The commission shall determine a rate
of interest for insufficient recoveries and additional charges
equal to the average short-term borrowing rate available to the
utility during the appropriate period.
(17) To avoid undue hardship or unduly burdensome or excessive
cost, the commission may do both of the following:
(a) Exempt an electric utility with fewer than 200,000
customers
in the this state of Michigan from 1 or more of the
procedural provisions of this section or may modify the filing
requirements of this section.
(b) Exempt an energy utility organized as a cooperative
corporation
pursuant to under sections 98 to 109 of Act No. 327 of
the
Public Acts of 1931, being sections 450.98 to 450.109 of the
Michigan
Compiled Laws, 1931 PA 327,
MCL 450.98 to 450.109, from 1
or more of the provisions of this section.
(18) Notwithstanding any other provision of this act, the
commission may, upon application by an electric utility, set power
supply cost recovery factors, in a manner otherwise consistent with
this
act, in an order resulting from a general rate case. Within
120
days following the effective date of this section, By October
27, 1987, for the purpose of setting power supply cost recovery
factors, the commission shall permit an electric utility to reopen
a general rate case in which a final order was issued within 120
days
before or after the effective date of this section June 29,
1987 or to amend an application or reopen the evidentiary record in
a pending general rate case. If the commission sets power supply
cost recovery factors in an order resulting from a general rate
case, all of the following apply:
(a) The power supply cost recovery factors shall cover a
future
period of 48 months or the number of months which that
elapse until the commission orders new power supply cost recovery
factors in a general rate case, whichever is the shorter period.
(b) Annual reconciliation proceedings shall be conducted
pursuant
to under subsection (12) and if an annual reconciliation
proceeding
shows a recoverable amount pursuant to under subsection
(15), the commission shall authorize the electric utility to defer
the
amount and to accumulate interest on the amount pursuant to
under subsection (16), and in the next order resulting from a
general rate case authorize the utility to recover the amount and
interest from its customers in the manner provided in subsection
(15).
(c)
The power supply cost recovery factors shall are not
be
subject
to revision pursuant to under
subsection (10).
(19)
Five years after the effective date of the amendatory act
that
added this subsection, By
June 29, 1992, and every 5 years
thereafter, the standing committees of the house and senate that
deal
with public utilities shall review the amendatory act that
added
this subsection.effect of
1987 PA 81.
Sec. 6u. (1) The commission, on its own motion or the motion
of any party, shall conduct a proceeding, as a contested case
pursuant to chapter 4 of the administrative procedures act of 1969,
1969 PA 306, MCL 24.271 to 24.287, to update the procedures and
rates schedules originally established by the commission in case
no. U-6798, to implement title II, section 210, of the public
utility regulatory policies act of 1978, as it relates to
cogeneration facilities and small power production facilities in
this state.
(2) The commission shall issue an order under subsection (1)
that does all of the following:
(a) Promotes the development of a diverse array of permanently
sustainable energy resources using the public and private sectors
to the highest degree possible.
(b) Ensures that rates for purchases by an electric utility
from, and rates for sales to, a cogeneration facility or small
power production facility located in this state over the term of a
contract are just and reasonable to the electric consumers of the
electric utility, the cogeneration facility, or small power
production facility, and are in the public interest.
(c) Increases the marketability of electric energy produced by
cogeneration facilities and small power production facilities
located throughout this state for the benefit of citizens of this
state.
(d) Ensures that an electric utility does not discriminate in
any way with respect to the conditions or price for provision of
maintenance power, standby power, supplementary power, or for any
other service.
(e) Requires that any prices charged by an electric utility
for maintenance power, standby power, supplementary power, and all
other such services are cost-based and just and reasonable.
(f) Creates a settled and uniform institutional climate for
the cogeneration facilities and small power production facilities
in this state, including, but not limited to, all of the following:
(i) Creating standardized contracts and avoided cost rates
available for qualifying facilities with a design capacity.
(ii) Establishing policies for electric utilities for
contracting with qualifying facilities.
(iii) Establishing a schedule of avoided cost price updates.
(iv) Establishing dispute resolution procedures for qualifying
facilities.
(3) The avoided cost rate schedules for the purchase of energy
and capacity from a cogeneration facility or small power production
facility shall be all of the following:
(a) Approved by the commission if the purchase is by an
electric utility.
(b) Specific to the qualifying facility.
(c) Consistent with the methodology utilized by the commission
in developing the transfer price schedule under section 47 of the
clean, renewable, and efficient energy act, 2008 PA 295, MCL
460.1047, as implemented in commission orders on the effective date
of the amendatory act that added this section.
(d) Consistent with applicable standards required by the
public utility regulatory policies act of 1978, including, but not
limited to, the establishment of avoided cost rates that are just
and reasonable to the electric customers of the electric utility
and in the public interest, do not exceed the incremental cost to
the electric utility of alternative renewable electric energy, and
do not discriminate against the owner of a small power production
facility.
(4) Within 1 year after the effective date of the amendatory
act that added this section, and by February 1 of each year
thereafter, the commission shall issue a report to the Michigan
agency for energy and the standing committees of the senate and
house of representatives with primary responsibility for energy and
environmental issues that provides a description and status of the
cogeneration facilities and small power production facilities in
this state, the current status of power purchase agreements of each
cogeneration facility and small power production facility in this
state, and the commission's efforts to comply with subsections (1)
to (3).
(5) As used in this section:
(a) "Avoided cost" means avoided costs as that term is defined
in 18 CFR 292.101.
(b) "Cogeneration facility" means a facility that meets both
of the following:
(i) Produces, through the sequential use of energy, electric
energy and useful thermal energy, including, but not limited to,
heat or steam, used for industrial, commercial, heating, or cooling
purposes.
(ii) Fifty percent or more of the facility is owned by a
person that is not an electric utility, an electric holding
company, an entity affiliated with an electric utility, or any
combination of those entities.
(c) "Qualifying facility" means qualifying cogeneration
facility or qualifying small power production facility as those
terms are defined in 16 USC 796.
(d) "Small power production facility" means a facility that
meets all of the following:
(i) Produces energy in this state primarily by the use of a
renewable energy resource, as defined in section 11 of the clean,
renewable, and efficient energy act, 2008 PA 295, MCL 460.1011.
(ii) Fifty percent or more of the facility is owned by a
person that is not an electric utility, an electric utility holding
company, an entity affiliated with an electric utility, or any
combination of those entities.
(iii) Has a power production capacity that, together with any
other small power production facility located at the same site and
owned by the same person, is not greater than 20 megawatts.
Enacting section 1. This amendatory act takes effect 90 days
after the date it is enacted into law.