Bill Text: MI HB5194 | 2017-2018 | 99th Legislature | Introduced


Bill Title: Public utilities; public service commission; authorized rate of return on equity; modify. Amends sec. 6a of 1939 PA 3 (MCL 460.6a).

Spectrum: Partisan Bill (Republican 1-0)

Status: (Introduced - Dead) 2017-11-01 - Bill Electronically Reproduced 10/31/2017 [HB5194 Detail]

Download: Michigan-2017-HB5194-Introduced.html

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

HOUSE BILL No. 5194

 

 

October 31, 2017, Introduced by Rep. Glenn 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 6a (MCL 460.6a), as amended by 2016 PA 341.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 6a. (1) A gas utility, electric utility, or steam 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. A utility shall

 

coordinate with the commission staff in advance of filing its

 

general rate case application under this section to avoid resource

 

challenges with applications being filed at the same time as

 

applications filed under this section by other utilities. In the

 

case of electric utilities serving more than 1,000,000 customers in

 

this state, the commission may, if necessary, order a delay in

 

filing an application to establish a 21-day spacing between filings

 

of electric utilities serving more than 1,000,000 customers in this

 

state. The utility shall place in evidence facts relied upon to

 

support the utility's petition or application to increase its rates

 

and charges, or to alter, change, or amend any rate or rate

 

schedules. The commission shall require notice to be given to all

 

interested parties within the service area to be affected, and all

 

interested parties shall have a reasonable opportunity for a full

 

and complete hearing. A utility may use projected costs and

 

revenues for a future consecutive 12-month period in developing its

 

requested rates and charges. The commission shall notify the

 

utility within 30 days after filing, whether the utility's petition

 

or application is complete. A petition or application is considered

 

complete if it complies with the rate application filing forms and

 

instructions adopted under subsection (8). 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. Concurrently with filing a complete

 

application, or at any time after filing a complete application, a

 

gas utility serving fewer than 1,000,000 customers in this state

 

may file a motion seeking partial and immediate rate relief. After

 

providing notice to the interested parties within the service area

 

to be affected and affording interested parties a reasonable

 

opportunity to present written evidence and written arguments

 

relevant to the motion seeking partial and immediate rate relief,

 

the commission shall make a finding and enter an order granting or

 

denying partial and immediate relief within 180 days after the

 

motion seeking partial and immediate rate relief was submitted. The

 

commission has 12 months to issue a final order in a case in which

 

a gas utility has filed a motion seeking partial and immediate rate

 

relief.

 

     (2) 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. 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 before 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. The commission shall allocate any

 

refund required by this subsection among primary customers based

 

upon their pro rata share of the total revenue collected through

 

the applicable increase, and among secondary and residential

 

customers in a manner to be determined by the commission. The rate

 

of interest for refunds shall equal equals 5% plus the London

 

interbank offered rate (LIBOR) for the appropriate time period. For

 

any portion of the refund that, exclusive of interest, exceeds 25%

 

of the annual revenue increase awarded by the commission in its

 

final order, the rate of interest shall be is the authorized rate

 

of return on the common stock of the utility during the appropriate

 

period. Any refund or interest awarded under this subsection shall

 

must not be included, in whole or in part, in any application for a

 

rate increase by a utility. This subsection only applies to

 

completed applications filed with the commission before the

 

effective date of the amendatory act that added section 6t.April

 

20, 2017.

 

     (3) This section does not impair the commission's ability to

 

issue a show cause order as part of its rate-making authority. An

 

alteration or amendment in rates or rate schedules applied for by a

 

public utility that will not result in an increase in the cost of

 

service to its customers may be authorized and approved without


notice or hearing. There shall be no increase in rates based upon

 

changes in cost of fuel, purchased gas, or purchased steam unless

 

notice has been given within the service area to be affected, and

 

there has been an opportunity for a full and complete hearing on

 

the cost of fuel, purchased gas, or purchased steam. The rates

 

charged by any utility under an automatic fuel, purchased gas, or

 

purchased steam adjustment clause shall must not be altered,

 

changed, or amended unless notice has been given within the service

 

area to be affected, and there has been an opportunity for a full

 

and complete hearing on the cost of the fuel, purchased gas, or

 

purchased steam.

 

     (4) The commission shall adopt rules and procedures for the

 

filing, investigation, and hearing of petitions or applications to

 

increase or decrease utility rates and charges as the commission

 

finds necessary or appropriate to enable it to reach a final

 

decision with respect to petitions or applications within a period

 

of time allotted by law to issue a final order after the filing of

 

the complete petitions or applications. The commission shall not

 

authorize or approve adjustment clauses that operate without notice

 

and an opportunity for a full and complete hearing, and all such

 

clauses are abolished. The commission may hold a full and complete

 

hearing to determine the cost of fuel, purchased gas, purchased

 

steam, or purchased power separately from a full and complete

 

hearing on a general rate case and may hold that hearing

 

concurrently with the general rate case. The commission shall

 

authorize a utility to recover the cost of fuel, purchased gas,

 

purchased steam, or purchased power only to the extent that the


purchases are reasonable and prudent.

 

     (5) Except as otherwise provided in this subsection and

 

subsection (1), if the commission fails to reach a final decision

 

with respect to a completed petition or application to increase or

 

decrease utility rates within the 10-month period following the

 

filing of the completed petition or application, the petition or

 

application is considered approved. If a utility makes any

 

significant amendment to its filing, the commission has an

 

additional 10 months after the date of the amendment to reach a

 

final decision on the petition or application. If the utility files

 

for an extension of time, the commission shall extend the 10-month

 

period by the amount of additional time requested by the utility.

 

     (6) A utility shall not file a general rate case application

 

for an increase in rates earlier than 12 months after the date of

 

the filing of a complete prior general rate case application. A

 

utility may not file a new general rate case application until the

 

commission has issued a final order on a prior general rate case or

 

until the rates are approved under subsection (5).

 

     (7) The commission shall, if requested by a gas utility,

 

establish load retention transportation rate schedules or approve

 

gas transportation contracts as required for the purpose of serving

 

industrial or commercial customers whose individual annual

 

transportation volumes exceed 500,000 decatherms on the gas

 

utility's system. The commission shall approve these rate schedules

 

or approve transportation contracts entered into by the utility in

 

good faith if the industrial or commercial customer has the

 

installed capability to use an alternative fuel or otherwise has a


viable alternative to receiving natural gas transportation service

 

from the utility, the customer can obtain the alternative fuel or

 

gas transportation from an alternative source at a price that would

 

cause them not to use the gas utility's system, and the customer,

 

as a result of their use of the system and receipt of

 

transportation service, makes a significant contribution to the

 

utility's fixed costs. The commission shall adopt accounting and

 

rate-making policies to ensure that the discounts associated with

 

the transportation rate schedules and contracts are recovered by

 

the gas utility through charges applicable to other customers if

 

the incremental costs related to the discounts are no greater than

 

the costs that would be passed on to those customers as the result

 

of a loss of the industrial or commercial customer's contribution

 

to a utility's fixed costs.

 

     (8) The commission shall adopt standard rate application

 

filing forms and instructions for use in all general rate cases

 

filed by utilities whose rates are regulated by the commission. For

 

cooperative electric utilities whose rates are regulated by the

 

commission, in addition to rate applications filed under this

 

section, the commission shall continue to allow for rate filings

 

based on the cooperative's times interest earned ratio. The

 

commission may modify the standard rate application forms and

 

instructions adopted under this subsection.

 

     (9) If, on or before January 1, 2008, a merchant plant entered

 

into a contract with an initial term of 20 years or more to sell

 

electricity to an electric utility whose rates are regulated by the

 

commission with 1,000,000 or more retail customers in this state


and if, before January 1, 2008, the merchant plant generated

 

electricity under that contract, in whole or in part, from wood or

 

solid wood wastes, then the merchant plant shall, upon petition by

 

the merchant plant, and subject to the limitation set forth in

 

subsection (10), recover the amount, if any, by which the merchant

 

plant's reasonably and prudently incurred actual fuel and variable

 

operation and maintenance costs exceed the amount that the merchant

 

plant is paid under the contract for those costs. This subsection

 

does not apply to landfill gas plants, hydro plants, municipal

 

solid waste plants, or to merchant plants engaged in litigation

 

against an electric utility seeking higher payments for power

 

delivered pursuant to contract.

 

     (10) The total aggregate additional amounts recoverable by

 

merchant plants under subsection (9) in excess of the amounts paid

 

under the contracts shall not exceed $1,000,000.00 per month for

 

each affected electric utility. The $1,000,000.00 per month limit

 

specified in this subsection shall must be reviewed by the

 

commission upon petition of the merchant plant filed no more than

 

once per year and may be adjusted if the commission finds that the

 

eligible merchant plants reasonably and prudently incurred actual

 

fuel and variable operation and maintenance costs exceed the amount

 

that those merchant plants are paid under the contract by more than

 

$1,000,000.00 per month. The annual amount of the adjustments shall

 

must not exceed a rate equal to the United States consumer price

 

index. The commission shall not make an adjustment unless each

 

affected merchant plant files a petition with the commission. If

 

the total aggregate amount by which the eligible merchant plants


reasonably and prudently incurred actual fuel and variable

 

operation and maintenance costs determined by the commission exceed

 

the amount that the merchant plants are paid under the contract by

 

more than $1,000,000.00 per month, the commission shall allocate

 

the additional $1,000,000.00 per month payment among the eligible

 

merchant plants based upon the relationship of excess costs among

 

the eligible merchant plants. The $1,000,000.00 limit specified in

 

this subsection, as adjusted, does not apply to actual fuel and

 

variable operation and maintenance costs that are incurred due to

 

changes in federal or state environmental laws or regulations that

 

are implemented after October 6, 2008. The $1,000,000.00 per month

 

payment limit under this subsection does not apply to merchant

 

plants eligible under subsection (9) whose electricity is purchased

 

by a utility that is using wood or wood waste or fuels derived from

 

those materials for fuel in their power plants. As used in this

 

subsection, "United States consumer price index" means the United

 

States consumer price index for all urban consumers as defined and

 

reported by the United States Department of Labor, Bureau of Labor

 

Statistics.

 

     (11) The commission shall issue orders to permit the recovery

 

authorized under subsections (9) and (10) upon petition of the

 

merchant plant. The merchant plant is not required to alter or

 

amend the existing contract with the electric utility in order to

 

obtain the recovery under subsections (9) and (10). The commission

 

shall permit or require the electric utility whose rates are

 

regulated by the commission to recover from its ratepayers all fuel

 

and variable operation and maintenance costs that the electric


utility is required to pay to the merchant plant as reasonably and

 

prudently incurred costs.

 

     (12) Subject to subsection (13), if requested by an electric

 

utility with less than 200,000 customers in this state, the

 

commission shall approve an appropriate revenue decoupling

 

mechanism that adjusts for decreases in actual sales compared to

 

the projected levels used in that utility's most recent rate case

 

that are the result of implemented energy waste reduction,

 

conservation, demand-side programs, and other waste reduction

 

measures, if the utility first demonstrates the following to the

 

commission:

 

     (a) That the projected sales forecast in the utility's most

 

recent rate case is reasonable.

 

     (b) That the electric utility has achieved annual incremental

 

energy savings at least equal to the lesser of the following:

 

     (i) One percent of its total annual retail electricity sales

 

in the previous year.

 

     (ii) The amount of any incremental savings yielded by energy

 

waste reduction, conservation, demand-side programs, and other

 

waste reduction measures approved by the commission in that

 

utility's most recent integrated resource plan.

 

     (13) The commission shall consider the aggregate revenues

 

attributable to revenue decoupling mechanisms, financial

 

incentives, and shared savings mechanisms the commission has

 

approved for an electric utility relative to energy waste

 

reduction, conservation, demand-side programs, peak load reduction,

 

and other waste reduction measures. The commission may approve an


alternative methodology for a revenue decoupling mechanism

 

authorized under subsection (12), a financial incentive authorized

 

under section 75 of the clean and renewable energy and energy waste

 

reduction act, 2008 PA 295, MCL 460.1075, or a shared savings

 

mechanism authorized under section 6x if the commission determines

 

that the resulting aggregate revenues from those mechanisms would

 

not result in a reasonable and cost-effective method to ensure that

 

investments in energy waste reduction, demand-side programs, peak

 

load reduction, and other waste reduction measures are not

 

disfavored when compared to utility supply-side investments. The

 

commission's consideration of an alternative methodology under this

 

subsection shall be conducted as a contested case pursuant to

 

chapter 4 of the administrative procedures act of 1969, 1969 PA

 

306, MCL 24.271 to 24.287.

 

     (14) Within 1 year after the effective date of the amendatory

 

act that added this subsection, By April 20, 2018, the commission

 

shall conduct a study on an appropriate tariff reflecting equitable

 

cost of service for utility revenue requirements for customers who

 

participate in a net metering program or distributed generation

 

program under the clean and renewable energy and energy waste

 

reduction act, 2008 PA 295, MCL 460.1001 to 460.1211. In any rate

 

case filed after June 1, 2018, the commission shall approve such a

 

tariff for inclusion in the rates of all customers participating in

 

a net metering or distributed generation program under the clean

 

and renewable energy and energy waste reduction act, 2008 PA 295,

 

MCL 460.1001 to 460.1211. A tariff established under this

 

subsection does not apply to customers participating in a net


metering program under the clean and renewable energy and energy

 

waste reduction act, 2008 PA 295, MCL 460.1001 to 460.1211, before

 

the date that the commission establishes a tariff under this

 

subsection, who continues to participate in the program at their

 

current site or facility.

 

     (15) The commission shall not authorize a return on equity for

 

a gas or electric utility respectively that exceeds the national

 

average of investor-owned gas or electric utilities' authorized

 

return on equity during the most recent 12 consecutive months

 

available.

 

     (16) If the commission determines that a gas or electric

 

utility's average return on equity over the most recent 12

 

consecutive months exceeded the average of its authorized return on

 

equity over that time period by 20 basis points or more, the

 

commission shall issue a show cause order as to why the gas or

 

electric utility's rates should not be immediately reduced to

 

eliminate the over-collection. The gas or electric utility's rates

 

must be collected under bond and are subject to refund from the

 

date of the commission's show cause order. Upon reestablishing the

 

gas or electric utility's rates to eliminate any future over-

 

collection following the show cause hearing, the commission shall

 

refund to customers, with interest, any amounts the gas or electric

 

utility collected from the date of show cause. The commission shall

 

order the refunds be made to the customers who were overcharged in

 

the actual amount they were overcharged. The rate of interest on

 

the refunds is the gas or electric utility's authorized return on

 

equity.


     (17) (15) Except as otherwise provided in this act, "utility"

 

and "electric utility" do not include a municipally owned electric

 

utility.

 

     (18) (16) As used in this section:

 

     (a) "Full and complete hearing" means a hearing that provides

 

interested parties a reasonable opportunity to present and cross-

 

examine evidence and present arguments relevant to the specific

 

element or elements of the request that are the subject of the

 

hearing.

 

     (b) "General rate case" means a proceeding initiated by a

 

utility in an application filed with the commission that alleges a

 

revenue deficiency and requests an increase in the schedule of

 

rates or charges based on the utility's total cost of providing

 

service.

 

     (c) "Steam utility" means a steam distribution company

 

regulated by the commission.

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