SB 587

SENATE BILL NO. 587
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
and certain providers of electric vehicle charging services; 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 powers and duties of certain
state governmental officers and entities; 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 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 2023
PA 231.
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 in the
service area to be affected, and allow interested parties 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 not later than 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 in 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 not later than 180 days after the motion seeking
partial and immediate rate relief was submitted. Before
issuing an order under this section, the commission shall submit a report to the
house and senate committees with jurisdiction over energy and utility policy
detailing any proposed rate increase, the justification for that rate increase,
and the anticipated impact on customers in this state. Not later than 30 days
after receiving a report under this subsection, the house and senate committees
that received the report shall hold a public hearing to review the proposed
rate increase, receive expert and stakeholder testimony, and issue a nonbinding
recommendation to the commission. 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 after 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 on 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 is 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 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 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 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 in 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 in 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
on 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 must 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 must be reviewed by the commission
upon on 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 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
on 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 its 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 on 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) The incremental energy savings
requirement of section 77(1) of the clean and renewable energy and energy waste
reduction act, 2008 PA 295, MCL 460.1077.
(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) or a financial
incentive authorized under section 75 of the clean and renewable energy and
energy waste reduction act, 2008 PA 295, MCL 460.1075, 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 must be conducted as a contested case in
accordance with chapter 4 of the administrative procedures act of 1969, 1969 PA
306, MCL 24.271 to 24.288.
(14) 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. 460.1232. In any rate case filed after June 1, 2018,
the commission shall, subject to section 173(7) of the clean and renewable
energy and energy waste reduction act, 2008 PA 295, MCL 460.1173, 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. 460.1232. 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, 460.1232, 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) Except as
otherwise provided in this act, "utility" and "electric
utility" do not include a municipally owned electric utility.
(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.