HOUSE BILL No. 5245 October 8, 1997, Introduced by Reps. Alley, Brater, Dobronski, McNutt, Cropsey, Middleton, Whyman and Llewellyn and referred to the Committee on Public Utilities. A bill to restructure the electric utility industry; to deregulate certain aspects of the industry and replace with com- petitive generation markets; to regulate and insure the avail- ability of certain utility services; to provide retail customers with competitive direct access to electric generation; to pre- scribe the powers and duties of certain state agencies and offi- cials; and to prescribe penalties. THE PEOPLE OF THE STATE OF MICHIGAN ENACT: 1 ARTICLE 1. GENERAL PROVISIONS 2 Sec. 101. (1) This act shall be known and may be cited as 3 the "Michigan electric industry restructuring act". 4 (2) The purpose of this act is to do all of the following: 5 (a) To establish a market for electricity in Michigan which 6 provides all customers with access to safe, reliable power at the 7 lowest available prices. 04118'97 SAT 2 1 (b) To restructure the electric utility industry to achieve 2 a deregulated and competitive market for the generation and sale 3 of electricity and related services in which there will be many 4 sellers in addition to many buyers. 5 (c) To ensure that electricity customers realize the full 6 benefits of competition by being able to buy from a wide array of 7 competing, qualified generators and suppliers of electricity. 8 (d) To establish dates certain to accomplish the transition 9 to a competitive electric industry in Michigan. 10 (e) To replace the traditional utility service with an obli- 11 gation to connect the customer to the local distribution 12 utility's regulated transmission and distribution system. 13 (f) To protect and improve the public health, environmental 14 quality, and natural resource values of the state through an 15 effort to reduce or minimize air and water emissions from elec- 16 tricity generation. 17 (g) To provide customer address to programs for low-income 18 assistance and energy conservation and efficiency which shall 19 assure that all citizens have access to a necessary level of 20 electric service. 21 (h) To establish rates and terms and conditions of electric- 22 ity transmission and distribution services for local distribution 23 utilities which are nondiscriminatory, provide equal access and 24 comparability of service and price. 25 (i) To require the separation of the provision of generation 26 services from the provision of transmission and distribution 27 services. 04118'97 3 1 (j) To ensure that customers have full access to alternative 2 suppliers of electricity and related services by requiring open 3 access to the electric transmission grid and distribution 4 system. 5 (k) To require that competition among electricity suppliers 6 and buyers will be fair, nondiscriminatory, and continuous. 7 (l) To provide regulators with the necessary authority to 8 assure reliability and safety of the electric system. 9 (m) To provide regulators with the necessary authority to 10 prevent the anticompetitive exercise of market or monopoly 11 power. 12 (n) To provide local distribution utilities with the oppor- 13 tunity to recover, following the process established herein, 14 their prudently incurred net, verifiable stranded investment 15 costs. 16 (o) To encourage methodologies for the pricing of transmis- 17 sion and distribution services which will enhance reliability, 18 compensate local distribution utilities fairly, allow for widest 19 possible markets for the sale of electricity, create incentives 20 for the maximum utilization of transmission facilities, and 21 relieve transmission constraints. 22 (p) To create a fully competitive market for electricity in 23 Michigan by a date certain as provided in this act, following 24 which time no customers will be denied meaningful access to com- 25 petitive sources of electricity. 26 (q) To encourage aggregation of residential, small and 27 medium-sized businesses, institutions, and schools where 04118'97 4 1 aggregators should be free to use market-based solutions and new 2 technologies to bring the benefits of competitive energy to all 3 customers. 4 Sec. 102. As used in this act: 5 (a) "Administrative procedures act of 1969" means 1969 PA 6 306, MCL 24.201 to 24.328. 7 (b) "Affiliate" means a person that directly or indirectly, 8 through 1 or more intermediaries, controls, is controlled by, or 9 is under common control with a local distribution utility, a 10 person that is an officer of, partner in or trustee of, or serves 11 in a similar capacity with respect to a local distribution utili- 12 ty, or a person that, directly or indirectly, is the beneficial 13 owner of 10% or more of any class of equity securities of another 14 company of which the local distribution utility is directly or 15 indirectly the owner of 10% or more of any class of equity 16 securities. 17 (c) "Board" means the board of directors of Michigan inde- 18 pendent system operator corporation established under article 6. 19 (d) "Commission" means the Michigan public service 20 commission. 21 (e) "Competitive market" means a market in which customers, 22 at their discretion, can choose to buy from many different sup- 23 pliers and change suppliers with relative ease, and where no 24 individual seller or buyer is able to exert market power. 25 (f) "Consumer" or "customer" means an end-user of electric- 26 ity or an aggregator purchasing or brokering electricity for a 27 group of end-users. 04118'97 5 1 (g) "Contested case" or "case" means a proceeding as defined 2 in section 3 of the administrative procedures act of 1969, MCL 3 24.203. 4 (h) "Direct access" means the ability of a retail electric- 5 ity customer to choose its electricity supplier and pay the local 6 distribution utility a reasonable fee to deliver the electricity 7 to the customer. 8 (i) "Divest" or "divestiture" means either a local distribu- 9 tion utility's sale to a nonaffiliate of its electric generating 10 plants and contracts for the purchase of electricity, or the 11 transfer of its electric generating plants and contracts for the 12 purchase of electricity to a separate affiliate corporation of 13 the local distribution utility, 100% of its stock of which corpo- 14 ration, as a part of a divestiture plan, will be distributed to 15 the shareholders of the local distribution utility. 16 (j) "Electricity supplier" means, but is not limited to, any 17 electric utility or any energy service provider which sells elec- 18 tricity and related services at retail to customers located in 19 the service territories of local distribution utilities. 20 (k) "Energy service provider" means the provider of elec- 21 tricity and related services sold to a consumer and delivered by 22 a local distribution utility which is not affiliated with the 23 local distribution utility. 24 (l) "Electric utility" means any public utility including a 25 local distribution utility. 26 (m) "FERC" means the federal energy regulatory commission. 04118'97 6 1 (n) "Independent system operator", "ISO", or "Michigan ISO" 2 means the corporation created in article 6. 3 (o) "Governing body" means the council, commission, or board 4 of trustees of a municipality, or when the charter of a munici- 5 pality provides that a separate board has general management over 6 the municipal electric utility, governing body means that sepa- 7 rate board, subject to review by the legislative body of the 8 municipality as its charter may provide. 9 (p) "Kilowatt" means 1,000 watts. 10 (q) "Local distribution utility" means a public utility, 11 other than a municipal electric utility, subject to the 12 commission's rate jurisdiction which operates the facilities nec- 13 essary to deliver electricity to customers. 14 (r) "Market power" means the ability of 1 or more persons to 15 affect the price of electricity in the relevant market, deny or 16 impede access to the transmission or distribution system, or to 17 tie the use of the transmission or distribution system to the 18 purchase of electricity or other services from a local distribu- 19 tion utility or an affiliate of a local distribution utility. 20 (s) "Market price of divested assets" means the net proceeds 21 received by a local distribution utility as a result of the 22 divestiture of a local distribution utility's generating plants 23 and contracts for the purchase of electricity provided. The 24 transaction shall be conducted in a commercially reasonable 25 manner designed to maximize the proceeds from the divestiture. 26 (t) "Megawatt" means 1,000,000 watts. 04118'97 7 1 (u) "Mitigate" or "mitigation" means the continuing duty of 2 a local distribution utility to reduce or minimize its stranded 3 investment costs, to the fullest extent possible, and to immedi- 4 ately notify the commission if the mitigation has reduced its 5 costs. Mitigation shall include, but not be limited to, contract 6 renegotiation, changes in accounting to the extent they comply 7 with generally accepted accounting principles, asset sales, 8 leases, refinancing, restructuring, general cost reductions, off 9 system electricity sales at prices which provide a net contribu- 10 tion to fixed costs, and income derived from the use of assets 11 giving rise to stranded investment costs. 12 (v) "Municipal electric utility" means an electric utility 13 owned by a municipality. 14 (w) "Municipal electric utility restructuring plan" means a 15 plan under which the customers of a municipal electric utility 16 are provided with access to alternative suppliers of 17 electricity. 18 (x) "Municipality" means a city, township, or village. 19 (y) "Nonpassable transaction charge" means a charge imposed 20 for the purposes described in section 203(1), which may not be 21 avoided by any customer of a local distribution utility except as 22 specifically provided in section 203(1). 23 (z) "Nonpancaked tariff" means a single basic tariff for 24 each level of transmission service applicable to all transmission 25 users within or through an ISO or a designated control area of an 26 ISO. This tariff may be subject to adjustments to reflect 27 differences in the nature of service and voltage levels. 04118'97 8 1 (aa) "Open access" means the operation of utility systems 2 under conditions where consumers can freely choose their elec- 3 tricity suppliers and pay a fee to a local distribution utility 4 to deliver the electricity to the point of end use on nondiscrim- 5 inatory terms and at cost-based rates. 6 (bb) "Person" means an individual, corporation, partnership, 7 association, governmental entity, or other legal entity. 8 (cc) "PSCR factor" means the power supply cost recovery 9 factor as defined in section 6j(1)(b) of 1939 PA 3, MCL 460.6j. 10 (dd) "Regulatory liabilities" means the unrecovered costs 11 relative to demand side management programs, plant abandonment 12 costs, unfunded pension amounts, deferred tax liabilities less 13 reserves of local distribution utilities approved by the commis- 14 sion prior to the effective date of this act but does not include 15 unfunded employee health benefits. 16 (ee) "Related services" means those services incident to the 17 generation, transmission, and distribution of electricity that 18 the commission determines to be the appropriate subject of 19 competition. 20 (ff) "Reliability councils" means the east central area 21 reliability council and other similar organizations. 22 (gg) "Restructuring plan" means a plan under which the cus- 23 tomers of a local distribution utility are provided with access 24 to alternative suppliers of electricity, and which otherwise com- 25 plies with the requirement of this act. 26 (hh) "Stranded investment costs" means those verifiable 27 costs which a local distribution utility prudently incurred 04118'97 9 1 during the era of regulated monopoly service that will result in 2 above-market prices in an era of competition. 3 (ii) "Total load" means the highest 15-minute peak demand on 4 a local distribution utility's system during 1996. 5 (jj) "Transfer capacity" means the ability of electricity 6 somewhere outside this state to deliver electricity to consumers 7 in this state, as measured on a peak day. 8 (kk) "Transition charge" means that charge authorized by 9 section 303. 10 (ll) "Unbundled" or "unbundling" means the separation of 11 various components of electricity production, delivery, and serv- 12 ice and the individual pricing of the components. 13 (mm) "Utility consumer representation fund" means the fund 14 created in section 311. 15 ARTICLE 2. MICHIGAN PUBLIC SERVICE COMMISSION 16 Sec. 201. (1) The commission shall have the jurisdiction 17 and authority to administer this act. 18 (2) In administering this act, the commission shall be 19 limited to the powers and duties prescribed by this act. 20 Sec. 202. In addition to the other duties and powers pre- 21 scribed by this act, the commission shall do all of the 22 following: 23 (a) Establish reasonable terms, conditions, and unbundled 24 rates for local distribution utility service based upon cost of 25 service principles. 26 (b) Require all local distribution utilities to transfer 27 their generation assets into 1 or more separate companies, that 04118'97 10 1 may be an affiliate of the local distribution company, in order 2 to maintain the functional separation of the generation assets 3 from the transmission and distribution assets of the local dis- 4 tribution utility, and to require that separate books and records 5 be kept for such generation assets, transmission assets, and dis- 6 tribution assets. 7 (c) Require all local distribution utilities to comply with 8 the standards of conduct in section 307. 9 (d) Take appropriate action to ensure the creation and con- 10 tinuance of a deregulated and competitive market for the genera- 11 tion and sale of electricity. The commission shall not have the 12 power to regulate the price of the generation component of power 13 sold to a retail customer by an electricity supplier in accord- 14 ance with section 204. 15 (e) Promulgate by emergency rules under section 48 of the 16 administrative procedures act of 1969, MCL 24.248, the manner and 17 form in which local distribution utilities within the state keep 18 accounts, books of accounts, and records in order for the commis- 19 sion to perform its duties, enforce the requirements of this act, 20 and ensure that there is no cross-subsidization of electric 21 services. 22 (f) Promulgate rules under sections 303, 304, and 307. 23 (g) Fulfill its responsibilities with respect to the 24 restructuring of local distribution utilities under article 3, 25 including the ability to modify the content of any restructuring 26 plan proposed by a local distribution utility consistent with the 04118'97 11 1 evidentiary requirements of the administrative procedures act of 2 1969. 3 (h) Require a local distribution utility to provide informa- 4 tion in aid of any investigation, in the form of documents or 5 testimony, in accordance with commission regulations. 6 (i) Refer, where appropriate, its findings to the Michigan 7 or United States attorney general, the United States department 8 of justice, the securities and exchange commission, the federal 9 energy regulatory commission, or the federal trade commission. 10 (j) Intervene, as provided and permitted by law or regula- 11 tion, in any proceeding initiated as result of a referral made 12 under subdivision (i). 13 (k) Require that transmission owners transfer control of 14 their transmission assets to the Michigan ISO or, if a regional 15 group exists, require that transmission owners transfer control 16 of their transmission assets to the regional ISO. 17 (l) Take such steps as may be reasonably necessary to elimi- 18 nate or remove any market barriers to the entry of energy service 19 providers of electricity which are not affiliates of utilities, 20 including ordering divestiture of generation assets as a means of 21 mitigating market power in electric generation, transmission, or 22 distribution. 23 (m) Approve proposed mergers, consolidations, acquisitions, 24 or disposition of assets in accordance with all of the 25 following: 26 (i) The disposition of generating plants to affiliates of a 27 local distribution utility and its affiliates and its holding 04118'97 12 1 companies, mergers, or consolidations of a local distribution 2 utility that involve the acquisition and disposition of assets or 3 securities of other utilities or electricity suppliers shall not 4 be effective unless approved in advance by the commission. The 5 commission shall consider whether a proposed merger, joint ven- 6 ture, consolidation, acquisition, or disposition may result in 7 anticompetitive or discriminatory conduct including, but not 8 limited to, the unlawful exercise of market power that will 9 impede the ability of retail electricity customers to obtain the 10 benefits of a properly functioning and workable competitive 11 retail electricity market. 12 (ii) Upon request for approval of a proposed merger, joint 13 venture, consolidation, acquisition, or disposition of generating 14 plants, the commission shall provide notice and opportunity for a 15 contested case under the administrative procedures act of 1969. 16 If the commission finds, after a hearing, that a proposed utility 17 merger, consolidation, acquisition, or disposition of generating 18 plants is likely to result in anticompetitive or discriminatory 19 conduct, including the exercise of market or monopoly power, that 20 will impede the ability of retail electricity customers to obtain 21 the benefits of a properly functioning and workable competitive 22 retail electricity market, the commission shall not approve the 23 proposed utility merger, consolidation, acquisition, or disposi- 24 tion of generating plants, except upon such terms and conditions 25 as it finds necessary to preserve the benefits of a properly 26 functioning and workable competitive retail electricity market. 04118'97 13 1 (n) Following a contested case, issue orders prohibiting 2 local distribution utilities from providing cross-subsidies from 3 the local distribution utilities to nonregulated entities and 4 from engaging in abusive or preferential affiliate transactions. 5 (o) Order a local distribution utility subject to its juris- 6 diction to interconnect with any retail customer, electric serv- 7 ice provider, or transmitter of electric energy under conditions 8 that will ensure the safety and reliability of the electrical 9 system. The order may be issued pursuant to a request of an 10 interested party, either on an ex parte basis or following an 11 expedited contested case. The commission shall adopt reasonable 12 rules and regulations governing interconnections. The rules and 13 regulations shall include giving the electric service provider or 14 retail customer the option to design, pay for, and own the 15 interconnection. 16 (p) Establish policies and rules to encourage the aggrega- 17 tion of loads within rate classes and between rate classes in 18 order to allow all sizes of customers to purchase electricity 19 from electricity suppliers. 20 (q) Establish the terms, conditions of service, and pricing 21 of back-up power that shall be offered to retail customers by 22 local distribution utilities, until the commission's regulatory 23 authority to regulate the price of back-up power terminates under 24 section 204. 25 (r) By February 15, 1999 and annually thereafter, the com- 26 mission shall hold a public hearing to assess the state of 27 competition in Michigan's market for electricity and to receive 04118'97 14 1 comments on the report which it received from the Michigan ISO 2 under section 604(4). 3 (s) By March 15, 1999 and annually thereafter, the commis- 4 sion shall issue a report to the legislature summarizing the 5 status of the market for electricity in this state. 6 Sec. 203. (1) In addition to the other powers and duties 7 prescribed by this act and following a contested case, the com- 8 mission may do any or all of the following: 9 (a) Establish a nonbypassable transaction charge for all of 10 the following purposes: 11 (i) To collect stranded investment costs as provided in 12 section 304. 13 (ii) To support continued utility service to low income con- 14 sumers who require but cannot pay for electricity service. 15 Before a charge under this subparagraph is approved by the com- 16 mission, the local distribution utility must prove that it has 17 taken all reasonable steps to collect from low income consumers 18 the cost of providing electric service. 19 (iii) To support nuclear decommissioning. 20 (iv) To support the utility consumer representation fund as 21 provided in section 311. 22 (v) To support the creation and continued funding of an 23 ISO. 24 (vi) To encourage cost-effective energy efficiency and con- 25 servation activities and in-state research, operation, and devel- 26 opment of existing, new, and emerging renewable resource 27 technologies. 04118'97 15 1 (b) The charges in subdivision (a) shall be collected from 2 all customers of a local distribution utility except that the 3 nonbypassable transaction charge shall not be applicable to 4 retail electricity sales by the local distribution utility to 5 customer loads that are located in a geographic area in which the 6 local distribution utility did not provide retail service on the 7 effective date of this act, or to the extent that customer loads 8 for the 2-month period immediately preceding the effective date 9 of this act were served by cogeneration, served by 10 self-generation, or directly served by transmission or distribu- 11 tion facilities of another electricity supplier which is not 12 subject to the jurisdiction of the commission. 13 (c) Issue an order prohibiting local distribution utilities 14 that have divested their generating plants and which acquire 15 additional generating plants from using the new generating plants 16 to make direct sales to customers located within the areas served 17 by the local distribution utility's transmission or distribution 18 facilities. 19 (d) Issue an order as provided in section 202, on the 20 commission's own initiative. 21 (e) Issue orders that are intended to eliminate market 22 power. 23 (f) Establish the transition charge provided in 24 section 303(4). 25 (2) The energy efficiency trust fund is created within the 26 state treasury. The fund shall receive $90,000,000.00 per year 27 for 3 years to be collected from customer classes through a 04118'97 16 1 nonbypassable transaction charge based upon their relative 2 contribution to peak demand. 3 (3) The fund shall be made available through a competitive 4 bidding process based upon the greatest reductions in demand and 5 energy on a cost effective basis. The commission shall be 6 responsible for assuring the timely collection of these funds and 7 for their disbursement as follows: 8 (a) One-half of the funds shall be deposited each year in 9 the trust fund, whose interest and earnings only shall be spent 10 as specified in subsection (1) after the expiration of the nonby- 11 passable transaction charge levied for this purpose. 12 (b) One-half of the funds shall be made available each year 13 for energy efficiency programs and services, and allocated to 14 each customer class in proportion to their funding percentage. 15 (4) The funds distribution for energy efficiency services 16 under this section shall be distributed to qualified energy effi- 17 ciency service providers and to eligible customers according to 18 rules promulgated by the commission. The commission shall estab- 19 lish a public advisory committee to assist in the development of 20 the rules and in the oversight of energy efficiency services 21 funded by this section. Eligible program types shall include, 22 but not be limited to, low-interest loans, direct grants, and 23 contracts for achieving energy savings. 24 (5) For the first 3 years after the effective date of this 25 act, the commission shall make available not less than 26 $1,000,000.00 nor more than $5,000,000.00 from the revenues 27 collected from the portion of the nonbypassable transaction 04118'97 17 1 charge levied under this section for grant and loans for the 2 research and demonstration of cost-effective renewable source 3 technologies that have the potential for reducing environmental 4 impacts from electricity generation. The commission shall, with 5 the assistance of the public advisory committee established under 6 subsection (4), establish application procedures for these funds 7 and shall provide that universities, not-for-profit organiza- 8 tions, and other persons may apply and be eligible to receive 9 these funds. 10 Sec. 204. The commission's authority and jurisdiction to 11 regulate the generation component of the price of electricity 12 shall terminate for each local distribution utility at the later 13 of when the commission makes a determination in a final order 14 issued pursuant to a contested case that all retail customers in 15 all rate classes have both the right to choose their electric 16 power suppliers and the actual present ability to exercise that 17 right in a meaningful manner or when any nonbypassable transac- 18 tion nondiscriminatory meter charge related to the collection of 19 stranded investment costs has terminated. 20 ARTICLE 3. RESTRUCTURING OF ELECTRIC UTILITIES 21 Sec. 301. (1) Within 60 days following the effective date 22 of this act, each local distribution utility that has over 23 500,000 customers in this state shall file with the commission an 24 application for approval of a restructuring plan, which shall be 25 consistent with the requirements of this act. 26 (2) Within 270 days following the effective date of this 27 act, each local distribution utility which has less than 500,000 04118'97 18 1 customers in this state shall file with the commission an 2 application for approval of a restructuring plan, which shall be 3 consistent with the requirements of this act. 4 (3) The commission shall immediately conduct a contested 5 case with respect to each restructuring plan, and it shall issue 6 a final order approving or amending the plan within 6 months fol- 7 lowing the filing of a local distribution utility's application. 8 Sec. 302. (1) A restructuring plan approved by the commis- 9 sion shall contain, at a minimum, all of the following 10 components: 11 (a) A provision for the unbundling of the rates for each of 12 the distinct services provided by the local distribution utility, 13 to be effective upon commission approval, including all of the 14 following: 15 (i) A determination of the cost of providing each individual 16 utility service, and the establishment of a separate rate to be 17 charged for each. 18 (ii) A requirement that local distribution utility bills 19 shall list each charge separately. 20 (iii) A determination that the rates set for each service 21 are based upon the cost of providing that service, taking into 22 consideration factors as time of use, the amount of usage, volt- 23 age level of usage, and coincident peak demand. 24 (iv) A determination that the rates for each service are 25 just and reasonable and do not include any cross-class 26 subsidies. 04118'97 19 1 (v) A determination that the rates for each service shall be 2 nondiscriminatory for customers of similar size which take like 3 and contemporaneous service. 4 (vi) A requirement, to the extent practicable, that each 5 service be optional at the discretion of each local distribution 6 utility customer. 7 (vii) The full amount of any discount in effect under a spe- 8 cial contract shall be applied against a customer's unbundled 9 rate for generation. 10 (b) A rate structure providing that those customers electing 11 to receive unbundled local distribution service including standby 12 service shall pay no more for the service than the cost the 13 applicable unbundled service components would have been if com- 14 puted as of January 1, 1997, or January 1, 1998, for local dis- 15 tribution utilities with less than 500,000 customers in this 16 state for the applicable customer class, as adjusted for known 17 reductions in revenue requirements and customers electing to pur- 18 chase all of their electricity requirements from a local distri- 19 bution utility shall receive utility service in accordance with 20 the commission-approved tariffs, but in no event shall customers 21 have to pay more for such service including any nonbypassable 22 transaction charge than the cost of the applicable tariff rate, 23 including the then effective PSCR factor, in effect as of 24 January 1, 1997, or January 1, 1998, for local distribution util- 25 ities with less than 500,000 customers in this state, for the 26 applicable class as adjusted for known reductions in revenue 27 requirement. A restructuring plan shall keep the rate structure 04118'97 20 1 in place, and 1939 PA 3, MCL 460.1 to 460.8, shall continue to 2 apply to tariff rates, until the commission makes the determina- 3 tion described in section 204. 4 (c) A provision encouraging the aggregation of load among 5 electricity customers in order to facilitate and maximize direct 6 access transactions for smaller customers including, but not 7 limited to, residential, small and medium-sized businesses, 8 institutions, and schools. 9 (d) A transition timetable and provisions for stranded cost 10 recovery consistent with either option A under section 303 or 11 option B under section 304 as selected by each local distribution 12 utility consistent with this section. 13 (2) Prior to the beginning of retail access, each 14 investor-owned electric utility shall prepare a plan for provid- 15 ing transition services and benefits for eligible employees. The 16 plan must do all of the following: 17 (a) Include a program to assist eligible employees in 18 obtaining employment. 19 (b) For 3 years after the beginning of retail access, or 20 until divestiture under this act is complete, whichever is later, 21 provide to eligible employees retraining services, including 22 vocational and technical training and out-placement services and 23 benefits. 24 (c) For 24 months or until permanent replacement coverage is 25 obtained through reemployment, whichever comes first, provide 26 continued health care insurance at the benefit and contribution 27 levels existing during employment with the utility. 04118'97 21 1 (d) Provide severance pay equal to 2 weeks of base pay for 2 each year of full-time employment, but in no event shall the 3 amount paid be in excess of 26 weeks of pay. 4 (3) Each investor-owned utility shall file with the commis- 5 sion a plan for providing transition services and benefits for 6 eligible employees that conforms to the requirements of this 7 section. A plan must be filed prior to the utility finalizing 8 any transaction that would result in an eligible employee being 9 laid off or at least 90 days prior to the start of retail access, 10 whichever is first. Prior to filing the plan with the commis- 11 sion, the utility shall inform its employees and their certified 12 representatives of the provisions of the proposed plan and, in 13 accordance with applicable law, shall confer with those employees 14 or their certified representatives regarding the impact of the 15 proposed plan on those employees. 16 (4) While a plan is in effect, an investor-owned utility 17 shall file notice with the commission of any closure or reloca- 18 tion of facilities and any action or reorganization that will 19 result in terminations. The notice must include a description of 20 the actions, the reasons for them, and an assessment of their 21 effects on the utility. 22 (5) If a local distribution utility company or 1 or more of 23 its subsidiary or parent companies are party to a collective bar- 24 gaining agreement recognized by federal or state law, and if as a 25 result of retail competition any of those companies create, 26 acquire, are acquired by, or merge with any other entity, that 27 entity shall continue to recognize and bargain with the union 04118'97 22 1 representing the employees of the company at the time of the 2 creation, acquisition, or merger and shall refrain from making 3 unilateral changes in the employees' terms and conditions of 4 employment. In addition, any successor employer is bound to the 5 terms of the collective bargaining agreement to the extent per- 6 mitted by federal law. Nothing in this section prevents any com- 7 pany, corporation, or other business from entering into any col- 8 lective agreement as allowed by state or federal law. 9 (6) The commission shall allocate the reasonable cost of the 10 services and benefits required under this section, and subtract 11 the value of benefits that can be obtained through existing fed- 12 eral and state programs which provide similar benefits, balances 13 in existing utility pension or benefit funds attributable to 14 departing employees which cannot be used by those employees, and 15 labor cost and tax reductions associated with utility generating 16 plants for the longer of 6 years or until retail utility rates 17 are fully deregulated, as established in a true-up process to be 18 conducted each year by the commission. Costs of services and 19 benefits minus the reductions provided in this subsection may be 20 recovered through charges collected by the local distribution 21 utility. All charges collected must be transferred to a system 22 benefits administrator in the transmission and local distribution 23 utility and used to provide services and benefits pursuant to the 24 requirements of this section. 25 (7) The commission shall adopt rules necessary to implement 26 this section. 04118'97 23 1 (8) As used in this section: 2 (a) "Eligible employees" means all employees of an electric 3 utility who are all of the following: 4 (i) Not officers of the utility. 5 (ii) Employed by the utility on January 1, 1998. 6 (iii) Generation-related employees terminated due to retail 7 competition within 3 years after the effective date of this act, 8 who are not hired by the local distribution utility or an 9 affiliate. 10 (iv) An employee by reason of the transfer of the employee's 11 job duties or assignment within a company or within affiliated 12 companies. 13 (b) "Retail competition" means retail access or the sale of 14 any generation asset that occurs under this act. 15 (9) Each public utility shall choose either option A under 16 section 303 or option B under section 304. 17 Sec. 303. Option A shall include all of the following: 18 (a) In order to provide each local distribution utility with 19 the opportunity to recover its stranded investment costs, rates 20 of return with respect to a local distribution company's elec- 21 tricity generating facilities will not be regulated as of January 22 1, 1997. 23 (b) Until April 1, 2001, each local distribution utility 24 shall be entitled to continue charging the unbundled electric 25 energy portion of its full retail rates for electricity supply 26 service at the levels in effect as of January 1, 1997. A utility 04118'97 24 1 may voluntarily charge less if it chooses, but retail rates shall 2 be capped at the levels in effect as of January 1, 1997. 3 (c) In order to provide each local distribution utility with 4 the opportunity to recover its stranded investment costs, com- 5 mencing on January 1, 1997, each electric utility shall be per- 6 mitted to retain, free from commission rate regulation, the value 7 and other benefits of the following measures it may take with 8 respect to its electricity supply service: 9 (i) Revising its electricity production asset or contract 10 portfolio, or both, through sales, exchanges, leases, negotia- 11 tions, buy outs, or purchases, or any combination thereof. 12 (ii) Changing the amounts, rates, methods, or terms, or any 13 combination thereof, of the depreciation of its assets. 14 (iii) Changing the amounts, rates, methods, or terms, or any 15 combination thereof, of the amortization of its regulatory or 16 other assets. 17 (iv) Implementing efficiency or technological improvements, 18 or both. 19 (v) Implementing capital, expense, and other cost 20 reductions. 21 (vi) Earning in excess of its authorized rate of return. 22 (vii) Any other measures consistent with this act which will 23 enhance the competitive posture of the utility's generation 24 services. 25 (d) Retail competition among electricity sellers shall be 26 phased in by each local distribution utility as follows: 04118'97 25 1 (i) Commencing on April 1, 1998, 1/3 of each utility's 2 customer load will be given an opportunity to purchase 3 electricity from 1 or more sellers of electricity selected by the 4 customer, provided the customer continues to pay the local dis- 5 tribution utility, in addition to transmission and distribution 6 charges, .005 cents per kilowatt to offset stranded investment 7 costs. The .005 cent charge shall be set forth on all customer 8 retail bills as a separate component of existing frozen rates and 9 on direct access bills as a separate transition charge. 10 (ii) Commencing on April 1, 1999 by payment of the transi- 11 tion charges, an additional 1/3 of each utility's customer load 12 will be given the same opportunity. 13 (iii) Commencing on April 1, 2000, the remaining 1/3 of each 14 utility's customer load will be given the same opportunity by 15 payment of the transition charge. 16 (iv) As of April 1, 2001, the transition charge will cease. 17 (e) In order for it to qualify for the regulatory treatment 18 provided for under option A, a local distribution utility must 19 file with the commission a written election and certification of 20 understanding and agreement, approved by its board of directors, 21 that it shall expeditiously take steps to increase the total 22 transfer capacity at each interconnection which the local distri- 23 bution utility has with another utility by 150% from the amount 24 of total transfer capacity existing at each interconnect as of 25 January 1, 1997 unless otherwise directed by an ISO, or divest 26 all of its generating assets and contracts for the purchase of 27 electricity. The election and certification of understanding and 04118'97 26 1 agreement shall further specify that the phase-in of the 2 increases will take place as soon as reasonably possible, consid- 3 ering planning, engineering, and construction lead times. All 4 required increases in transfer capacity shall be completed not 5 later than 5 years from the date of filing of the election and 6 certification of understanding and agreement with the 7 commission. 8 (f) On each anniversary date following the date of the 9 filing of the election and certification of agreement with this 10 commission, each local distribution utility that has selected 11 option A shall file with the commission a report, together with 12 sworn testimony and exhibits, detailing the progress it has made 13 toward achieving the required increases in total transfer capac- 14 ity and the amount of stranded investment cost recovery achieved 15 by the local distribution utility during the preceding year, and 16 the commission shall commence a contested case hearing with 17 respect to the election. If the commission determines in any of 18 the first 4 hearings that the local distribution utility has 19 failed to take good faith steps to increase the total transfer 20 capacity as required, or if the commission determines at the 21 fifth hearing, should it be necessary, that the 150% increase 22 required at the end of 5 years was not in fact achieved, the com- 23 mission shall issue an order directing the local distribution 24 utility to divest itself of all of its electric-generating facil- 25 ities and contracts for the purchase of electricity no later than 26 7 years following the filing by the local distribution utility of 27 its election and certification of understanding and agreement. 04118'97 27 1 During the period of time the local distribution utility is 2 implementing its divestiture requirement, the local distribution 3 utility shall continue to operate under the rate cap as provided 4 in subdivision (b) and it will enter into short-term purchase 5 power contracts to serve the customers which do not engage in 6 direct access at the lowest reasonable cost. 7 (g) In the event the commission issues an order of divesti- 8 ture as provided by this section, the order shall be enforced by 9 the circuit court upon application by the commission, the attor- 10 ney general, or any other interested party. 11 Sec. 304. Option B shall include all of the following: 12 (a) A provision requiring that all customers of a local dis- 13 tribution utility have the right to choose their electricity 14 power supplier in accordance with a transition timetable under 15 which no later than 90 days following a final commission order 16 under section 301(3), 1/3 of the local distribution utility's 17 total load will be eligible for direct access, with an additional 18 1/3 being eligible beginning 18 months following the final order 19 and the final 1/3 being eligible beginning 30 months following 20 the final order. A local distribution utility with less than 21 500,000 customers in this state may elect to make only 10% of its 22 total load eligible for direct access within 90 days of a final 23 order under section 301(3) and an additional 10% of its total 24 load eligible within 18 months and 30 months from the date of the 25 order, respectively. If a utility makes this election, it may 26 not seek approval of the nonbypassable meter charge authorized by 27 subdivision (b). 04118'97 28 1 (b) After a contested case, the commission shall approve a 2 nonbypassable transaction charge under this section to recover a 3 utility's stranded investment costs. A local distribution util- 4 ity owning 10% or more of the generating capacity in this state 5 as measured by the nameplate ratings of its total generating 6 capacity shall divest itself of all of its generating plants and 7 purchase power contracts by sales to nonaffiliates using commer- 8 cially reasonable business practices designed to maximize both 9 the sales proceeds and the number of new owners of the generating 10 plants and for the purchase of electricity contracts. All of the 11 following apply to the approval of a nonbypassable transaction 12 charge under this section: 13 (i) All sales of generating plants and for the purchase of 14 electricity contracts must be completed within 3 years of the 15 date of commission approval of a local distribution utility's 16 restructuring plan or the utility will not be eligible for 17 stranded investment cost recovery. 18 (ii) Once the provisions of subdivision (a) have been com- 19 pleted, a local distribution utility may file an application with 20 the commission requesting recovery of its stranded investment 21 costs and said application shall, at a minimum, include: 22 (A) A bona fide plan and commitment to retire the outstand- 23 ing debt related to the stranded investments for which the local 24 distribution utility is seeking recovery. 25 (B) A demonstration that the sales were conducted in a com- 26 mercially reasonable manner designed to maximize the sales 27 price. 04118'97 29 1 (C) A demonstration that a local distribution utility sold 2 the local distribution utility's various generating plants and 3 purchase power contracts to the greatest number of unaffiliated 4 buyers as possible. In no event may any purchaser or its affili- 5 ate purchase more than 30% of a local distribution company's gen- 6 erating plants or purchase power contracts. 7 (D) The net price received for all generating plants and 8 purchase power contracts. 9 (E) Sufficient information to demonstrate that the buyer is 10 not an affiliate. 11 (F) A complete explanation of how the above market costs 12 were incurred and if affiliates were involved. 13 (G) A full and complete explanation and justification of why 14 the commission should not deny recovery of some or all of the 15 stranded costs incurred by reason of transactions with 16 affiliates. 17 (H) The amount of stranded investment cost recovery expected 18 to be received from customers which continue purchasing all of 19 their electricity requirements from their local distribution 20 utilities. 21 (I) The total stranded investment costs and the proposed 22 nonbypassable transaction charge for each customer class and an 23 explanation of the data used to calculate the charges. 24 (iii) Pursuant to an application for recovery of stranded 25 investment costs, the commission shall issue an order approving a 26 reasonable nonbypassable transaction charge, provided that where 27 the stranded investment costs arose through dealings with an 04118'97 30 1 affiliate of the local distribution utility, the commission may 2 approve none or only a portion of the stranded investment costs 3 if the stranded investment costs are unverifiable, unreasonable, 4 or imprudently incurred and in no event shall the commission 5 approve any stranded investment cost recovery related to capacity 6 and energy charges of purchase power contracts except for the 7 period remaining in the 17-1/2 years during which the commission 8 is precluded from reconsideration of previously approved capacity 9 charges, as provided in section 6j(13)(b), 1939 PA 3, MCL 10 460.6j. 11 (iv) The nonbypassable transaction charge will be calculated 12 and allocated between rate classes of the local distribution 13 utility based on class demands over a representative historical 14 12-month period. 15 (v) The nonbypassable transaction charge will be calculated 16 to be a levelized amount over the transition period during which 17 it is to be collected based upon forecasts of metered electricity 18 flows to customers, including amounts contributed toward stranded 19 investment costs by customers which continue to purchase all of 20 their electricity requirements from their local distribution 21 utilities, subject to periodic review and further adjustments as 22 provided in this act. 23 (vi) The stranded investment costs which the nonbypassable 24 transaction charge under option B is to recover shall include an 25 amount, determined as of the date of divestiture of each generat- 26 ing plant or purchase power contract which represents the sum of 27 the original cost of all generating plant less booked 04118'97 31 1 depreciation through the date of divestiture, the nonmitigable 2 cost of all power under purchase power contracts as approved by 3 the commission, and the cost of regulatory liabilities, less the 4 market price of these assets or liabilities and the net present 5 value of any tax benefits or credits that have been generated by 6 customers of a local distribution utility as a result of normal- 7 ized tax accounting. There is no stranded investment cost 8 related to operations and maintenance expense, administrative, 9 marketing, and general expense or related categories of expenses, 10 and there is no stranded investment cost related to any expendi- 11 tures or contracts made after the effective date of the federal 12 energy policy act of 1992. 13 (c) Any stranded investment cost will be collected over a 14 transition period of not to exceed 5 years, commencing on the 15 effective date of the approval by the commission of a local dis- 16 tribution utility's application. 17 (d) An annual review by the commission to determine whether 18 nonbypassable transaction charge should remain in effect, termi- 19 nated, or adjusted, because the local distribution utility has 20 done any of the following: 21 (i) Not actively facilitated a transition to an open and 22 competitive market for generation. 23 (ii) Not provided nondiscriminatory open and direct access 24 to customers. 25 (iii) Engaged in anticompetitive or discriminatory conduct. 26 (iv) Exercised undue market power. 04118'97 32 1 (v) Not mitigated its stranded costs. 2 (vi) Not reduced or eliminated any transmission 3 constraints. 4 (vii) Not provided consumers reasonable and cost-based 5 access to its transmission and distribution facilities. 6 (viii) Not retired the debt associated with the assets, 7 which gave rise to the stranded investment cost payments made by 8 customers. 9 (ix) Not joined in a regional ISO or formed a state ISO if 10 no regional ISO exists. 11 (e) A local distribution utility shall file within 60 days 12 of the yearly anniversary date of the order approving the 13 restructuring plan an application which addresses all of the mat- 14 ters set forth in subsection (4), the commission shall immedi- 15 ately commence an expedited contested case and the commission 16 shall enter its final order within 210 days of the filing of the 17 application. 18 (f) The local distribution utility has the burden of proof 19 with respect to all matters set forth in subsection (4). 20 (g) During the annual review provided in subsection (4) the 21 commission may adjust the levelized nonbypassable transaction 22 charge to reflect changes in forecasted metered electricity flows 23 and in the forecasted amounts that will be contributed to 24 stranded investment cost recovery by those customers which con- 25 tinue to purchase all of their electricity requirements from 26 their local distribution utilities. 04118'97 33 1 (h) The commission shall order refunds of the nonbypassable 2 transaction charges which have been collected if the local 3 distribution utility has not complied with the provisions of this 4 act. 5 Sec. 305. Under either option A or option B, the increment 6 of load made eligible for direct access shall be allocated during 7 each such transition period first by rate class, based upon each 8 class's contribution, including interruptible and firm customers, 9 to either the single or the average of the 3 highest peak 10 demands, and then to individual customers within a rate class, 11 either by customer lottery with respect to those classes whose 12 rates do not contain a demand component, or in the case of 13 classes whose rates do contain a demand component to all custom- 14 ers who make application for same by allocating the available 15 capacity to them in proportion to their respective contract 16 demands. To the extent that a particular class of utility cus- 17 tomer does not utilize the entire amount of total load allocated 18 to it, that amount shall be distributed proportionally to the 19 other classes until such time as the entire amount of total load 20 made eligible for direct access during the transition period has 21 been fully subscribed. The commission shall establish procedures 22 to reallocate unsubscribed capacity. 23 Sec. 306. (1) An electricity supplier shall not be required 24 to provide a local distribution utility with reciprocal rights to 25 sell electricity in the service territories of the electricity 26 supplier as a prerequisite to making retail sales in the service 27 territory of the utility. 04118'97 34 1 (2) If, after 3 years from the date of the final order 2 issued under section 301(3), a local distribution utility is not 3 allowed to make sales of electricity to customers located in the 4 service territory of a utility selling electricity to consumers 5 in the local distribution utility's service territory, then, upon 6 application by the local distribution utility, the commission 7 shall have the authority to impose a condition of reciprocity as 8 a prerequisite for a utility to continue sales of electricity in 9 this state. 10 Sec. 307. (1) All local distribution utilities shall be 11 required to comply with the following standards of conduct: 12 (a) A local distribution utility shall strictly enforce 13 tariff provisions for which there is no discretion in the appli- 14 cation of the provision. A local distribution utility shall 15 apply tariff provisions in the same manner to the same or 16 similarly-situated entities if there is discretion in the appli- 17 cation of the provision. A local distribution utility shall not, 18 through a tariff provision or otherwise, give its affiliated 19 electricity supplier or customers of its affiliated electricity 20 supplier preference over nonaffiliated electricity suppliers or 21 customers thereof in matters relating to any product or service. 22 (b) To the extent technically possible, all products and 23 services offered by a local distribution utility shall be avail- 24 able on a comparable basis to all customers and electricity sup- 25 pliers simultaneously. Any discount, rebate, or fee waiver for 26 any product or service offered by a local distribution utility 04118'97 35 1 shall be offered on a comparable basis to all customers and 2 electricity suppliers simultaneously. 3 (c) A local distribution utility shall not sell or otherwise 4 provide products or services to its affiliated electricity sup- 5 pliers without either posting the offering electronically on a 6 well-known source or otherwise making a sufficient offering to 7 the market for that product or service. 8 (d) A local distribution utility shall process all similar 9 requests for a product or service in the same manner and within 10 the same period of time. 11 (e) A local distribution utility shall not condition or tie 12 the provision of any product, service, or rate agreement by the 13 local distribution utility to the provision of any product or 14 service in which an affiliated electricity supplier is involved. 15 (f) A local distribution utility shall process all similar 16 requests for information in the same manner and within the same 17 period of time. A local distribution utility shall not provide 18 information to an affiliated electricity supplier without a 19 request in cases where information is made available to nonaffil- 20 iated electricity suppliers only upon request. A local distribu- 21 tion utility shall not allow an affiliated electricity supplier 22 preferential access to any nonpublic information regarding the 23 distribution system or customers taking service from the local 24 distribution utility that is not made available to nonaffiliated 25 electricity suppliers upon request, and shall instruct all of its 26 employees not to provide affiliated electricity suppliers or 04118'97 36 1 nonaffiliated electricity suppliers any preferential access to 2 nonpublic information. 3 (g) Employees of a local distribution utility are prohibited 4 from sharing with any affiliated electricity supplier or any non- 5 affiliated electricity supplier any market information acquired 6 from the affiliated electricity supplier or from any nonaffili- 7 ated electricity supplier, or any market information developed by 8 the distribution utility in the course of responding to requests 9 for distribution services. 10 (h) A local distribution utility shall keep a log of all 11 requests for information made by the affiliated electricity sup- 12 plier and nonaffiliated electricity supplier and the date of the 13 response to the requests. The log shall be subject to periodic 14 review by the commission. The commission shall establish catego- 15 ries of requests for information and shall specify which of the 16 categories, if any, are sufficiently trivial as to be exempt from 17 the log requirements. 18 (i) A local distribution utility shall not release any pro- 19 prietary customer information without the prior written authori- 20 zation of the customer. 21 (j) A local distribution utility shall refrain from giving 22 any appearance of speaking on behalf of its affiliated electric- 23 ity supplier. Neither a distribution utility nor an affiliated 24 electricity supply shall in any way represent that any advantage 25 accrues to customers or others in the use of the local distribu- 26 tion utility's services as a result of that customer or others 27 dealing with the affiliated electricity supplier. A local 04118'97 37 1 distribution utility shall not engage in joint advertising or 2 marketing programs of any sort with its affiliated electricity 3 supplier, nor shall the local distribution utility promote or 4 market any product or service offered by its affiliated electric- 5 ity supplier. The commission shall maintain a list of all elec- 6 tricity suppliers, which list shall be kept current. If a cus- 7 tomer requests information about electricity suppliers, the local 8 distribution utility shall provide a copy of the list with elec- 9 tricity suppliers to appear in random sequence and not in alpha- 10 betical order, but the local distribution utility shall in no way 11 promote its affiliated electricity supplier. 12 (k) Employees of a local distribution utility are prohibited 13 from stating or providing to any customer or potential customer 14 any opinion regarding the reliability, experience, qualifica- 15 tions, financial capability, managerial capability, operations 16 capability, customer service record, consumer practices, or 17 market share of any affiliated electricity supplier or nonaffili- 18 ated electricity supplier. 19 (l) Employees of a local distribution utility shall not be 20 shared with, and shall be physically separated from those of, an 21 affiliated electricity supplier. The commission may approve an 22 exemption from these separation requirements upon a finding by 23 the commission that shared employees or facilities would be in 24 the best interest of the public, that such sharing would have no 25 anticompetitive effect, and that the costs of the shared employ- 26 ees or facilities can be fully and accurately allocated between 27 the local distribution utility and the affiliated electricity 04118'97 38 1 supplier. Any request for an exemption shall be accompanied by a 2 full and transparent allocation of costs for any shared facili- 3 ties or general and administrative support services, and the com- 4 mission shall allow a reasonable opportunity for parties to 5 submit comments regarding any request for an exemption. An 6 exemption shall be valid until such time that the commission 7 determines that modification or removal of the exemption is 8 necessary. 9 (m) A local distribution utility and its affiliated elec- 10 tricity supplier shall keep separate books of accounts and 11 records that shall be subject to review by the commission. 12 (n) A local distribution utility shall establish and file 13 with the commission a dispute resolution procedure to address 14 complaints alleging violations of these rules. The procedure, at 15 a minimum, shall designate a person to conduct an investigation 16 of the complaint and communicate the results of the investigation 17 to the claimant in writing within 30 days after the complaint was 18 received, including a description of any action taken and the 19 complainant's right to file a complaint with the commission if 20 not satisfied with the results of the investigation. The local 21 distribution utility shall maintain a log of all complaints. 22 (2) A local distribution utility that owns and operates an 23 affiliate, including a contract affiliate, in this state shall do 24 all of the following: 25 (a) The affiliate and the local distribution utility shall 26 operate from physically separate locations. The affiliate must 04118'97 39 1 maintain inventory and equipment separately from the local 2 distribution utility. 3 (b) The local distribution utility shall perform competitive 4 solicitations to select contractors for the implementation of 5 utility-sponsored energy efficiency programs and other resource 6 acquisition solicitations. The affiliate may submit a proposal, 7 but will receive no preferential treatment evaluation and con- 8 tracting terms as a nonaffiliated bidder. The local distribution 9 utility shall not purchase from the affiliate or provide the 10 affiliate with any nontariff services. 11 (c) Local distribution utility personnel and assets, includ- 12 ing corporate officers and directors, and equipment, shall not be 13 used to perform analyses or provide other services for the affil- 14 iate, unless the affiliate is charged the full fair market value 15 cost of the analysis or service, and similar services are offered 16 to nonaffiliates at similar terms. 17 (d) The local distribution utility may not disclose to its 18 affiliate any information obtained in connection with providing 19 utility services to a customer or potential customer. 20 (e) The local distribution utility must offer the same dis- 21 counts, rebates, fee waivers, penalty waivers, or guarantees to 22 all nonutility affiliated suppliers or customers that it offers 23 to its affiliate or customers of its affiliate. 24 (f) The local distribution utility shall process all similar 25 requests for regulated utility services in the same manner and 26 within the same period of time, whether requested on behalf of 27 competitive activities or a third party. This provision shall 04118'97 40 1 not be construed to limit the local distribution utility's 2 ability to carry out its public service obligation as it consid- 3 ers necessary. 4 (g) Joint calls are prohibited. A customer may arrange to 5 have a local distribution utility representative call separately 6 to advise on technical matters unrelated to sales, but the repre- 7 sentative shall not make joint sales calls with an affiliate 8 representative. 9 (h) Joint promotions between the local distribution utility 10 and the affiliate are prohibited, such as inclusion of flyers for 11 the affiliate in the local distribution utility's bills or any 12 similar access to billing information. The local distribution 13 utility shall not allow its affiliates to utilize its name in any 14 manner such that customers can reasonably imply that the distri- 15 bution services provided by the company are of a superior quality 16 when power is purchased from an affiliate, that the merchant 17 services are being provided by the distribution utility rather 18 than the affiliate, or that the power purchased from the competi- 19 tive supplier may not be reliably delivered. This prohibits the 20 display of the utility's brand name logo on personnel uniforms or 21 company vehicles. Promotional material may not allow the affili- 22 ate to be identified as an affiliate of the local distribution 23 utility. 24 (i) The local distribution utility shall not provide sales 25 leads to its affiliate and must refrain from giving the appear- 26 ance that the local distribution utility speaks on behalf of its 27 affiliate. If a customer requests information about equipment 04118'97 41 1 suppliers or providers of conservation or other services sold by 2 affiliates, to the extent the local distribution utility responds 3 to the request, the local distribution utility shall provide a 4 list to all suppliers in the area and shall not promote the 5 affiliate. Furthermore no employee of a local distribution util- 6 ity who has responsibilities in the areas of system planning, 7 system operation, power services, or customer services shall also 8 be an employee of any affiliated company. 9 (j) Nonregulated affiliates should not be allowed to market 10 the benefit of buying their products through financing provided 11 by their utility parent. Financing of purchases in the competi- 12 tive marketplace on the utility bill shall be made available to 13 all qualified competitors and their customers, if such services 14 are made available to any affiliate, at the same terms and 15 rates. 16 (k) All transactions between regulated utility activities 17 and competitive activities shall be accounted for in accordance 18 with the local distribution utility's cost allocation manual. 19 Any transaction or activity offered by the local distribution 20 utility to the affiliate must be offered to all competitors under 21 the same terms and conditions. Any transaction or activity 22 offered by the affiliate to the local distribution utility must 23 be offered to all competitors under the same terms and 24 conditions. 25 (3) Local distribution utilities shall disclose a customer's 26 billing determinants including monthly usage, maximum demands, 27 and on-peak billing demands, if available, promptly upon receipt 04118'97 42 1 of a request which includes a signed consent by the customer and 2 shall charge the requesting party no more than the local distri- 3 bution utility's actual and reasonable out-of-pocket expenses. 4 Sec. 308. The commission shall, within 180 days following 5 the effective date of this act, promulgate rules which establish 6 minimum standards for electricity suppliers that may sell elec- 7 tricity to retail customers, and otherwise deal with the subject 8 of electricity suppliers. The rules shall, at a minimum, do all 9 of the following: 10 (a) Ensure that electricity suppliers are financially able 11 to honor their contracts with consumers. 12 (b) Require electricity suppliers, as a precondition to 13 making electricity sales to customers in this state, to consent 14 to abide by all informational filing requirements of the 15 commission. 16 (c) Require electricity suppliers, as a precondition to 17 making electricity sales to customers in this state, to submit 18 themselves to the jurisdiction of the Michigan courts. 19 (d) Subject to section 302, expressly state that electricity 20 suppliers shall not be required to offer reciprocity as a precon- 21 dition to making electricity sales to customers in this state. 22 (e) Expressly state that electricity suppliers shall not be 23 required to join any power pool as a precondition of making sales 24 of electricity to customers in this state. 25 Sec. 309. (1) The commission shall license competitive 26 electricity suppliers in accordance with this section. 04118'97 43 1 (2) A retail electricity supplier shall not engage in the 2 business of the sale, marketing, brokering, or aggregating for 3 the sale of electricity in this state without a license under 4 this act. A retail electric supplier who seeks to do business in 5 this state shall file an application with the commission that 6 includes all of the following information: 7 (a) The legal name of the applicant. 8 (b) The business address of the applicant. 9 (c) The state where the applicant incorporated, date of 10 organization, and a copy of the articles of incorporation, asso- 11 ciation, or other form of organization. 12 (d) The name and business address of all officers and direc- 13 tors, partners, or other similar officials of the applicant. 14 (e) The name, title, and telephone number of the applicant's 15 customer service contact person. 16 (f) The name, title, and telephone number of the applicant's 17 regulatory contract person. 18 (g) The name, title, and address of the applicant's regis- 19 tered agent in this state for service of process. 20 (h) A description of the nature of the business to be con- 21 ducted, and a map showing the geographic area where the applicant 22 seeks to do business. 23 (i) A copy of a standard contract form for typical residen- 24 tial customers. 25 (j) Whether the applicant or any member of its board of 26 directors or officers have been or are the subject of state or 04118'97 44 1 federal investigation, license revocation, or lawsuit, and, if 2 so, the identification of the proceedings. 3 (k) Evidence of financial soundness, such as surety bonds, a 4 recent financial statement, or other evidence as specified by the 5 commission. 6 (3) The application shall be deemed approved after 90 days, 7 unless the commission initiates a contested case proceeding by 8 notice and public hearing that states the reason why the applica- 9 tion should be denied. The applicant shall have an opportunity 10 to correct any deficiency noted by the commission in writing. A 11 failure to comply with the application requirements or evidence 12 that indicates a pattern of violation of state or federal con- 13 sumer protection laws and rules, including antitrust laws and 14 securities rules, shall be sufficient to deny an application. A 15 license shall remain valid for a period of 5 years unless sooner 16 revoked for cause, but may be renewed upon filing of updated 17 information. 18 (4) After a license is issued, a retail electricity supplier 19 must inform the commission in writing of any material change in 20 the information which was originally submitted to obtain a 21 license from the commission within 10 days of the change. The 22 failure to provide such information in a timely manner shall be 23 grounds for revocation of the license. 24 (5) The commission may revoke a license for the retail sale 25 of electricity for cause after opportunity for public hearing. 26 (6) A retail electricity supplier shall promptly provide a 27 written contract to a residential customer who has agreed to 04118'97 45 1 purchase electricity from the supplier. The contract shall be in 2 writing and contain all the material terms. At a minimum, the 3 contract shall conspicuously disclose all of the following 4 information: 5 (a) The recurring and nonrecurring per kilowatt hour and 6 monthly charges. 7 (b) The supplier's typical source of electricity and the 8 average source of fuel for generation of such electricity during 9 the preceding year. 10 (c) The customer's right to file a complaint with the com- 11 mission after the customer has attempted to resolve the dispute 12 with the supplier. 13 (d) The supplier's license number from the commission, full 14 disclosure of all names under which the supplier does business in 15 this state, how the consumer will receive bills, and the name and 16 address of the supplier's billing agent, if any. 17 (e) The customer's scheduling and notification requirements, 18 if any, and which party is ultimately responsible for imbalance 19 charges. 20 (7) A retail electricity supplier shall enter into a con- 21 tract with each distribution company that services its 22 customers. The contract which shall be approved as to form and 23 content by the commission shall describe the billing arrangements 24 between the distribution company and the supplier, how informa- 25 tion concerning customer status will be transmitted between the 2 26 entities, whether and under what conditions upstream metering 27 will occur to facilitate settlements of nonhourly metered 04118'97 46 1 customers, and other settlement issues. The contract shall be 2 filed with the commission by the retail electric supplier prior 3 to the commencement of business by the supplier in this state. 4 If the local distribution utility and electricity supplier cannot 5 reach agreement to enter a contract, the electricity supplier 6 shall file a fully executed contract in the form approved by the 7 commission with the local distribution utility and the commission 8 and shall be entitled to receive the services covered in the 9 contract. 10 (8) A retail electric supplier shall inform every prospec- 11 tive customer of the availability of universal service programs 12 for qualified customers and how customers can apply for such 13 programs. A summary of the programs shall be provided in writing 14 within 10 days of commencement of service for residential 15 customers. 16 (9) Upon reasonable cause, the commission may initiate an 17 investigation for the purpose of determining compliance with this 18 act. Upon the filing of a complaint or upon the commission's 19 investigation, the commission shall have the right to obtain from 20 any electricity supplier relevant information pertaining to the 21 subject matter of the complaint or investigation. The supplier 22 shall make such information available to the commission within 23 this state at a location convenient to both parties. All compet- 24 itively sensitive information identified by the supplier shall be 25 placed under seal and shall be exempt from the freedom of infor- 26 mation act, 1976 PA 442, MCL 15.231 to 15.246. The attorney 27 general shall, and the complainant and other intervenors may, 04118'97 47 1 upon signing a protective agreement and upon order of the 2 commission, have access to all information including competi- 3 tively sensitive information. Upon a finding after a hearing 4 that the supplier has violated 1 or more provisions of this act, 5 the commission may issue such orders as necessary, pursue a revo- 6 cation of the supplier's license, order restitution to specific 7 customers, and assess fines. 8 (10) The commission shall require that all electricity sup- 9 pliers shall offer and may charge for energy efficiency audits 10 and education and information on the environmental and economic 11 benefits of energy efficiency to residential customers. 12 (11) The commission shall require that all electricity sup- 13 pliers offer to residential customers the option to purchase 14 electricity derived from "renewables". As used in this section, 15 "renewables" means electric power generated from waste to energy 16 facilities or hydropower facilities in existence as of January 1, 17 1997, organic waste, biomass, wood, dedicated energy crops, land- 18 fill gas, coal-bed methane, geothermal, solar, wind, fuel cells, 19 photovoltaic resources, or other renewable energy resources, as 20 approved by the commission. 21 (12) It shall not be a condition of certification by the 22 commission of an electric supplier under this section that the 23 company have the ability to deliver renewables-based electricity 24 at the time of its application for certification or at the time 25 of its offering to sell that electricity to its ultimate 26 customers. The commission shall give an electric supplier a 27 reasonable period of time to acquire and supply renewables-based 04118'97 48 1 electricity to an ultimate customer who requests such 2 electricity. 3 (13) The commission shall within 1 year of the effective 4 date of this act establish procedures to require not less than 5 annual reporting of renewable source supply percentages with 6 which all electricity suppliers shall comply. If, within 5 years 7 of the effective date of this act, the proportion of all elec- 8 tricity supplied in this state from renewable sources does not 9 meet or exceed 5%, the commission shall require all electricity 10 suppliers to certify that they meet or exceed a 5% renewable 11 source supply standard not later than 5 years after the effective 12 date of this act, if such supplies of power can be obtained at a 13 price not greater than 110% of the market price of power to the 14 customer. An energy service provider may satisfy the renewable 15 source requirement by purchasing renewable source energy. For 16 purposes of calculating the percentage of electricity supplied 17 from renewable sources, the commission shall include all elec- 18 tricity generated by organic waste, biomass, landfill gas, geo- 19 thermal, solar, wind, and fuel cells. The commission shall also 20 include electricity generated by hydropower facilities and 21 waste-to-energy facilities in existence as of January 1, 1997, 22 but the commission shall not include electricity generated by 23 hydropower facilities and waste-to-energy facilities which com- 24 mence or recommence operations after January 1, 1997. 25 (14) The commission shall establish by rule information dis- 26 closure and filing requirements for competitive energy service 27 providers. The rules must require generation providers to file 04118'97 49 1 their generally available rates, terms, and conditions with the 2 commission. The rules shall establish standard disclosure 3 requirements for all energy service providers. The commission 4 shall develop a standard format for disclosure requirements to 5 facilitate ease of comparison and informed consumer choice. 6 Rules setting forth disclosure requirements shall include among 7 disclosed information, but not be limited to, any of the 8 following: 9 (a) Standard unit price. 10 (b) Price variability. 11 (c) The supplier's typical source of electricity and the 12 average source of fuel for generation of such electricity during 13 the preceding year. 14 (d) Average annual emissions to the extent available for the 15 previous year of provider sources to air, water, and land for 16 latest period, which provides the amount of emissions during 17 power generation of nitrogen oxides, sulfur dioxide, carbon diox- 18 ide, particulates, heavy metals, and including but not limited to 19 mercury. 20 (e) An energy service provider profile. 21 (15) The commission shall require that the information dis- 22 closed under subsection (14) be provided to customers in writing 23 with any mail solicitation, and by other means as the commission 24 deems appropriate to assure the consumer's right to know about 25 price, fuel mix, and environmental impacts of consumer choice. 26 The commission shall electronically compile and maintain such 04118'97 50 1 information at a designated web site. The commission shall 2 require that the information be periodically updated annually. 3 (16) The commission shall be responsible for ensuring and 4 overseeing a comprehensive public education program which shall 5 be both of the following: 6 (a) Designed to maximize public participation in the 7 commission's decision-making process undertaken under this act 8 and minimize customer confusion about the changes being under- 9 taken in the electric industry. The commission's outreach and 10 education plan shall include all of the following: 11 (i) The dissemination of information by means of interactive 12 approaches, as well as brochures or other written materials, and 13 a variety of mass media outlets. 14 (ii) An explanation in clear, accessible language of the 15 basic concepts of electric restructuring; information that rates, 16 consumer protections, and low-income programs may be affected by 17 decisions of the commission, an explanation of customer risks and 18 responsibilities, an explanation of proposed current consumer 19 protections and a comparison with those recommended or approved 20 by the commission under a retail competition market structure, 21 information about how to assess and make use of a household 22 energy profile to shop for electricity, advice on how to select a 23 retail electric supplier; information about aggregation, informa- 24 tion about dispute resolution mechanisms including the role of 25 the commission in resolving disputes with retail electric suppli- 26 ers, and a notice of how to obtain additional information. 04118'97 51 1 (iii) Well-publicized public forums conducted in several 2 geographical areas of this state to obtain public input and 3 provide opportunities for exchange of questions and answers, 4 during the 3-year transition period. 5 (iv) The active involvement of community-based organizations 6 in developing messages and devising and implementing education 7 strategies. 8 (v) Targeted efforts to reach rural, low-income, elderly, 9 non-English speaking, disabled, and minorities. 10 (vi) The use of focus groups to gather public input on 11 public education needs. 12 (vii) The toll-free hotline to provide guidance to consumers 13 seeking advice about personal energy needs, the selection of a 14 retail supplier, aggregation, or dispute resolution. 15 (b) The commission shall make available, without charge, all 16 of the following information that is regularly updated and 17 revised: 18 (i) Listings of electricity suppliers. 19 (ii) Price comparisons of electricity suppliers with more 20 than 10% of the Michigan market. 21 (17) As a condition of licensing, all of the following apply 22 to a competitive energy service provider that provides or pro- 23 poses to provide generation service to a residential customer: 24 (a) May not terminate generation service without at least 30 25 days' prior notice to the customer. 26 (b) Must offer service to the customer for a minimum period 27 of 30 days. 04118'97 52 1 (c) Must allow the customer to rescind selection of the 2 competitive energy service provider orally or in writing within 5 3 days of initial selection. 4 (d) May not telemarket services to the customer if the cus- 5 tomer has filed with the commission a written request not to 6 receive telemarketing from competitive energy service providers. 7 (e) Must provide to the customer within 30 days of contract- 8 ing for retail service a disclosure of information provided to 9 the commission pursuant to rules adopted under this section in a 10 standard written format established by the commission. 11 (f) Must comply with any other provisions adopted by the 12 commission by rule or order. 13 (18) The commission may limit the duration and effectiveness 14 of a license to a specified term, may conduct proceedings for the 15 renewal of licenses, and may conduct proceedings for the revoca- 16 tion of a license when a requirement of this section has not been 17 complied with by a competitive electric service provider. The 18 commission shall adopt rules governing the procedures for issuing 19 or revoking a license under this section and related matters. 20 (19) The commission shall adopt rules that establish the 21 following minimum consumer protections. These rules shall be 22 applicable to all persons who sell, offer to sell, or distribute 23 for sale electricity to retail customers in this state. The com- 24 mission may adopt rules that contain additional consumer protec- 25 tion standards or that expand the minimum standards listed below 26 unless it finds that such regulation impedes the development of a 27 competitive market and that the benefits of the competitive 04118'97 53 1 market outweigh the protections of the proposed legislation. The 2 commission shall report annually to the legislature any action it 3 has taken or proposes to take with respect to this provision. 4 (20) Local distribution utilities and electricity suppliers 5 shall protect a customer's billing and payment history from dis- 6 closure unless the disclosure is authorized by law or has been 7 approved by the customer in writing. This protection shall not 8 be interpreted to prevent a distribution company or supplier from 9 selling or releasing generic information concerning the usage, 10 load shape curve, or other general characteristics of customers 11 as a group or rate classification. The commission may protect 12 the generic information of any customer group or class if it 13 determines that the release of this information would lead to a 14 prohibited practice, such as unlawful discrimination, or that the 15 release would reveal individual customer information because of 16 the size of the class or the nature of the information. A dis- 17 tribution company is authorized to release a list of its custom- 18 ers and their addresses to any retail electric supplier under 19 such conditions as specified by the commission by rule. The com- 20 mission may authorize the release of customer-specific informa- 21 tion by a distribution company or supplier if it determines that 22 the access to the identified information would not be harmful to 23 individual customers and the benefits to the customers whose 24 information would be released will outweigh any detriments. 25 (21) A local distribution utility must offer to provide a 26 watt-hour meter or other meter typically installed or required 27 for service for the customer class in question as a condition of 04118'97 54 1 providing service to any residential customer. A residential 2 customer shall not be required to obtain a special meter to par- 3 ticipate in the choice of a retail electric supplier. 4 (22) The commission shall adopt rules that govern the mini- 5 mum disclosures that must be included in all bills issued by 6 local distribution utilities and retail suppliers of 7 electricity. Local distribution utilities shall be required to 8 offer billing and collection services to electricity suppliers, 9 and the commission may regulate the terms and price for this 10 service, but suppliers shall not be required to buy this service 11 and may bill and collect directly from their customers. The 12 commission's rules shall also describe the method by which a 13 local distribution utility or supplier may bill customers for 14 energy efficiency services or products in addition to the sale of 15 electricity. 16 (23) The commission shall arrange for provision of universal 17 service, under section 310, to any residential customer who does 18 not choose a specific retail supplier by a specific date after 19 the initiation of retail competition and customer choice, who 20 specifically requests such service, or who has been refused or 21 denied service by a retail supplier for any reason. The intent 22 of this provision is to provide a default source of electricity 23 service for those residential customers who would otherwise be 24 without electricity as a result of the initiation of retail elec- 25 tric competition. 26 (24) The commission shall conduct a bid to choose the retail 27 electric supplier for basic service and bill and collect for this 04118'97 55 1 service for qualified customers. The commission shall determine 2 the minimum requirements for the provision of basic service. The 3 bid shall be conducted annually and require at least 1 option for 4 a price that does not vary by time-of-day or season and may 5 require additional rate design features as required by the 6 commission. 7 (25) There shall be no administrative or fixed fee associ- 8 ated with initiating basic service charged to the customer, 9 except that the commission may authorize a fee for a customer who 10 requests basic service more than once in any 12-month period. 11 The commission shall exempt low-income customers or those who are 12 denied or refused credit by a retail supplier from any such fee. 13 The commission shall regulate the conditions under which the dis- 14 tribution company may disconnect basic service. 15 (26) The commission shall adopt rules that contain minimum 16 credit and collection procedures and practices applicable to res- 17 idential retail electric competition, including all of the 18 following: 19 (a) Application for service. 20 (b) Credit evaluation and deposits. 21 (c) When disconnection of service can be used as a method of 22 collection, the timing of notices of disconnection and required 23 disclosures, disconnection procedures, and a customer's right to 24 a payment arrangement to prevent disconnection. 25 (d) A customer's right to retain service during a temporary 26 medical emergency. 04118'97 56 1 (e) A tenant's right to avoid disconnection of service when 2 a landlord fails to pay an overdue bill for the period covered by 3 the lease, and the tenant's right to obtain service in his or her 4 own name. 5 (f) Limitations on the transfer of previously unpaid debt 6 from 1 customer's account to that of another and from a 7 customer's account at 1 location to an account at another 8 location. 9 (g) Limitations on the billing of previously unbilled 10 amounts. 11 (h) When late fees may be assessed and limitations on their 12 amount and method of application to an overdue amount. 13 (i) Reconnection rights and limits on reconnection fees. 14 (j) Rules concerning partial payment and the allocation of 15 payments and credits to regulated and unregulated portions of the 16 total electric bill when the distribution company bills for the 17 electricity supplier or when the distribution company bills for 18 both regulated and unregulated services. 19 (27) The commission shall establish and advertise a 20 citizen's electricity market hotline with a telephone number that 21 shall respond to consumer questions and complaints about their 22 electric service and the transition to a more competitive retail 23 electric market. The commission's rules shall include a require- 24 ment that all local distribution utilities and retail electric 25 suppliers notify their customers at the time service is initi- 26 ated, and upon the receipt of a complaint from a customer, of 27 their right to informally appeal their complaint to the 04118'97 57 1 commission by calling the commission's toll-free number. A local 2 distribution utility or retail electric supplier shall not dis- 3 connect or discontinue service to a customer for a disputed 4 amount if that customer has filed a complaint that is pending 5 with the commission pursuant to the commission's rules. As used 6 in this subsection, "receipt of a complaint" means, with respect 7 to a local distribution utility and retail electric supplier, 8 that a customer has notified the company orally or in writing 9 that he or she is not satisfied with the company's initial 10 response to his or her complaint. The commission shall have the 11 authority to investigate, mediate if possible, hear, and resolve 12 any complaint submitted by a customer except that the commission 13 may not award damages. 14 (28) A customer may change his or her retail electric sup- 15 plier at any time, but may remain responsible for any unpaid 16 charges owed to a supplier if the customer fails to give proper 17 notice. A retail electric supplier shall not require any notice 18 that exceeds 3 business days. Any fee or penalty charged by the 19 supplier associated with early termination of a contract shall be 20 conspicuously disclosed in any contract between the supplier and 21 the customer. The commission shall adopt rules that specify the 22 type and manner of communications between the customer and the 23 supplier and between the supplier and the distribution company to 24 effectuate a customer's change in supplier. 25 (29) The commission shall establish consumer protection cer- 26 tification procedures for all claims made by electricity 27 suppliers regarding environmental performance, including but not 04118'97 58 1 limited to energy efficiency services and reporting of renewable 2 source energy supplies. 3 (30) In an adjudicatory proceeding, the commission may 4 impose a penalty of up to $1,000.00 for each violation of this 5 section or any consumer protection rule adopted under this 6 section. Each day a violation continues constitutes a separate 7 offense. 8 (31) The commission shall resolve disputes between competi- 9 tive energy service providers and retail residential consumers of 10 electricity concerning standards established under this section. 11 (32) The commission may impose by rule any additional 12 requirements necessary to carry out the purposes of this act, 13 except that this section may not be construed to permit the com- 14 mission to regulate the rates of any competitive energy service 15 provider. 16 (33) The commission may issue a cease and desist order for 17 either of the following: 18 (a) After an adjudicatory hearing held in conformance with 19 the administrative procedures act of 1969, if the commission 20 finds that any competitive energy service provider or transmis- 21 sion and distribution utility has engaged or is engaging in any 22 act or practice in violation of any law or rule administered or 23 enforced by the commission or any lawful order issued by the 24 commission. 25 (b) In an emergency, without hearing or notice, if the com- 26 mission receives a written, verified complaint or affidavit 27 showing that a competitive energy service provider or a 04118'97 59 1 transmission and distribution utility is selling electricity to 2 retail residential consumers without being duly licensed or is 3 engaging in conduct that creates an immediate danger to the 4 public safety or is reasonably expected to cause significant, 5 imminent, and irreparable public injury, may issue an emergency 6 cease and desist order. An emergency cease and desist order is 7 effective immediately and continues in force and effect until 8 further order of the commission or until stayed by a court of 9 competent jurisdiction. In a subsequent hearing, the commission 10 shall in a final order affirm, modify, or set aside the emergency 11 cease and desist order and may employ simultaneously or sepa- 12 rately any other enforcement or penalty provisions available to 13 the commission. 14 (34) The commission may order restitution for any party 15 injured by a violation for which penalty may be assessed under 16 this section. 17 (35) A transmission and distribution utility may not discon- 18 nect services to a consumer due to nonpayment of generation 19 charges or any other dispute with a competitive electricity pro- 20 vider, except that the commission may permit disconnection of 21 electric service to consumers of electricity based on nonpayment 22 of charges for service provided under this section. 23 (36) The commission shall require standard billing informa- 24 tion on bills for electric power service. 25 (37) The commission may impose a reasonable charge on resi- 26 dential customers to pay for the services provided by the 27 commission pursuant to this section. 04118'97 60 1 Sec. 310. The commission shall, within 180 days following 2 the effective date of this act, promulgate rules which establish 3 requirements for universal service, based on the following 4 principles: 5 (a) The local distribution utility shall be required to con- 6 nect to all consumers requesting a connection. 7 (b) The local distribution utility shall procure electricity 8 for all customers who request service, using competitive bidding 9 procedures. 10 (c) To ensure the competitiveness of the rates charged to 11 consumers who remain with the local distribution utility follow- 12 ing the time when the commission's authority and jurisdiction to 13 regulate the generation component of electricity terminates under 14 section 204, the commission may assign the customers to alterna- 15 tive suppliers based on a competitive bidding process. At a min- 16 imum, the commission shall require that the utility competitively 17 bid the electric generation supply for such customers. 18 Sec. 311. (1) A fund for utility consumer representation in 19 electric industry deregulation matters is created. The state 20 treasurer shall administer the fund under section 6m of 1939 PA 21 3, MCL 460.6m. The initial level of the fund shall be 22 $2,000,000.00, which funding level shall increase on a yearly 23 basis as provided in section 6m of 1939 PA 3, MCL 460.6m. 24 (2) The funding provided in subsection (1) shall be used 25 solely for the representation of customer interests in any matter 26 involving the subjects of this act, including specifically those 27 matters relating to electricity markets in which undue market 04118'97 61 1 power is alleged to be possessed by sellers of electricity, or in 2 matters involving the formation and operation of the ISO. Such 3 representation shall include proceedings before the commission 4 and judicial proceedings to enforce the provisions of this act 5 and the provisions of the Michigan antitrust reform act, 1984 PA 6 274, MCL 445.771 to 445.788. 7 (3) The funding provided in subsection (1) shall be in addi- 8 tion to that presently required by section 6m of 1939 PA 3, MCL 9 460.6m, and shall be collected through the nonbypassable transac- 10 tion charge established in section 203(1) and remitted to the 11 state treasurer on a monthly basis. 12 (4) On a quarterly basis, the state treasurer shall distrib- 13 ute 75% of the amount collected by this section to the attorney 14 general's office to be used solely for the purposes described in 15 subsection (2), and distribute 25% to the utility consumer par- 16 ticipation board created by section 6m of 1939 PA 3, MCL 460.6m, 17 for administration under section 6m of 1939 PA 3, MCL 460.6m, and 18 redistribution as grants solely for the purposes described in 19 subsection (2). 20 ARTICLE 4. PENALTIES AND REQUIRED LEGAL ACTION 21 Sec. 401. If after notice and hearing the commission finds 22 a person has violated this act, or failed to promptly and fully 23 comply with a directive or order issued by the commission or the 24 Michigan ISO, or engaged in a continued pattern of market abuses, 25 the commission shall order remedies and penalties to protect and 26 make whole customers and other persons who have suffered an 04118'97 62 1 economic loss as a result of the violation, including, but not 2 limited to, 1 or more of the following: 3 (a) To pay a fine for the first offense of not less than 4 $10,000.00 per day that the person is in violation of this act, 5 and for each subsequent offense, a fine of not less than 6 $20,000.00 or more than $50,000.00 per day. 7 (b) A refund to customers of a utility of any collected 8 excessive rates. 9 (c) Cease and desist orders. 10 (d) Orders to pay costs incurred by complaining parties. 11 (e) Orders directing an owner of generation, transmission, 12 or distribution facilities to sell all or a part of its facili- 13 ties to a nonaffiliated entity. 14 Sec. 402. The commission shall ensure that none of the 15 amounts paid under section 401 or any other related defense costs 16 are passed through to the local distribution utility's customers 17 in any manner. 18 Sec. 403. (1) The attorney general shall immediately com- 19 mence a legal action against the appropriate local distribution 20 utility if either of the following occurs: 21 (a) The local distribution utility fails to transfer control 22 and operation of its transmission system to the Michigan ISO cre- 23 ated under article 6 of this act or withdraws control. 24 (b) The local distribution utility fails to functionally 25 separate its generation assets from its transmission and distri- 26 bution assets as provided in section 202(b). 04118'97 63 1 (2) The attorney general may commence a legal action against 2 the appropriate local distribution utility if the Michigan ISO 3 makes a determination that a local distribution utility possesses 4 undue market power in the market for the sale of electricity 5 under section 604. 6 ARTICLE 5. MUNICIPAL ELECTRIC UTILITIES 7 Sec. 501. (1) Within 180 days of the effective date of this 8 act, each governing body of a municipal electric utility shall 9 issue a preliminary municipal electric utility restructing plan, 10 which shall be consistent with the requirements of article 3. 11 (2) The governing body of a municipal electric utility shall 12 make a determination of which of its facilities are transmission 13 facilities and which of its facilities are distribution facili- 14 ties, in accordance with requirements of the FERC which are 15 applicable to municipal electric utilities. 16 (3) The governing body of a municipal electric utility shall 17 establish a separate charge for the delivery of electricity 18 acquired by the customer from a supplier other than the municipal 19 electric utility. The charges may include, but shall not be 20 limited to, amounts to repay all principal and interest costs and 21 other obligations on bonded indebtedness and for the prepayment 22 of power purchase contracts or other obligations. 23 (4) Upon issuing a preliminary municipal electric utility 24 restructing plan, the governing body of a municipal electric 25 utility shall schedule public hearings for the purpose of receiv- 26 ing customer input on the preliminary municipal electric utility 04118'97 64 1 restructing plan, and shall issue a final plan within 6 months of 2 issuing the preliminary plan. 3 (5) All municipal electric utility customers shall have the 4 right to choose electricity suppliers as provided for in the 5 municipal electric utility restructing plan developed and 6 approved by the governing body of the municipal electric 7 utility. In no event shall the right to choose electricity sup- 8 pliers be later than 1 year following the ability of all custom- 9 ers of a local distribution utility serving less than 500,000 10 customers to choose their electricity suppliers, as provided for 11 in this act. 12 Sec. 502. This act does not compel any municipal electric 13 utility to violate restrictions applicable to facilities financed 14 with tax-exempt bonds or contractual restrictions and covenants 15 regarding use of transmission and other facilities. 16 Sec. 503. A person, corporation, utility, or municipal 17 electric utility shall not provide electric distribution service 18 to a retail distribution customer of a municipal electric utility 19 unless the municipal electric utility consents in writing. 20 Sec. 504. Except as expressly provided to the contrary, 21 this act shall not be construed as limiting the authority of the 22 governing body of a municipal electric utility to establish rates 23 and terms and conditions of service, issue and repay debt, and 24 otherwise manage the affairs of the municipal electric utility. 25 ARTICLE 6. THE MICHIGAN INDEPENDENT SYSTEM OPERATOR 04118'97 65 1 Sec. 601. (1) There is hereby created a nonprofit 2 corporation which shall be known as the Michigan independent 3 system operator corporation. 4 (2) The Michigan ISO is created for the purpose of control- 5 ling the operations of the transmission system within this 6 state. 7 (3) The corporation shall be governed by its board of 8 directors. The board of directors shall consist of no more than 9 7 directors. Four directors shall have a background in corporate 10 leadership, such as corporate executive officer, chairperson, 11 finance, accounting, or utility law. One director shall have a 12 background in transmission planning. One director shall have a 13 background in transmission operation. One director shall have a 14 background in commercial markets and trading/risk management. A 15 director shall not have been a director, officer, or employee of 16 a member, transmission customer, or their affiliates within 2 17 years. A director shall not have a material business relation- 18 ship with a member, transmission customer, or their affiliates. 19 (4) Initial nominees for directors shall be identified by a 20 qualified, independent executive search firm. Two nominees shall 21 be identified for each board position. Two corporate leadership 22 directors shall serve for 2 years, 1 corporate leadership posi- 23 tion and the commercial market position shall serve for 3 years, 24 1 corporate leadership position and the transmission operation 25 position shall serve for 4 years, and the transmission planning 26 position shall serve for 5 years. After the initial 27 appointments, all terms will be for a period of 6 years. 04118'97 66 1 (5) The governor shall appoint a selection committee 2 comprised of 2 utility members, 2 residential members, 2 commer- 3 cial members, and 2 industrial members. The selection committee 4 shall serve for a period of 4 years. The board of directors 5 shall be elected by a majority vote of the members of this 6 committee. 7 (6) The initial utility, residential, commercial, and indus- 8 trial members of the selection committee shall be appointed no 9 later than 60 days after the effective date of this act. 10 (7) The funding mechanism for the creation and operation of 11 the Michigan ISO shall be by the nonbypassable transaction charge 12 under section 203. 13 Sec. 602. (1) Governance of the Michigan ISO shall be 14 structured in a fair and nondiscriminatory manner. 15 (2) Neither the Michigan ISO nor any of its employees shall 16 have any financial interest in the economic performance of any 17 power market participant. 18 (3) The Michigan ISO shall be completely separate from the 19 interests of the owners of the transmission and distribution 20 system. 21 Sec. 603. (1) The Michigan ISO shall have the following 22 duties, responsibilities, and powers: 23 (a) Provide open access to the transmission and distribution 24 system and all services under its control using nonpancaked tar- 25 iffs which apply to all eligible users in a nondiscriminatory 26 manner and at the same time provide the correct economic signals 04118'97 67 1 designed to encourage the efficient use of the transmission 2 system. 3 (b) Ensure the reliability of grid operations. 4 (c) Control operation of all interconnected transmission 5 facilities within its region. 6 (d) Identify constraints on the system and be able to take 7 actions to relieve those constraints within the trading rules 8 established by the ISO board. These rules shall promote the 9 efficient utilization of the transmission system and maximize 10 trading. 11 (e) Create appropriate incentives for efficient management 12 and administration and procure the services needed for such man- 13 agement and administration in an open competitive market. 14 (f) Make transmission system information publicly available 15 on a real time basis via an electronic information network con- 16 sistent with the FERC's requirements. 17 (g) Develop mechanisms to coordinate with all neighboring 18 control areas. 19 (h) Establish an alternative dispute resolution process to 20 resolve disputes in the first instance. 21 (i) Develop plans for a transmission system which effi- 22 ciently supports the needs of all users on a non-discriminatory 23 basis. 24 (j) Direct the owners to implement improvements and upgrades 25 to expand competition of transmission and distribution 26 facilities. 04118'97 68 1 (k) Independently calculate system available transfer 2 capabilities, and, where justified, establish a lesser or greater 3 change to the available transfer capacity upgrade than that pro- 4 vided in section 303. 5 (l) Take appropriate measures to prevent market power manip- 6 ulations in transmission and distribution. 7 (m) Assure efficient real-time operation, security monitor- 8 ing, and protection of the transmission and distribution system 9 to serve the transmission and distribution needs of all of the 10 electric generation and load in this state on a reliable basis at 11 the lowest reasonable cost. 12 (n) Undertake least-cost transmission planning and expansion 13 of the ISO system that include public participation and take 14 account of public health and safety needs and environmental costs 15 and burdens. This responsibility includes maintaining a reliable 16 and adequate transmission and distribution system on a nondis- 17 criminatory basis for the benefit of all end-users and generation 18 on the system, including but not limited to rural areas. 19 (o) Provide for comparable and nondiscriminatory transmis- 20 sion and distribution service to all users of the ISO grid for 21 all purposes under a tariff approved by the ISO board and filed 22 with the FERC. No other entity may provide transmission service 23 to itself or to others over the facilities under the ISO's 24 control. 25 (p) Provide control area and other ancillary services to all 26 users of the ISO grid on an efficient basis at reasonable cost 04118'97 69 1 and in a manner that facilitates fair and vigorous competition in 2 the production and sale of electric energy in this state. 3 (q) Maximize throughput to lower the transmission and dis- 4 tribution costs of long-term firm users, consistent with reli- 5 ability obligations and the needs of end-use load dependent cus- 6 tomers on the ISO system. 7 (r) Eliminate transmission and distribution constraints and 8 equitably allocate constraints when they cannot be eliminated, 9 recognizing existing resources commitments. 10 (s) Provide appropriate price signals, including credits, 11 for efficient location of new generation. 12 (t) Develop uniform construction and design standards for 13 the ISO system, as well as uniform operating guides, rating cri- 14 teria, and other practices and procedures. 15 (u) Maintain the ISO system in a manner that protects the 16 facilities of owners and ensures reliable service at the lowest 17 reasonable cost and prevents manipulation of available transmis- 18 sion capacity. 19 (v) Review and approve proposed unit commitment, dispatch 20 and generation maintenance schedules to prevent manipulation of 21 available transmission capacity and the exercise of market power, 22 to maximize available transfer capacity and to maintain 23 reliability. 24 (w) Require maintenance and conditioned operation of any 25 specific generating facilities necessary to preserve and maintain 26 available transmission transfer capacity or reliability pursuant 04118'97 70 1 to any merger or other conditions imposed on such facilities by 2 any regulatory agency. 3 (x) Impose conditions necessary to mitigate the vertical 4 market power of entities controlling generation facilities and 5 transmission or distribution facilities. 6 (y) Participate in ECAR and any regional reliability coun- 7 cils as transmission and control area operator for the grid and 8 adhere to all applicable ECAR, regional council, and other reli- 9 ability requirements and criteria. 10 (z) Establish and administer nondiscriminatory requirements 11 for all entities serving load on the ISO grid to reasonably bal- 12 ance their loads and resources so that reliability is maintained 13 and load serving obligations are met fairly. 14 (aa) Assign responsibility for routine facility upgrades and 15 improvements to the appropriate owner and establish and adminis- 16 ter a competitive process for ownership and construction of major 17 new additions to the ISO grid. The ISO shall not own transmis- 18 sion and distribution lines. 19 (bb) Administer existing transmission contracts of owners to 20 provide fair and comparable service. 21 (cc) Determine the number of control areas that should be 22 permitted to exist in Michigan given the geography, the present 23 integration and operation of any separate systems, and the conse- 24 quences and costs of total integration. 25 (dd) Begin discussions with other states with the goal of 26 creating a regional ISO. 04118'97 71 1 (ee) Assume and perform any and all other duties necessary 2 to accomplish the ISO's purposes. 3 (ff) Develop and recommend to the commission cost-based 4 hourly, daily, weekly, and monthly stand-by service and redis- 5 patch service which will provide an economical means to ensure 6 reliable power imports until the 150% increase in transfer capac- 7 ity can be achieved. 8 (2) The ISO may, by written contract, delegate to other 9 entities, including transmission and distribution owners, the 10 actual operation of specific facilities, maintenance of specific 11 facilities, or operation of a subcontrol area as the ISO deems 12 appropriate and efficient, provided that the delegation does not 13 interfere with accomplishment of the ISO's purpose or meeting any 14 of its responsibilities and ultimate control, operating authori- 15 ty, maintenance, and planning responsibility for the ISO system 16 rests in the ISO. 17 Sec. 604. (1) Within 90 days after the members of the board 18 are appointed, the Michigan ISO shall issue a written report to 19 the legislature and the commission identifying significant con- 20 straints on the transmission and distribution system in this 21 state. 22 (2) At the same time as the Michigan ISO issues its report 23 to the legislature and the commission, it shall order the owners 24 of the transmission and distribution system to submit to the ISO 25 within 60 days detailed remedial plans and estimated costs for 26 mitigating the constraints identified in the ISO's report. 04118'97 72 1 (3) Within 30 days after receiving the remedial plans, the 2 ISO shall evaluate the plans and issue appropriate orders 3 directing the owners of the transmission and distribution system 4 to expeditiously mitigate the constraints in the system. 5 (4) On or before January 15, 1999 and annually thereafter, 6 the ISO shall submit to the commission a report including all of 7 the following: 8 (a) An analysis of whether there is an effective, competi- 9 tive market for electricity in this state. 10 (b) A summary of any comments or complaints received from 11 customers or sellers regarding market power issues. 12 (c) An identification of existing and potential transmission 13 or distribution bottlenecks, constraints, and systems needs. 14 (d) A summary of the steps which the ISO has taken or will 15 take to mitigate these problems. 16 (e) Recommendations for appropriate action by the 17 commission. 18 (f) A report on market concentration in the market for elec- 19 trical generation within this state, as identified by the 20 Herfindahl-Hirschman index. The report shall track the 21 Herfindahl-Hirschman index associated with the capacity of all 22 electric power suppliers in Michigan available to makes sales to 23 others, including interconnected capacity and excluding capacity 24 dedicated solely to self-generation. If the Herfindahl-Hirschman 25 indexes of the available capacity in this state exceed a value of 26 2,000, the ISO shall find that the generation market is highly 27 concentrated and is characterized by undue market power. 04118'97 73 1 Sec. 605. All owners of transmission or distribution 2 facilities shall comply with the ISO's directives and shall sup- 3 port the ISO's plans and construct facilities in accordance with 4 those plans. 5 Sec. 606. (1) The Michigan ISO shall cooperate in promoting 6 the formation of a multistate authority to control transmission 7 on a regional basis. 8 (2) If a regional authority is formed, the Michigan ISO 9 shall coordinate or merge with the regional authority only if all 10 of the following conditions are satisfied: 11 (a) The regional authority is fully independent from the 12 interests of the owners of the transmission and distribution 13 system in this state. 14 (b) The regional authority possesses powers comparable to 15 the powers granted to the Michigan ISO in this act. 16 (c) Coordination or merger with the regional authority will 17 be consistent with the purpose of this act. 04118'97 Final page. SAT