February 26, 2008, Introduced by Reps. Young and Accavitti and referred to the Committee on Energy and Technology.
A bill to amend 1939 PA 3, entitled
"An act to provide for the regulation and control of public and
certain private utilities and other services affected with a public
interest within this state; to provide for alternative energy
suppliers; to provide for licensing; to include municipally owned
utilities and other providers of energy under certain provisions of
this act; to create a public service commission and to prescribe
and define its powers and duties; to abolish the Michigan public
utilities commission and to confer the powers and duties vested by
law on the public service commission; to provide for the
continuance, transfer, and completion of certain matters and
proceedings; to abolish automatic adjustment clauses; to prohibit
certain rate increases without notice and hearing; to qualify
residential energy conservation programs permitted under state law
for certain federal exemption; to create a fund; to provide for a
restructuring of the manner in which energy is provided in this
state; to encourage the utilization of resource recovery
facilities; to prohibit certain acts and practices of providers of
energy; to allow for the securitization of stranded costs; to
reduce rates; to provide for appeals; to provide appropriations; to
declare the effect and purpose of this act; to prescribe remedies
and penalties; and to repeal acts and parts of acts,"
(MCL 460.1 to 460.10cc) by adding section 6r.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 6r. (1) As used in this section:
(a) "Booked cost of steam" includes all of the following:
(i) Retail gas purchases consisting of all costs for gas
service including customer charges, distribution charges, and any
gas cost recovery factor.
(ii) Wholesale gas purchases, consisting of the contract cost
of gas, transportation fuel, pipeline transportation fees, and any
local transportation or distribution fees.
(iii) Storage gas charges, including the cost of gas, fuel, gas
injection fees, withdrawal fees, and associated transportation
fees.
(iv) The cost of financial hedging instruments approved by the
commission such as futures and options, including premiums,
settlement gains and losses, and commodity exchange and
administration fees.
(v) Steam purchases, consisting of all costs for steam
purchased including customer charges, distribution charges, and
associated transportation fees.
(vi) Costs for other fuel purchases including, but not limited
to, any coal, wood, garbage, tires, waste oil, fuel oil or other
materials used as a fuel for the production of steam, and all
customer charges, distribution charges, and associated
transportation and storage fees.
(b) "Steam supply cost recovery clause" means a clause in the
rates or rate schedule of a utility which permits the monthly
adjustment of rates for steam supply to allow the utility to
recover the booked costs of fuel burned by the utility for steam
generation and the booked costs of purchased steam transactions by
the utility incurred under reasonable and prudent policies and
practices.
(c) "Steam supply cost recovery factor" means that element of
the rates to be charged for steam service to reflect steam supply
costs incurred by a utility and made pursuant to a steam supply
cost recovery clause incorporated in the rates or rate schedule of
a utility.
(d) "Utility" means a steam distribution company regulated by
the commission.
(2) Pursuant to its authority under this act, the commission
may incorporate a steam supply cost recovery clause in the steam
rates or rate schedule of a utility. An order incorporating a steam
supply cost recovery clause shall be the result of a hearing solely
on the question of the inclusion of the clause in the rates or rate
schedule. The hearing shall be conducted as a contested case
pursuant to chapter 4 of the administrative procedures act of 1969,
1969 PA 306, MCL 24.271 to 24.287.
(3) In order to implement the steam supply cost recovery
clause established pursuant to subsection (2), a utility annually
shall file a complete steam supply cost recovery plan describing
the expected sources of steam supply and changes in the cost of
steam supply anticipated over a future 12-month period specified by
the commission and requesting for each of those 12 months a
specific steam supply cost recovery factor. The utility shall file
the steam supply cost recovery plan at least 3 months before the
beginning of the 12-month period covered by the plan. The plan
shall describe all major contracts and steam supply arrangements
entered into by the utility for providing steam supply during the
specified 12-month period including the price of fuel, the duration
of the contract or arrangement, and an explanation or description
of any other term or provision of the contract or arrangement as
required by the commission. The plan shall also include the
utility's evaluation of the reasonableness and prudence of its
decisions to provide steam supply in the manner described in the
plan, in light of its existing sources of steam generation, and an
explanation of the actions taken by the utility to minimize the
cost of fuel to the utility.
(4) In order to implement the steam supply cost recovery
clause established pursuant to subsection (2), a utility shall
file, contemporaneously with the steam supply cost recovery plan
required by subsection (3), a 1-year forecast of the steam supply
requirements of its customers, its anticipated sources of supply,
and projections of steam supply costs, in light of its existing
sources of steam generation and sources of steam generation under
construction. The forecast shall include a description of all
relevant major contracts and steam supply arrangements entered into
or contemplated by the utility, and any other information the
commission may require.
(5) If a utility files a steam supply cost recovery plan and a
1-year forecast as provided in subsections (3) and (4), the
commission shall conduct a proceeding, to be known as a steam
supply and cost review, to evaluate the reasonableness and prudence
of the steam supply cost recovery plan filed by a utility pursuant
to subsection (3), and establish the steam supply cost recovery
factors to implement a steam supply cost recovery clause
incorporated in the rates or rate schedule of the utility. The
steam supply and cost review shall be conducted as a contested case
pursuant to chapter 4 of the administrative procedures act of 1969,
1969 PA 306, MCL 24.271 to 24.287.
(6) In its final order in a steam supply and cost review, the
commission shall evaluate the reasonableness and prudence of the
decisions underlying the steam supply cost recovery plan filed by
the utility pursuant to subsection (3), and shall approve,
disapprove, or amend the steam supply cost recovery plan
accordingly. In evaluating the decisions underlying the steam
supply cost recovery plan, the commission shall consider the cost
and availability of the steam generation available to the utility,
the cost of short-term firm purchases available to the utility,
whether the utility has taken all appropriate actions to minimize
the cost of fuel, and other relevant factors. The commission shall
approve, reject, or amend the 12 monthly steam supply cost
recovery factors requested by the utility in its steam supply cost
recovery plan. The factors ordered shall be described in fixed
dollar amounts per unit of steam, but may include specific amounts
contingent on future events.
(7) In its final order in a steam supply and cost review, the
commission shall evaluate the decisions underlying the 1-year
forecast filed by a utility pursuant to subsection (4). The
commission may also indicate any cost items in the 1-year forecast
that, on the basis of present evidence, the commission would be
unlikely to permit the utility to recover from its customers in
rates, rate schedules, or steam supply cost recovery factors
established in the future.
(8) The commission, on its own motion or the motion of any
party, may make a finding and enter a temporary order granting
approval or partial approval of a steam supply cost
recovery plan in a steam supply and cost recovery review after
first having given notice to the parties to the review and giving
those parties a reasonable opportunity for a full and complete
hearing. A temporary order made pursuant to this subsection is
considered a final order for purposes of judicial review.
(9) If the commission has made a final or temporary order in a
steam supply and cost review, the utility may each month
incorporate in its rates for the period covered by the order any
amount up to the steam supply cost recovery factors permitted in
that order. If the commission has not made a final or temporary
order within 3 months of the submission of a complete steam supply
cost recovery plan, or by the beginning of the period covered in
the plan, whichever comes later, or if a temporary order has
expired without being extended or replaced, then, pending an order
which determines the steam supply cost recovery factors, a utility
may each month adjust its rates to incorporate all or a part of the
steam supply cost recovery factors requested in its plan. Any
amount collected under the steam supply cost recovery factors
before the commission makes its final order shall be subject to
prompt refund with interest to the extent that the total amount
collected exceeds the total amount determined in the commission's
final order to be reasonable and prudent for the same period of
time.
(10) Not less than 3 months before the beginning of the third
quarter of the 12-month period, a utility may file a revised steam
supply cost recovery plan which shall cover the remainder of the
12-month period. Upon receipt of a revised steam supply cost
recovery plan, the commission shall reopen the steam supply and
cost review. In addition, the commission may reopen the steam
supply and cost review on its own motion or on the showing of good
cause by any party if at least 6 months have elapsed since the
utility submitted its complete filing and if there are at least 60
days remaining in the 12-month period under consideration. A
reopened steam supply and cost review shall be conducted as a
contested case pursuant to chapter 4 of the administrative
procedures act of 1969, 1969 PA 306, MCL 24.271 to 24.287, and in
accordance with subsections (3), (6), (8), and (9).
(11) Not more than 45 days following the last day of each
billing month in which a steam supply cost recovery factor has been
applied to customers' bills, a utility shall file with the
commission a detailed statement for that month of the revenues
recorded pursuant to the steam supply cost recovery factor and the
allowance for cost of steam supply included in the base rates
established in the latest commission order for the utility, and the
cost of steam supply. The detailed statement shall be in the manner
and form prescribed by the commission. The commission shall
establish procedures for insuring that the detailed statement is
promptly verified and corrected if necessary.
(12) Not less than once a year, and not later than 3 months
after the end of the 12-month period covered by a utility's steam
supply cost recovery plan, the commission shall commence a
proceeding, to be known as a steam supply cost reconciliation, as a
contested case pursuant to chapter 4 of the administrative
procedures act of 1969, 1969 PA 306, MCL 24.271 to 24.287.
Reasonable discovery shall be permitted before and during the
reconciliation proceeding in order to assist parties and interested
persons in obtaining evidence concerning reconciliation issues,
including, but not limited to, the reasonableness and prudence of
expenditures and the amounts collected pursuant to the clause. At
the steam supply cost reconciliation, the commission shall
reconcile the revenues recorded pursuant to the steam supply cost
recovery factors and the allowance for cost of steam supply
included in the base rates established in the latest commission
order for the utility with the amounts actually expensed and
included in the cost of steam supply by the utility. The commission
shall consider any issue regarding the reasonableness and prudence
of expenses for which customers were charged if the issue was not
considered adequately at a previously conducted steam supply and
cost review.
(13) In its order in a steam supply cost reconciliation, the
commission shall require a utility to refund to customers or credit
to customers' bills any net amount determined to have been
recovered over the period covered in excess of the amounts
determined to have been actually expensed by the utility for steam
supply, and to have been incurred through reasonable and prudent
actions not precluded by the commission order in the steam supply
and cost review. The refunds or credits shall be apportioned among
the customers of the utility utilizing procedures that the
commission determines are reasonable. The commission may adopt
different procedures with respect to customers served under the
various rate schedules of the utility and may, in appropriate
circumstances, order refunds or credits in proportion to the excess
amounts actually collected from each customer during the period
covered.
(14) In its order in a steam supply cost reconciliation, the
commission shall authorize a utility to recover from customers any
net amount by which the amount determined to have been recovered
over the period covered was less than the amount determined to have
been actually expensed by the utility for steam supply, and to have
been incurred through reasonable and prudent actions not precluded
by the commission order in the steam supply and cost review. For
excess costs incurred through management actions contrary to the
commission's steam supply and cost review order, the commission
shall authorize a utility to recover costs incurred for steam
supply in the reconciliation period in excess of the
amount recovered over the period only if the utility demonstrates
by clear and convincing evidence that the excess expenses were
beyond the ability of the utility to control through reasonable and
prudent actions. For excess costs incurred through management
actions consistent with the commission's steam supply and cost
review order, the commission shall authorize a utility to recover
costs incurred for steam supply in the reconciliation period in
excess of the amount recovered over the period only if the utility
demonstrates that the level of the expenses resulted from
reasonable and prudent management actions. The amounts in excess of
the amounts actually recovered by the utility for steam supply
shall be apportioned among and charged to the customers of the
utility utilizing procedures that the commission determines are
reasonable. The commission may adopt different procedures with
respect to customers served under the various rate schedules of the
utility and may, in appropriate circumstances, order charges to be
made in proportion to the amounts which would have been paid by
those customers if the amounts in excess of the amounts actually
recovered by the utility for cost of steam supply had been included
in the steam supply cost recovery factors with respect to those
customers during the period covered. Charges for the excess amounts
shall be spread over a period that the commission determines is
appropriate.
(15) If the commission orders refunds or credits pursuant to
subsection (13), or additional charges to customers pursuant to
subsection (14), in its final order in a steam supply cost
reconciliation, the refunds, credits, or additional charges shall
include interest. In determining the interest included in a refund,
credit, or additional charge pursuant to this subsection, the
commission shall consider, to the extent material and practicable,
the time at which the excess recoveries or insufficient recoveries,
or both, occurred. The commission shall determine a rate of
interest for excess recoveries, refunds, and credits equal to the
greater of the average short-term borrowing rate available to the
utility during the appropriate period, or the authorized rate of
return on the common stock of the utility during that same period.
Costs incurred by the utility for refunds and interest on refunds
shall not be charged to customers. The commission shall determine a
rate of interest for insufficient recoveries and additional charges
equal to the average short-term borrowing rate available to the
utility during the appropriate period.
(16) Five years after the effective date of the amendatory act
that added this subsection, and every 5 years thereafter, the
standing committees of the house and senate that deal with public
utilities shall review the amendatory act that added this
subsection.