HB-5476, As Passed Senate, June 4, 2014

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 5476

A bill to amend 1939 PA 3, entitled

"An act to provide for the regulation and control of public and

certain private utilities and other services affected with a public

interest within this state; to provide for alternative energy

suppliers; to provide for licensing; to include municipally owned

utilities and other providers of energy under certain provisions of

this act; to create a public service commission and to prescribe

and define its powers and duties; to abolish the Michigan public

utilities commission and to confer the powers and duties vested by

law on the public service commission; to provide for the

continuance, transfer, and completion of certain matters and

proceedings; to abolish automatic adjustment clauses; to prohibit

certain rate increases without notice and hearing; to qualify

residential energy conservation programs permitted under state law

for certain federal exemption; to create a fund; to provide for a

restructuring of the manner in which energy is provided in this

state; to encourage the utilization of resource recovery

facilities; to prohibit certain acts and practices of providers of

energy; to allow for the securitization of stranded costs; to

reduce rates; to provide for appeals; to provide appropriations; to

declare the effect and purpose of this act; to prescribe remedies

and penalties; and to repeal acts and parts of acts,"

by amending section 11 (MCL 460.11), as added by 2008 PA 286.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 11. (1) ~~This subsection applies beginning January 1,~~

~~2009.~~ Except as otherwise provided in this subsection, the

commission shall phase in electric rates equal to the cost of

providing service to each customer class over a period of 5 years

from ~~the effective date of the amendatory act that added this~~

~~section.~~ October 6, 2008. If the commission determines that the

rate impact on industrial metal melting customers will exceed the

2.5% limit in subsection (2), the commission may phase in cost-

based rates for that class over a longer period. The cost of

providing service to each customer class shall be based on the

allocation of production-related and transmission costs based on

using the 50-25-25 method of cost allocation. The commission may

modify this method to better ensure rates are equal to the cost of

service. ~~if this method does not result in a greater amount of~~

~~production-related and transmission costs allocated to primary~~

~~customers.~~

(2) The commission shall ensure that the impact on residential

and industrial metal melting rates due to the cost of service

requirement in subsection (1) is no more than 2.5% per year.

(3) Within 60 days of the effective date of the amendatory act

that added this subsection, the commission shall commence a

proceeding for each affected electric utility to examine cost

allocation methods and rate design methods used to set rates. In

each proceeding, each affected utility shall file within 60 days of

the commencement of that proceeding a proposal to modify the

existing cost allocation methods and rate design methods that have

been used to set existing rates and shall provide notice to all of

that utility's customers outlining the proposed cost allocation

methods and rate design methods. A proposal filed by an affected

electric utility must meet both of the following conditions:

(a) Be consistent with subsection (1), which authorizes the

commission to modify the 50-25-25 method of allocating production-

related and transmission costs to better ensure rates are equal to

the cost of service.

(b) Explore different methods for allocation of production,

transmission, distribution, and customer-related costs and overall

rate design, based on cost of service, that support affordable and

competitive electric rates for all customer classes.

(4) The scope of a proceeding under subsection (3) is limited

to examining cost allocation and rate design methods proposed to

set rates for each affected electric utility that filed a proposal

under subsection (3). The commission shall allow any interested

person to intervene in a proceeding under subsection (3), including

on behalf of residential utility customers. The commission shall

not schedule a prehearing conference for the purposes of

considering interventions until an electric utility files a

proposal under subsection (3). Within 270 days after a proposal is

filed under subsection (3), the commission shall issue a final

order adopting the cost allocation methods and rate design methods

considered appropriate by the commission and doing either of the

following:

(a) Implementing rates consistent with those cost allocation

methods and rate design methods.

(b) Fixing a date for the establishment of rates consistent

with those cost allocation methods and rate design methods, which

date shall not be later than December 1, 2015.

(5) A utility may file other rate applications during the

pendency of a proceeding initiated under subsection (3). If an

affected electric utility files a rate application before December

1, 2014, the commission may close and consolidate the proceedings

initiated under subsection (3) with the case so long as a final

order addressing the proceedings initiated under subsection (3) can

be implemented by December 1, 2015.

(6) The commission shall order the administrative law judge

presiding over a proceeding under subsection (3) or (5) to prepare

an interim report that the commission shall submit to the

legislature within 150 days after proposals are filed under

subsection (3) or in a consolidated case under subsection (5)

describing the actions that have been taken to comply with

subsection (3), including a summary of the record evidence and

positions of the parties submitted to date regarding all of the

following:

(a) A summary of proceedings that have been initiated.

(b) The schedules adopted for those proceedings.

parties to each of those proceedings.

(d) The estimated impacts on the various customer classes of

each of the proposals, in aggregate and for an average customer in

each customer class.

(e) A description of qualifications for any proposed new rate

and estimation of the number of customers impacted by that new

rate.

(f) A description of proposed definitions or methods that

support affordable and competitive electric rates for all customer

classes.

(7) Not later than 60 days before a final order is required to

be issued under subsection (4) or in a consolidated case under

subsection (5), the commission shall forward to the legislature the

proposal for decision in each of the proceedings initiated under

subsection (3) issued by the administrative law judge presiding

over those proceedings including a summary of the evidence

presented by the parties in the proceeding on which the

commission's final decision must be made.

(8) ~~(3)~~ Notwithstanding any other provision of this act, the

commission may establish eligible low-income customer or eligible

senior citizen customer rates. Upon filing of a rate increase

request, a utility shall include proposed eligible low-income

customer and eligible senior citizen customer rates and a method to

allocate the revenue shortfall attributed to the implementation of

those rates upon all customer classes. As used in this subsection,

"eligible low-income customer" and "eligible senior citizen

customer" mean those terms as defined in section 10t.

(9) ~~(4)~~ Notwithstanding any other provision of this section,

the commission shall establish rate schedules which ensure that

public and private schools, universities, and community colleges

are charged retail electric rates that reflect the actual cost of

providing service to those customers. ~~Not later than 90 days after~~

~~the effective date of the amendatory act that added this section,~~

~~electric~~ Electric utilities regulated under this section shall file

with the commission tariffs to ensure that public and private

schools, universities, and community colleges are charged electric

rates as provided in this subsection.

(10) ~~(5)~~ Subsections (1) to ~~(4)~~ (9) apply only to electric

utilities with 1,000,000 or more retail customers in this state.

(11) Within 2 years of the effective date of the amendatory

act that added this subsection, an electric utility serving fewer

than 120,000 retail customers in this state may file an application

with the commission to modify the cost allocation methods and rate

design methods used to set that utility's existing rates. Within

180 days of the effective date of the amendatory act that added

this subsection, an electric utility serving 120,000 or more but

fewer than 1,000,000 retail customers in this state shall file an

application with the commission to modify the cost allocation

methods and rate design methods used to set that utility's existing

rates. This subsection does not apply to a cooperative electric

utility that has elected to become member-regulated under the

electric cooperative member-regulation act, 2008 PA 167, MCL 460.31

to 460.39. Upon receipt of an application under this subsection,

the commission shall commence a proceeding for that electric

utility, limited to examining and implementing any modifications to

the cost allocation methods and rate design methods used by that

utility. An electric utility's application must meet both of the

following conditions:

(a) Be consistent with the cost of providing service

provisions of subsection (12).

(b) Explore different methods for allocation of production,

transmission, distribution, and customer-related costs and overall

rate design, based on cost of service, that support affordable and

competitive electric rates for all customer classes.

(12) ~~(6) This subsection applies beginning January 1, 2009.~~

The commission shall approve rates equal to the cost of providing

service to customers of electric utilities serving less than

1,000,000 retail customers in this state. The rates shall be

approved by the commission in each utility's first general rate

case filed after passage of ~~the amendatory act that added this~~

~~section.~~ 2008 PA 286. If, in the judgment of the commission, the

impact of imposing cost of service rates on customers of a utility

would have a material impact, the commission may approve an order

that implements those rates over a suitable number of years. The

commission shall ensure that any impact on rates due to the cost of

service requirement in this subsection is not more than 2.5% per

year.

(13) ~~(7)~~ The commission shall annually retain an independent

consultant to verify that the requirements of this section are

being satisfied for each electric utility. The costs of this

service shall be recoverable in the utility's electric rates. This

subsection does not apply after December 31, 2015.

(14) An analysis of affordable rates under this section shall

include both of the following:

(a) An analysis of rate impacts directly attributable to

proposed cost allocation methods, not including expiring costs

associated with non-base energy and non-base energy delivery that