In re IMPLEMENTING SECTION 6W OF 2016 PA 341 FOR CLOVERLAND ELECTRIC COOPERATIVE.CLOVERLAND ELECTRIC COOPERATIVE, Appellant,
MICHIGAN PUBLIC SERVICE COMMISSION, Appellee.
LC No. 00-018258.
CLOVERLAND ELECTRIC COOPERATIVE, Appellant: MICHAEL G. OLIVA.
MPSC, Appellee: AMIT T. SINGH.
Before: O'BRIEN, P.J., and FORT HOOD and CAMERON,
Mich.App. 165] Cameron, J.
Appellant, Cloverland Electric Cooperative (Cloverland), is a
member-regulated electric cooperative, which generates and
delivers electricity to five counties in Michigan's Upper
Peninsula. In 2016, the Michigan Legislature passed Public
Act 341 to ensure [329 Mich.App. 166] that alternative
electric suppliers (AES) demonstrate that they are able to
generate enough electricity to meet their capacity
obligations. If an AES cannot meet its obligations, then the
electric utility, such as Cloverland, must provide the
AES's customers with electric capacity, and in return,
implement a State Reliability Mechanism (SRM) charge, which
must be paid by the AES's customers. After a hearing was
held, the Public Service Commission (the PSC or the
commission) issued an opinion and order on November 30, 2017,
requiring Cloverland to also implement an SRM charge on
Cloverland's full-service member-customers pursuant to
the newly enacted law. On appeal, Cloverland challenges the
PSC's decision to require the implementation of the SRM
charge. We affirm.
explained by Cloverland's chief financial officer, Robert
J. Malaski, Cloverland is a member-regulated electric
cooperative that generates, distributes, and sells electric
energy to its
member-customers in the counties of Chippewa, Delta, Luce,
Mackinac and Schoolcraft in Michigan's Upper Peninsula,
including the cities of Sault Ste. Marie, St. Ignace,
Mackinac Island and Manistique. Cloverland has approximately
42,000 member-customers, consisting of residential, farm
residential, seasonal, commercial, outdoor lighting and large
Malaski testified that " Cloverland has a single member,
UP Paper, LLC, ('UP Paper') which purchases a [329
Mich.App. 167] portion of its electric energy from an AES.
Cloverland also serves UP Paper for the remainder of its
electric energy needs under the terms of a special
case is about the legal requirements for ensuring the
reliability of the electric grid in Michigan. In order for a
summary of the proceedings in this case to make sense, it is
necessary to quote pertinent language from the governing
statute, MCL 460.6w, which was added by 2016 PA 341
(Act 341), effective April 20, 2017, and to explain a recent
opinion of this Court, In re Reliability Plans of
Electric Utilities for 2017-2021, 325 Mich.App. 207, 926
N.W.2d 584 (2018).
At the end of 2016, our Legislature enacted new electric
utility legislation that included Act 341. That act added,
among other statutory sections, MCL 460.6w."
In re Reliability Plans, 325 Mich.App. at 210-211 .
By way of background, Michigan's Legislature previously
enacted what was known as the Customer Choice and
Electricity Reliability Act, MCL 460.10 et seq., as
enacted by 2000 PA 141 and 2000 PA 142, to further the
deregulation of the electric utility industry. That act
permitted customers to buy electricity from alternative
electric suppliers instead of limiting customers to
purchasing electricity from incumbent utilities . . . . Among
the purposes of the act, as amended by Act 341, is the
promotion of " financially healthy and competitive
utilities in this state." MCL 460.10(b).
[In re Reliability Plans, 325 Mich.App. at 211
(quotation marks and citation omitted).]
additional background information, it is noted that
the Midcontinent Independent System Operator (MISO) is the
regional transmission organization responsible for managing
the transmission of electric power in a large geographic area
that spans portions of Michigan and 14 other states. To
accomplish this, MISO combines the [329 Mich.App. 168]
transmission facilities of several transmission owners into a
single transmission system. In addition to the transmission
of electricity, MISO's functions include capacity
resource planning. MISO has established ten local resource
zones; most of Michigan's lower peninsula is located in
MISO's Local Resource Zone 7, while the upper peninsula
is located in MISO's Local Resource Zone 2. [Id.
Further, MISO " serves as a mechanism for suppliers to
buy and sell electricity capacity through an auction. This
allows for the exchange of capacity resources across energy
providers and resource zones." Id. at 212 .
At the end of 2016, our Legislature enacted Act 341, in part
adding MCL 460.6w, which imposes resource adequacy
requirements on electric service providers in Michigan and
imposes certain responsibilities on the [PSC]." In
re Reliability Plans, 325 Mich.App. at 213 .
MCL 460.6w(2) provides, in relevant part, " If,
by September 30, 2017, the Federal Energy Regulatory
Commission [(FERC)] does not put into effect a resource
adequacy tariff that includes a capacity forward
auction or a prevailing state compensation
mechanism, then the commission shall establish [an SRM] under
subsection (8)." It is undisputed here that the FERC did
not implement a resource adequacy tariff that included a
capacity forward auction or a prevailing state compensation
mechanism by September 30, 2017. Thus, the PSC was required
to establish an SRM under MCL 460.6w(8). See
MCL 460.6w(2); In re Reliability Plans, 325
Mich.App. at 213 (" The parties agree that because
the [FERC] did not put into effect the MISO-proposed tariff,
the [PSC] is required by [MCL 460.6w(2)] to
establish [an SRM]." ). [329 Mich.App. 169] An SRM
" means a plan adopted by the commission in the absence
of a prevailing state compensation mechanism to ensure
reliability of the electric grid in this state consistent
with subsection (8)." MCL 460.6w(12)(h).
an AES fails to demonstrate that it has sufficient capacity
to meet its capacity obligations, the electric utility must
provide the AES's customer with electric capacity, and in
return, an SRM charge must be paid. In particular,
MCL 460.6w(6) provides:
A capacity charge shall not be assessed for any portion of
capacity obligations for each planning year for which an
alternative electric supplier can demonstrate that it can
meet its capacity obligations through owned or contractual
rights to any resource that the appropriate independent
system operator allows to meet the capacity obligation of the
electric provider. The preceding sentence shall not be
applied in any way that conflicts with a federal resource
adequacy tariff, when applicable. Any electric provider that
has previously demonstrated that it can meet all or a portion
of its capacity obligations shall give notice to the
commission by September 1 of the year 4 years before the
beginning of the applicable planning year if it does not
expect to meet that capacity obligation and instead expects
to pay a capacity charge. The capacity charge in the utility
service territory must be ...