Michigan Public Service Commission seeks final comments on new PURPA rules

May 31, 2017

LANSING, Mich. – The Michigan Public Service Commission (MPSC) today approved key aspects of the first update in 25 years of the approach utilities must take to determine avoided costs under the federal Public Utility Regulatory Policies Act (PURPA) of 1978.

PURPA opened the power market to certain small renewable power producers, allowing them to sell the electricity they produce to utilities. The amount a utility pays the small producer is considered the avoided cost, which is the amount the utility would have incurred if it had bought or produced the power itself.

The method to determine a utility’s avoided cost rate under PURPA has been in place since the early 1980s and long-term contracts in Michigan are beginning to expire. Under Michigan’s new energy laws, which went into effect in April, the MPSC is required to review PURPA avoided cost determinations at least every five years.

The first PURPA review case to come before the MPSC involves Consumers Energy Co. (Case No. U-18090). The Commission’s order today approved a revised avoided cost methodology, but the calculations of the new rates based on natural gas power production methods require more information from parties in the case.

The approved approach would require Consumers to base its calculations on the cost to produce power using natural gas, instead of coal. The Commission also ruled the Standard Offer (the tariff utilities pay to qualified facilities) be available to facilities that produce up to 2 megawatts of power, an increase from 100 kilowatts, and that Standard Offers should be for a term of up to 20 years. Recognizing the rapid changes in the energy markets, the MPSC also called for a biennial avoided cost review.

Additional input regarding natural gas power production methods as part of determining avoided costs should be filed with the Administrative Law Judge Mark E. Cummins by June 12, with responses due by June 19.

Input sought on renewable energy plan development

In other action, the MPSC requested public comments on the requirement that utilities file amended renewable energy plans to comply with new energy laws.

Act 342 increases to 15 percent by 2021 the amount of energy that electric providers are required to produce from renewable sources. That’s an increase from the present 10 percent requirement.

Proposed filing requirements are posted within the docket for Case No. U-18409. Comments must be filed by 5 p.m. June 30, with replies to be filed by 5 p.m. July 21.

The renewable energy plans and PURPA Avoided Cost Review are part of an energy law overhaul that sets a framework for an affordable, reliable and adaptable energy future that is protective of the environment and removes many barriers to reducing energy waste. Learn more about the laws here.

The Commission also approved:

  • The exchange of two service areas between Cherryland Electric Cooperative (Cherryland) and the Traverse City Light and Power Department (TC Light and Power). The companies have stated in Case No. U-18342 that the moves will better serve customers and provide more geographically congruent service areas. Cherryland will take over service along River Road while TC Light and Power will take over service in the Barlow area, according to Cherryland. About 200 total customers will be affected.

  • A July 1 deadline for electric utilities, municipally owned electric utilities and cooperative electric utilities to report to the MPSC (Case No. U-17377) how many service meters will be subject to a surcharge to fund the Low-Income Energy Assistance Fund (LIEAF). The current monthly per meter rate that customers pay is 96 cents. The surcharge can’t exceed $1. Utilities that do not collect the surcharge cannot shut off service to any residential customer from Nov. 1, 2017, to April 15, 2018

  • Setting times and dates for prehearing conferences to establish a State Reliability Mechanism for Upper Michigan Energy Resources Corp. (UMERC), Upper Peninsula Power Co. (UPPCo), and Cloverland Electric Cooperative (Cloverland) (Case No. U-18253 et al). All three hearings will be Wednesday, June 28, with UMERC’s at 9 a.m., UPPCo’s at 9:30 a.m. and Cloverland’s at 10 a.m. at the Commission’s offices at 7109 W. Saginaw Highway, Lansing.

  • A license under the Michigan Telecommunications Act for Talk America LLC to provide basic local telephone service in areas served by AT&T Michigan, Frontier North Inc. and Frontier Midstates Inc. The Commission said granting the license (Case No. U-18347) will increase competition to the benefit of Michigan residents.

  • A settlement agreement with DTE Gas Co. (Case No. 18206) under the utility’s revenue decoupling mechanism (RDM). Some customers will see either a credit or surcharge on their October, November and December bills this year under the agreement. Residential bills will see a credit of $1.06 for each of the three months; owners of Class 1 multi-family buildings will get a $5.02 credit; owners of Class 2 multi-family buildings face an $18.36 charge; non-residential general service customers will receive a 77-cent credit; and schools get a $90.62 credit. Under revenue decoupling, a utility isn’t punished for achieving energy efficiency goals.

The MPSC announced that Administrative Law Judge Sharon Feldman has been named Administrative Law Manager of the Michigan Administrative Hearings System’s Public Service Commission Division. Also, Lauren Van Steel has been hired as an Administrative Law Examiner.

For more information about the MPSC, please visit www.michigan.gov/mpsc or sign up for one of its listservs to keep up to date on MPSC matters.