June 2021

 

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In the June Spotlight, we provide an update on the Federal Communication Commission's Rural Digital Opportunity Fund, summarize key projections from the 2021 Michigan Energy Appraisal Summer Outlook, and recap the participation of Commissioner Tremaine Phillips in the recent 2021 Michigan Environmental Justice Conference. We also highlight a MISO study on Michigan capacity import and export limits and review the Commission's approval of a change in ownership of a northern Michigan electric utility company.


Rural Digital Opportunity Fund Update - Michigan

The last 15 months have brought change for many of us. As families began to work and learn from home in March 2020, it became clear that reliable, high-speed internet access was critical - and not just for binge watching Tiger King. Work meetings, school classes, and even public meetings of various government bodies (including the MPSC) all moved to on-line formats, and it quickly became clear that access to these tools would be required to fully participate in many work and school settings as well as in civic life.

While 2020 exacerbated the need for reliable internet access, improving rural broadband access had long been a priority of the Federal Communications Commission (FCC), and the wheels had been put in motion in late 2019 to provide funding to providers to build out broadband infrastructure in unserved areas. This program, known as the Rural Digital Opportunity Fund, or RDOF, identified unserved areas of the country and asked providers to submit bids to serve them. Winning bidders would receive funding to assist in the build-out of their networks and bring broadband to these unserved areas. In total, $16 billion was made available and, in December 2020, winning bidders were announced by the FCC. Michigan had 13 winning bidders that are qualified to receive in aggregate up to $363 million in RDOF support over the next 10 years and extend high-speed internet service to almost 250,000 locations throughout the state.

To receive RDOF funds, winning bidders must be designated as an Eligible Telecommunication Carrier (ETC) for their specific service area by June 7, 2021. This designation is important because it is the process through which providers certify that they will comply with laws, rules, and important state consumer protection and service quality standards, and certify that they will provide emergency back-up power to ensure their service will remain functional in emergency situations. The MPSC is responsible for approving ETC designations and service territories for providers operating in the state and received 15 ETC designation applications beginning in January (some RDOF winners chose to assign their new service areas to other providers in accordance with FCC RDOF rules, resulting in more ETC applications than RDOF winners). In addition to reviewing these ETC applications, the MPSC also oversaw the licensing applications which many of these providers were required to submit.

Since January, 14 of the 15 ETC applications and 7 of the 8 corresponding licensing applications have been reviewed and approved by the Commission, allowing these providers to continue in the RDOF process and making them eligible to receive up to $353 million in RDOF support. The single outstanding application remains under review and an extension of the ETC designation deadline has been requested by that provider.

MPSC Staff and Commissioners are excited about the opportunities created by the RDOF and appreciate the opportunity to play a role in helping bring broadband to Michigan's unserved residents.


2021 Summer Energy Appraisal

On May 26, the MPSC released the 2021 version of its annual Michigan Energy Appraisal Summer Outlook. This report is intended to provide a short-term view of the MPSC's Energy Security Section's expectations for energy supply and demand. However, the upheaval caused by the COVID-19 pandemic has introduced atypical volatility into energy consumption patterns with continued uncertainty in future projections. The report's key findings and projections across energy sectors include the following:

  • Electricity sales in 2020 were 5% below 2019 sales. This decline was led by the industrial sector's 16% decline, while residential electricity use increased 6.6% to 35.7 billion kilowatt hours, attributed to Michigan residents working from home. Current weather projections call for this summer to be 8% warmer than average, which could impact electricity use.
  • The average monthly residential natural gas summer bill for Michigan's four largest gas utilities - DTE Gas, SEMCO Energy, Consumers Energy, and Michigan Gas Utilities - is projected to be approximately $36.79 for the April-October 2021 period. A residential customer's annual gas bill from April 2021 to March 2022 is forecasted to be $824, about $63 higher than the previous year.
  • Based on EIA protections, Michigan crude oil producers might expect to receive $50 per barrel for sweet blends and $45 per barrel for sour blends in 2021, which could encourage exploration and development of additional wells after a year of depressed prices in 2020.
  • Demand for gasoline in 2020 was 3.9 billion gallons, a decline of 15.2% from 2019, and the second consecutive annual decline, largely attributed to COVID's impact on state economic activity. With pandemic restrictions easing, demand is expected to rebound in 2021, although the extent of the rebound will depend on factors including future infection rates and consumer comfort with travel. As of May 19, a gallon of regular gas was $2.94, up from $1.85 a year ago, according to AAA Michigan. The EIA projects Midwest regular-grade gasoline prices will average $2.71 per gallon during this year's April - September driving season, up from $1.92 per gallon in 2020.
  • Midwest distillate stocks were at 26.7 million barrels as of May 14, 2021, lower than in 2020. U.S. distillate inventories were near the middle of the five-year range at 132 million barrels, down from 159 million barrels a year ago. On-highway diesel prices as of mid-May 2021 were at $3.15 per gallon, up 70 cents per gallon from a year ago.

This year's report also highlights two key issues that will continue to require attention:

  • Enbridge Energy's application for authority to replace and relocate the segment of the Line 5 pipeline in the Straits of Mackinac into a tunnel beneath the lakebed remains an active case before the Commission (Case No. U-20763). On April 21, 2021, the MPSC rejected intervenors' arguments that the Commission must examine whether there is a public need for the 641 miles of Line 5 not at issue in Enbridge's application, while also agreeing that the replacement pipe segment review must include an examination of the allegations of greenhouse gas pollution under the Michigan Environmental Protection Act.
  • A ransomware cyberattack in early May 2021 on the Colonial Pipeline, which delivers gasoline, diesel, jet fuel, and heating oil, impacted supplies along the Gulf Coast through the East Coast. Michigan's gasoline supplies were not interrupted, as Michigan primarily relies on refined petroleum products from Marathon's Detroit Refinery and refineries in Chicago and Toledo. MPSC Staff closely monitored the situation and included in the report highlights of the MPSC's work to ensure the safe and reliable delivery of energy products to consumers.

See the full report for a deeper dive into each of these topics.


Environmental Justice Conference

The 2021 Michigan Environmental Justice Conference: Rebuilding Trust, Reimagining Justice, and Removing Barriers took place May 18-20 and was co-hosted by the Office of the Environmental Justice Public Advocate; the Michigan Advisory Council on Environmental Justice; the Michigan Interagency Environmental Justice Response Team; and the Michigan Department of Environment, Great Lakes, and Energy. This free, virtual conference was designed to help Michigan move forward in the quest for transformative change, meaningful engagement, and the development of intersectional solutions as we work toward a more just and equitable future.

At the conference, MPSC Commissioner Tremaine Phillips participated with other distinguished panel members in a discussion titled "The Future of Infrastructure: Above and Below - Transportation, Water and Internet Access." The panel sought to explore the inextricable links between equity and infrastructure, as well as the steps being taken to ensure equitable access to critical resources such as internet, transportation, and safe drinking water. Noting how an appropriate understanding of past policy decisions is necessary to inform future ones, Commissioner Phillips explained, "Not only are we trying to inject equity into the infrastructure decisions as we move forward, but we are also trying to unravel the inequities and discrimination and systematic racism that has been placed into the infrastructure."

View the full panel session (or any of the other sessions from the agenda) with the invitation code 2021MICHIGANEJ.

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MISO Michigan CIL-CEL Expansion Study Report

In conjunction with the publication of the MPSC's Statewide Energy Assessment in Sep. 2019, Governor Gretchen Whitmer and then-MPSC Chairman Sally Talberg sent a letter to Midcontinent Independent System Operator (MISO) requesting that MISO work with Commission Staff and stakeholders on solutions to increase Michigan's energy capacity import limits, which would strengthen system reliability. MISO is the regional transmission organization that operates most of Michigan's electric grid. MISO, in conjunction with the MPSC Staff, convened stakeholder meetings throughout 2020 to facilitate the development of the scope of the study. The resulting Michigan Capacity Import/Export Limit Expansion Study Report (MI CIL/CEL) considered both near-term and longer-term scenarios with increasing amounts of renewable energy added over time. The study found that the capacity import limit could be increased through either the development of two relatively low-cost transmission solutions or the addition of new substations. However, MISO cautioned that the analysis conducted has the following limitations:

  • The local area constraints identified in the study can be sensitive to the assumed siting of future local generation.
  • The study focuses only on dispatch and transfer capability during system peak conditions and does not necessarily provide a picture of the import needs that Michigan may have for other time periods.
  • MISO stakeholders must confront significant new reliability challenges as the generation resource mix evolves over time.

MISO further explained:

(This study) will inform MISO's broader Reliability Imperative initiative. The Reliability Imperative's Market Redefinition workstream will contemplate changes to market structures to recognize and reflect the reliability needs of a grid in which a single zone, such as lower Michigan, could have surplus energy during one time-period, but scarcity in another. To enable power delivery in such situations, the Reliability Imperative's Long Range Transmission Planning (LRTP) workstream is focused on ensuring that the regional transmission grid is not a barrier to the rapid transition of resources that is ongoing and projected. While the CIL study began before the initiation of planning analysis on the LRTP, MISO expects that longer term development of the regional resources and grid will require additional strengthening of interstate ties to manage energy flows into and out of Michigan as well as other states.

For more information, see the full Michigan Capacity Import/Export Limit Expansion Study, MISO's Reliability Imperative webpage, and MISO's Long Range Transmission Planning webpage.


Transfer of Ownership of Upper Peninsula Power Co.

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At its May 26, 2021, meeting, the Commission approved a settlement agreement to approve the transfer of ownership of Upper Peninsula Power Co. (UPPCO), which serves about 52,000 electricity customers across the U.P. (Case No. U-20995). Under the agreement, Axium UP Holdings LLC purchases the entirety of UPPCO's stock from Lake AIV LP. The transfer settlement agreement addresses the following issues:

  • Existing rates will not be impacted, and Axium will not seek to recover sale transaction costs from UPPCO customers.
  • No workforce cuts are expected, and Axium commits to honoring collective bargaining agreements and existing pay and benefits for 24 months, maintaining the utility's current offices, and continuing existing charitable contributions for at least five years.
  • UPPCO agrees not to request an adjustment to base rates that would take effect before Jan. 1, 2023, unless the company must do so because of corporate income tax rate increases.
  • Axium is directed to move expeditiously to implement its debt refinancing plan, which will benefit customers both through long-term stability and by the lower interest rate that reduces financing costs. 
  • Axium agrees to increase the discretionary cap on its distributed generation program from 2% to at least 3% of its average in-state peak load.
  • In its next rate case, UPPCO will include proposals to address the recommendations of the Upper Peninsula Energy Task Force Committee for an electric vehicle charging station pilot program; alternative pilot tariffs and/or rebates applicable to electric space heating and water heating, and a low-income residential customer pilot tariff in consultation with Staff and the Attorney General.
  • Axium will forgive 20% of the bad debt booked to the company's COVID-19 deferred asset account, which will be borne by shareholders and not recovered from ratepayers. UPPCO will propose an arrears forgiveness program, in consultation with the Staff and the Attorney General, within 90 days from the execution of the settlement agreement to apply the 20% of bad debt to customer arrearages.

Have a utility complaint, or need help with your utility service? We're here to help. Submit your complaint or inquiry online or call 800-292-9555.


Tune in to our next regularly scheduled virtual Commission Meeting on June 23, 2021 at 1:30 PM.


The mission of the Michigan Public Service Commission is to serve the public by ensuring safe, reliable, and accessible energy and telecommunications services at reasonable rates.


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