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Ratemaking

Ratemaking

One of the key functions of the MPSC is to set rates charged by regulated electric and natural gas utility companies.

The MPSC has the statutory authority to regulate rates for all public utilities in Michigan except municipally owned utilities and member-regulated cooperatives.

Rate Case Process

Chart showing the ratemaking processA regulated utility cannot increase its rates without Commission approval. A utility must file a request to increase rates through the MPSC’s rate case process which provides MPSC Staff and other intervenors the ability to scrutinize requests through a contested case proceeding.

Similar to how a judge functions in court, an Administrative Law Judge (ALJ) is an attorney that presides over rate case proceedings – setting the schedule, hearing motions from parties to the case, and overseeing cross-examination of witnesses. Intervenors in the case are able to submit testimony and exhibits, cross examine witnesses, and file legal briefs on issues in the case. The ALJ reviews the evidentiary record and makes findings in the form of a proposal for decision, or PFD. The Commission takes the PFD under consideration and has 10 months from the date the utility filed the application to issue a final decision through an order.

In the ratemaking process, a portion of the power, natural gas, and steam supply costs are recovered through a base amount that is included in base rates. The costs that exceed the base amount included are recovered through Power Supply Cost Recovery (PSCR), Gas Cost Recovery (GCR), and Steam Supply Cost Recovery (SSCR) surcharges that tend to fluctuate and may vary from month to month. These costs are reconciled every year to recover actual fuel and purchased power costs and the cost of transmission service following a prudence review.

To learn more about rates cases and the rate case process, see the MPSC’s Rate Case Issue Brief. If you’re interested in participating in a proceeding before the Commission, information on how to get involved can be found here. 

Current Open Rate Cases

 

Rate Case Filing Requirements

Following the 2016 energy law, the MPSC established standard filing requirements for rate cases that are used by each regulated utility when it files its rate case application.

The Rate Case Filing Requirements contain three parts.

  • Part I contains instructions for filing, including providing a notice in the case docket, information required in the filing, and the format of filed exhibits.
  • Part II requires certain reports to be included in the filing such as the most recent two years of the utility’s Annual Reports, the Annual Report to the SEC, the four most recent quarterly reports to shareholders, and bond and other financial prospectuses during the past two years.
  • Part III contains forms and instructions for supplemental data and rate case process, schedule and discovery guidelines.

The MPSC Staff will convene a new stakeholder collaborative on the rate case filing requirements as directed by the Commission in Case No. U-18238.