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Michigan Gas Utilities to Cease Accepting New Choice Customers Under Moratorium
June 29, 2011
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Michigan Gas Utilities Corporation said that it, "will cease accepting new GCC [Gas Customer Choice] customer enrollments for one year," beginning September 1, 2011 (U-16481).
During this "moratorium," Michigan Gas Utilities said that it will assess the appropriate amount of Gas Customer Choice customers and the associated volumes that its local distribution system can accommodate on a sustainable basis going forward.
Michigan Gas Utilities announced the moratorium in rebuttal testimony in consolidated cases addressing its Gas Cost Recovery plan, its proposed reservation charge on choice suppliers (see 1/26 story), and related Supplier of Last Resort cost allocation issues.
A moratorium was first recommended by the Residential Ratepayer Consortium, which presented an analysis arguing that Michigan Gas Utilities, "cannot provide safe and reliable service to the GCR [Gas Cost Recovery] customers at the existing levels of GCC participation."
Choice sales have grown from 1% of non-transportation (e.g. GCR or choice) volumes in 2008 to an expected 33% by the end of the 2011-2012 GCR year.
Michigan Gas Utilities agreed that, "dramatic growth of the GCC program has created a new and currently challenging operating paradigm for the Company ... the Choice program has grown so rapidly that it is increasingly difficult to balance the Company's system."
"The increasingly large proportion of Choice supply at the city gate, compared to GCR volumes, is also negatively affecting the Company's ability to balance its supply portfolio for GCR customers," Michigan Gas Utilities said.
"Further exacerbating the challenge is the disproportionate growth of those GCC volumes in some areas of the system. GCC volumes in the Benton Harbor area are projected to be 49% of throughput for the current Plan year. This compares to 4% at Otsego South. The disproportionate growth from geographic area to the next has created excess supplies in one area and shortages in others that cannot be remedied by simply shifting supplies. This translates into daily challenges in system balancing in each of the areas," Michigan Gas Utilities continued.
Michigan Gas Utilities said that it is not suggesting a permanent cap on the growth of the choice program, "[s]imply a 'time out' to make the appropriate adjustments that will allow us to operate the system in a safe, reliable and non-discriminatory manner."
The Michigan Gas Customer Choice Association called the Residential Ratepayer Consortium's operational concerns, "specious," in its rebuttal testimony filed concurrently with Michigan Gas Utilities' announcement, and thus did not address the utility's statements. In particular, the Choice Association said that various actions that Michigan Gas Utilities takes to meet Peak Day requirements will more than ensure that current or even higher levels of choice participation do not jeopardize the operation of the Michigan Gas Utilities system, even in the event temperatures exceed those included in the Peak Day.
"Neither MGUC's GCC Tariff nor any of the State of Michigan's orders on Gas Customer Choice provide for the complete cessation of GCC enrollments without an accompanying emergency. At this time, no such emergency or triggering event has occurred, and no reasonable person could predict such an event based on the available facts," the Michigan Gas Customer Choice Association said.
Regarding the impetus of the case, the proposed reservation charge, intervenors such as the Attorney General have argued that the charge is appropriate given that capacity release is "unworkable" due to changes federal regulations. The Choice Association rebutted that, "the decision to abandon capacity assignment was a business decision that it [Michigan Gas Utilities] made, not because capacity assignment was no longer an available option, but because it did not want to go through the procedures necessary to use that method of cost recovery."
The Michigan Gas Customer Choice Association summarized the reservation charge as follows:
"MGUC wants to reclassify stranded costs left behind by customers who migrated to GCC to escape MGUC's flawed fixed price purchase program as SOLR costs. If there is one area of agreement in this case -- MGCCA, MGUC, RRC and AG -- it is that the fixed price purchase program has been unsuccessful and has accelerated the movement of customers to GCC. By reclassifying stranded costs as SOLR costs MGUC will have a new place to allocate expenses and will avoid the consequences of its purchasing decisions."
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