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Large Michigan Customers Attack Evidentiary Support for 1 Mill/kWh Choice Surcharge
August 29, 2011
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A 1 mill per kWh surcharge which would be imposed on retail open access customers (ROA) in Michigan under a proposed decision lacks evidentiary support and is contrary to statute, large customers and suppliers said in briefs on exceptions.
As only noted in Matters (8/15), a proposed order in Detroit Edison's rate case would impose the 1 mill charge on retail access customers to cover Detroit Edison's environmental compliance costs, since retail access customers retain the option to return to Detroit Edison for supply and rely on the utility's generation assets.
However, Kroger noted that, "none of the parties supporting this proposal submitted any evidence that one mill per kilowatt-hour represents the environmental compliance costs caused by the fact that the Company is required to serve ROA customers if they return to full service."
"That number seems to be plucked out of thin air. The ALJ would require an evidentiary foundation for other recommendations discussed in the PFD ... but supports Staff's proposed one mill charge to ROA customers without any foundation that this charge is set [at] an appropriate level to compensate Detroit Edison for the environmental costs it ostensibly incurred on behalf of ROA customers," Kroger said.
The Association of Businesses Advocating Tariff Equity also said that the 1 mill per kWh charge, "arbitrarily shifts costs between rates inside a rate class."
"First, the charge is not based on cost to serve. Staff's witness stated that the proposed charge is not based on any cost of service study. Therefore, the charge is arbitrary. Second, the charge arbitrarily moves costs between rates in D1.1, D3, D3.2, D3.3, D4, D5, D6, D6.1, D6.2, D8 and R8 rate classes. It should be noted that Rate Class D6.2 is a Primary Educational Institute Rate Class. MCL 460.11(4) mandates that public and private schools should be charged electric rates that reflect the actual cost of providing service to those customers," ABATE said.
Energy Michigan also rebutted the ALJ's conclusion that choice customers can return to Detroit Edison supply without financial penalty, which the ALJ found supports charging such customers for environmental compliance costs.
"Choice customers pay over 7 mills/kWh in securitization and nuclear decommissioning costs to support DTE production facilities for a total of over $28 million per year at current Choice levels. Moreover, Electric Choice customers must provide notice by December (6 months) before they return to Company service thus allowing Edison to secure economical supplies of needed power on the MISO market in time to serve returning Choice customers. Choice customers failing to provide the required notice are subject to a penalty in the form of a rate that is 10% above the higher of retail or market rates," Energy Michigan noted.
"Staff's proposed charge is essentially a stranded cost charge," Kroger added, as Energy Michigan argued that the PSC lacks statutory authority to impose a new stranded cost.
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