House Energy chair: Utility regulators may violate new state energy law

Glenn says MPSC abuse of authority could cost public schools and manufacturers hundreds of millions in higher energy costs each year, taking money out of the classroom and making Michigan less competitive for new jobs

Lansing, Mich. -- Associate Speaker Pro Tem and House Energy Policy Chairman Rep. Gary Glenn, R-Larkin Twp., Thursday said the Michigan Public Service Commission is preparing next month to adopt a policy that would violate state and federal energy law and drive up electricity rates -- already highest in the Midwest -- for thousands of public schools and major employers. The move would take tens of millions of dollars out of the classroom each year, Glenn said, and make Michigan's economy less competitive for new business, industry, and jobs.

"This is clearly a back door attempt by unelected bureaucrats to eliminate Michigan's Electricity Choice program by bureaucratic regulation, a protectionist scheme that was pushed by the state's two monopoly utilities in the last legislative session but was expressly rejected by the people's elected representatives," Glenn said.

He said the Public Service Commission "has no legal authority to just make it up as they go along to serve the financial interests of the state's two monopoly utilities, in direct violation of the plain language, spirit, and intent of state and federal law, and at the cost of hundreds of millions in higher electricity costs each year to Michigan schools and businesses."

Glenn says in an August 1st order, Public Service Commissioners instructed staff to develop policy that threatens to require electricity choice providers who compete with the state's two regional monopolies -- Consumers Energy and Detroit Edison -- to prove they can supply their customers using only electricity that's generated in Michigan. Final adoption of the policy is scheduled for September 28th.

"That's like passing a law telling Michigan families, businesses, and schools we can only buy food or products that are grown or made in Michigan, no matter how much higher the price may be out of our family or business or local school budgets," Glenn said. "Our objective should be just the opposite -- to save electricity users as much money as possible, and make Michigan as competitive for new business and industry and jobs as possible, by providing customers the cheapest electricity possible, regardless of whether it comes from a wind farm in North Dakota or an oil well in Texas."

Such a "local clearing requirement" would force competing electricity providers to buy more expensive energy generated in Michigan, which threatens tens of millions in higher costs each year to public schools alone.

In a July 13th letter to the Public Service Commission, the Michigan Schools Energy Cooperative said it "has saved Michigan schools over $140 million -- or $35 per student per year -- through the (Electricity Choice) program, dollars that are returned directly back into the classroom."

The cooperative's membership includes Michigan Association of Independent School Administrators, Michigan Association of School Administrators, Michigan Association of School Boards, Michigan School Business Officials, and Middle Cities Education Association.

"We are certain that the Commission understands that many of the original legislative drafts...included a 'local clearing requirement' (later eliminated from the legislation) that would require alternative electric suppliers to buy all or mostly all of their capacity locally in Michigan," wrote cooperative Secretary-Treasurer Raymond Telman. "As you know, that language would have effectively eliminated the Electric Choice program, as DTE and Consumers own or have purchased virtually all local capacity and could and would either refuse to sell to AESs or sell to AESs at an above market price."

Glenn also cited a July 25th letter to the Public Service Commission by House Majority Whip Rep. Rob Verheulen, R-Walker, and Rep. Chris Afendoulis, R-Grand Rapids Twp., the primary sponsors of the compromise energy package approved by the Legislature in December and signed into law.

The legislation "deliberately removed this contentious ('local clearing requirement') language and in doing so, a compromise was reached," Verheulen and Afendoulis wrote. "The final language clearly allows Alternative Energy Suppliers to use any resource allowed by (the Midwest's federally-regulated regional electricity grid manager, Midcontinent Independent System Operator) to meet capacity obligations without reference to local resources."

"We have strong concerns that the imposition by the Commission of any requirements on AESs in excess of those MISO requires...violates the legislative intent of PA 341 and will place a significant additional burden on schools and businesses in our districts and all across Michigan," they wrote. "It will also threaten the sustainability of the (Electricity Choice) program, the viability and continuation of which was a primary goal of the legislation."

The proposed local generation requirement would directly violate not only the new state energy law, but federal regulations as well, Glenn said, both of which expressly state -- as Reps. Afendoulis and Verheulen referenced -- that a competing electricity provider "can meet its capacity obligations through owned or contractual rights to any resource that the appropriate independent system operator allows to meet the capacity obligation of the electric provider." MISO does not require competing energy suppliers that sell to Michigan customers to sell only electricity that's generated in Michigan.

But the Public Services Commission ignored clear statements of legislative intent and state and federal law, declaring exactly the opposite of the legislative record and text: "The Commission found that a locational requirement is required under (the new state law) and that a locational requirement applicable to individual (competing energy suppliers) is allowed as part of the capacity obligations set forth by the Commission." (See item 3 at: http://www.michigan.gov/mpsc/0,4639,7-159-80741_80743-406252--,00.html )

If competing energy suppliers are no longer allowed to sell cheaper electricity generated out of state and imported into Michigan, Kalamazoo Public Schools, as just one example, could be forced to spend $1 million more each year for electricity, taking that same amount out of the classroom, Glenn said.

Such a move would violate not only state and federal laws and regulations and give monopoly utilities the ability to squeeze their cheaper competitors out of business, Glenn said, but would constitute an unauthorized assumption of law-making power by Public Service Commissioners that simply does not exist in state law.

He cited a Michigan Court of Appeals ruling in a 1993 lawsuit against the PSC by Midland Cogeneration Venture, the largest gas-fueled electricity and steam producing facility in North America, which is located in the legislative district Glenn represents. The Court ruled that the Public Service Commission "possesses no common law powers but is a creature of the Legislature, and all of its authority must be conferred by clear and unmistakable language in specific statutory enactments, because doubtful power does not exist.” Midland Cogeneration Venture v. Public Service Commission, 199 Mich App 286, 295–96 (1993)

The Court of Appeals also ruled in 1999 that “where the Legislature has considered certain language and rejected it in favor of other language, the resulting statutory language should not be held to explicitly authorize what the Legislature explicitly rejected.” MCI Telecom Complaint, 460 Mich 396, 415 (1999).

The following public school and major manufacturing organizations, among others, have also sent letters to the Public Service Commission sharing Glenn's view that the PSC should not attempt to impose a local generation requirement for electricity sold in Michigan, a move they all said would be harmful to electricity users and Michigan's economy:

See the complete record at: http://www.michigan.gov/mpsc/0,4639,7-159-80741_80743-406252--,00.html

* Association of Businesses Advocating Tariff Equity, a group of major manufacturers whose combined electricity and gas bills exceed $1 billion a year in Michigan alone: ABATE's membership includes Dow Chemical Company, the largest employer in Glenn's legislative district, for whom electricity is the single biggest cost of doing business, and nearby Hemlock Semiconductor, the largest consumer of electricity in Michigan. The group also includes General Motors, Marathon Petroleum, Pfizer Pharmaceuticals, and U.S. Steel.

* Michigan Chemistry Council, of which The Dow Chemical Company is also a member.

* The Michigan Chamber of Commerce.

* The Grand Rapids Chamber of Commerce

* Spartan Stores

Glenn said if the PSC proceeds with plans to violate state and federal law and exceed its legal authority, lawsuits in federal and state court are a certainty. "I will recommend that the Legislature itself go to court, if necessary, to reassert that energy policy in Michigan will be set by the Legislature, who are elected by and accountable to the people, and not by an appointed bureaucracy that seems intent on advancing the financial self interests of two corporate monopolies at the expense of Michigan ratepayers and our economy."