House Energy chair: Court rejects utility regulators' attempt to violate state law

Glenn says ruling is major blow to utility monopolies' hopes of eliminating Electricity Choice market, and that MPSC's attempted abuse of authority would have 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. — House Energy Policy Committee chairman Rep. Gary Glenn, R-Williams Twp., Friday welcomed a unanimous decision Thursday by a three-member panel of the state Court of Appeals slapping down the Michigan Public Service Commission's attempt to 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 have taken tens of millions of dollars out of the classroom each year, Glenn said, and made Michigan’s economy less competitive for new business, industry, and jobs.

The Court ruled 3-to-0 in Association of Businesses Advocating Tariff Equity (ABATE) vs. Michigan Public Service Commission, Consumers Energy et al that Michigan's newly-revised energy law "does not provide the MPSC the authority to impose a local clearing requirement on individual alternative electric suppliers."

ABATE is a group of major manufacturers whose combined electricity and gas bills exceed $1 billion a year in Michigan alone: its 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.

“The Court rightly and unanimously rejected what was clearly a back door attempt by unelected bureaucrats to eliminate Michigan’s Electricity Choice program by bureaucratic regulation, reviving a protectionist scheme pushed by the state’s two monopoly utilities in the last legislative session but expressly rejected by the people’s elected representatives,” Glenn said. "Lawmakers next session, under a new governor, should eliminate Consumers' and DTE's government-privileged monopoly status monopoly altogether and return to a competitive free market system in which all customers are free to choose where they buy their electricity."

"The Court's ruling also validated the opinion of three deputy attorneys general assigned to the MPSC," Glenn said, "who had publicly warned commissioners not to impose the requirement because it would contradict federal rules and regulations, harm electrical reliability for some customers, and force cheaper electricity suppliers out of business, forcing their customers to buy from Consumers or DTE instead at higher cost. MPSC commissioners appeared so intent on serving the financial interests of monopoly utility bosses that they ignored the counsel of their own lawyers."

But judges Thursday unanimously agreed with Glenn's contention last summer that 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 pointed to the MPSC order last summer that imposed a "local clearing requirement" that threatened to eventually require electricity choice providers who compete with the state’s two regional electricity monopolies — Consumers Energy and Detroit Edison — to prove they can supply their customers using only electricity that’s generated in Michigan.

The MPSC had issued a final order just last week in which it delayed imposing such a requirement, but asserted its authority and intention to eventually "phase in" such a requirement over time.

“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, 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.”

The MPSC’s “local clearing requirement” had threatened to eventually force competing electricity providers to buy more expensive energy generated exclusively in Michigan -- in practical terms, meaning competitors to Consumers and DTE would have been forced to buy from Consumers and DTE at higher cost -- which in turn would have threatened tens of millions in higher costs each year to public schools alone.

For example, in a letter last summer to the PSC. 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 (AESs) 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 25, 2017 letter to the PSC 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 2016 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 (the new state energy law) 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 have directly violated 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 PSC 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.” 

If competing energy suppliers, eventually, 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.

Glenn said last summer that 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, but would constitute an unauthorized assumption of law-making power by Public Service Commissioners that simply does not exist in state law.

He cited at the time 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 in 1993 had ruled that the PSC “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 major manufacturing organizations, among others, also sent letters last summer 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 by clicking here. 

* 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