The Citizens Utility Board of Michigan (CUB)—working with the Michigan Attorney General and the Sierra Club—was successful in saving Michigan ratepayers more than $3 million through intervention in a Power Supply Cost Recovery (PSCR) case before the Michigan Public Service Commission (MPSC).
The case, U-21262, involved requests from Indiana Michigan Power Company (I&M) to recover costs associated with the purchase of power from three outdated and expensive Ohio and Indiana coal-burning power plants in 2023. Last year we wrote a blog post about these same plants and I&M when the MPSC warned the utility that it may not be able to recover the full costs for the purchase of power from the plants from the year 2024.
Crucially, sourcing power from these plants was not a cost-effective strategy for meeting customer demand, as demonstrated in joint testimony submitted by CUB and its partners. An expert analysis showed that the cost of the energy supplied by these three aging coal plants exceeded market rates by $14.4 million. CUB asked the MPSC to disallow that amount from I&M’s cost recovery.
It should be noted that I&M and its parent company, American Electric Power (AEP), both hold financial stake in these coal-fired plants. Two of the plants in question are owned by the Ohio Valley Electric Corporation (OVEC), of which I&M and AEP are shareholders. The third, Unit 1 of the Rockport Generating Station, is owned by AEP. While these affiliations are not necessarily unusual, CUB has argued that they should open I&M to additional scrutiny under the Commission’s Code of Conduct due to the potential for a conflict of interests.
Under MPSC rules governing these types of situations—referred to as “affiliate transactions”— the costs of energy provided to utilities by affiliated entities are capped in proportion to market rates. However, CUB and fellow advocates demonstrated through testimony that the costs in question greatly exceeded market rates.
At its July 10, 2025 meeting, the MPSC issued two disallowances of cost recovery for I&M’s purchase of coal-fired power from these affiliated plants. Taken together, these disallowances totaled $3,043,543 in costs that will not be added to electric rates for I&M customers.
This is not the first time such arguments and subsequent disallowances have occurred during I&M PSCR cases. Unfortunately, it is becoming a year-after-year pattern as I&M continues securing power from its affiliates despite the exorbitant costs to consumers.
It is unfortunate that over $10 million in unfair costs will still be allowed to be passed on to Michigan ratepayers. That figure includes $8,606,762 of allowed costs attributed to the Rockport plant. While CUB argued for a broader scope of adjudication for this contract, the Commission limited its scope to include only energy costs. But in addition to energy, I&M also charges ratepayers for capacity—the capability of power plants to produce energy. A large portion of I&M’s costs to meet capacity needs were not considered for disallowance. The Commission indicated that this decision was meant to follow a precedent established in past cases.
CUB will continue to advocate for a broader scope for cost disallowance in future I&M PSCR cases and will continue pushing the utility to begin termination of these costly contracts. Michigan ratepayers should not be required to prop up aging energy infrastructure when suitable, affordable alternatives are readily available.