In this issue we report promising developments in DTE’s pending rate case, continuing discussion of performance-based regulation to make Michigan less vulnerable to outages, and more.
News
Source: JK Nair.
Administrative Law Judge Questions Cost-Effectiveness, Credibility of DTE Rate Case Proposal
A promising sign recently came in DTE’s pending electric rate case when an administrative law judge released a strongly-worded proposal for decision (essentially a recommendation for the Michigan Public Service Commission [MPSC]) finding that nearly half of the rate hike that DTE is asking for should be rejected. The judge agreed with arguments from CUB and other intervening groups that DTE’s plans for spending on the grid have essentially disregarded cost-effectiveness as a goal.
“DTE has not considered affordability in the sense of considering the burden on ratepayers of the billions of dollars of investment in the distribution system it has included in this filing,” the administrative law judge, Sharon Feldman, wrote in just one sentence that could sum up much of her criticism of DTE.
DTE is proposing to raise its revenue by $619 million, which would translate to a 13.9% rate hike for residential customers and be one of the biggest rate increases in the past few years. Under Feldman’s recommendation, however, that revenue increase would be slashed to $290 million.
Much of that $619 million is made up of spending on the distribution grid that DTE says is necessary to turn around its poor performance on electric reliability. But earlier this year CUB, in cooperation with the Michigan Environmental Council, the Natural Resources Defense Council and the Sierra Club, sponsored expert witness testimony arguing that DTE has failed to show that its spending proposals are the most cost-effective way to improve reliability. Moreover, DTE’s proposals are biased in favor of unnecessarily expensive options, such as replacing infrastructure and equipment more often than needed. The utility is able to charge customers for a rate of return on capital investments like infrastructure replacements, which is why CUB and other stakeholders scrutinize the utility’s spending plans to see if they are overlooking other measures that may not be as profitable for the utility but may more cost-effectively improve reliability.
Judge Feldman endorsed the thrust of this critique. “DTE is not seeking cost-effective ways to improve reliability. Rather, DTE’s approach appears to be to create programs for the wholesale replacement of infrastructure, and then identify the candidates for those programs, rather than prioritizing cost-effectiveness,” she wrote.
She also agreed with arguments made by our witnesses that DTE is not being credible when it refuses to provide information we have requested that would allow us to better evaluate the cost-effectiveness of the utility’s proposals. “DTE has failed to provide the information necessary to support its contentions. Its assurances that it has ‘subject matter experts’ who consider all the ‘impact dimensions’ and evaluate them properly are wholly unpersuasive on this record, when it refused to provide any of the underlying analyses sought by [Michigan Environmental Council/Natural Resources Defense Council/Sierra Club/CUB] and the Attorney General,” she wrote.
Overall, her proposal for decision is a powerful rebuke to DTE. But ultimately, the MPSC commissioners themselves will have to decide what to do with the judge’s recommendation. A decision is due in November. Follow this case (U-21297) here.
CUB Outlines Steps for Performance-Based Regulation
The MPSC Staff has put forth a proposal for a system of financial incentives and disincentives for utilities tied to reliability metrics in an effort to push utilities to improve their performance on outages, and in recent comments CUB pointed to several problems with this proposal that should be fixed if Michigan is going to implement the best rules to ensure better utility performance on electric reliability.
We outlined these comments in this blog post, but the main themes are:
- Utilities should have to pay any penalties directly to those customers most affected by power outages
- Utilities should only be eligible for penalties, not rewards, because providing reliability is one of the core jobs a utility should do, not something for which they should get extra credit
- The utilities’ performance on reliability should be tracked relative to national benchmarks of utility performance
- There needs to be some kind of metric that looks at how the affordability of rates is affected by efforts to improve reliability
Then, on Oct. 20, CUB filed reply comments responding to the utilities’ own comments on this matter. Here, among other responses, CUB took issue with a claim from Consumers Energy. The utility argued that using reliability metrics that track outages that occur on “major event days” – days where major outage events occur, usually triggered by severe weather – is “unfair and unreasonable” because weather is outside the utility’s control.
But, as we responded, this argument ignores the history of how Consumers Energy and DTE, because they underinvested in the grid for years, have in the first place got us into this mess where the grid is more vulnerable to severe weather. In addition, there are measures the utilities can take that, while not literally controlling the weather, can increase resilience in the face of severe weather. An example would be more aggressive tree trimming, which makes the grid far less vulnerable to one of the major causes of outages: branches falling on power lines. We need metrics that include major event days so that utilities are better motivated to take measures that reduce vulnerability to outages from severe weather.
By the end of the year, the MPSC Staff is due to submit a report on financial incentives/disincentives mechanisms that takes into account comments from CUB and other stakeholders.
Recent Headlines
- The MPSC issues an order asking Consumers Energy to show why it should not be found to have violated consumer protection rules for making excessive and inaccurate bill estimates due to faulty meters.
- AG Dana Nessel calls for the MPSC to investigate DTE’s eBill paperless program, saying the automatic enrollment program may be causing customers to miss bill payments.
- The passage of state-level clean energy policy in Michigan can help the state win more federal funding opportunities, Michigan Energy Innovation Business Council President Laura Sherman writes in the Detroit News.
Pending Cases
CUB is currently advocating on behalf of residential utility customers in a number of active cases before the Michigan Public Service Commission.
Rate Cases
Indiana Michigan Power Electric U-21461
Consumers Energy Electric U-21389
Power Supply Cost Recovery (PSCR) Cases
Indiana Michigan Power 2023 PSCR Plan Case U-21261