September 13, 2005, Introduced by Senators PATTERSON, HAMMERSTROM, BASHAM, CLARK-COLEMAN, BARCIA, CROPSEY, HARDIMAN, JACOBS, TOY, OLSHOVE, JELINEK, ALLEN, CHERRY, KUIPERS, CLARKE, GARCIA, GOSCHKA, SCOTT and BISHOP and referred to the Committee on Technology and Energy.
A bill to amend 1939 PA 3, entitled
"An act to provide for the regulation and control of public
utilities and other services affected with a public interest within
this state; to provide for alternative energy suppliers; to provide
for licensing; to include municipally owned utilities and other
providers of energy under certain provisions of this act; to create
a public service commission and to prescribe and define its powers
and duties; to abolish the Michigan public utilities commission and
to confer the powers and duties vested by law on the public service
commission; to provide for the continuance, transfer, and
completion of certain matters and proceedings; to abolish automatic
adjustment clauses; to prohibit certain rate increases without
notice and hearing; to qualify residential energy conservation
programs permitted under state law for certain federal exemption;
to create a fund; to provide for a restructuring of the manner in
which energy is provided in this state; to encourage the
utilization of resource recovery facilities; to prohibit certain
acts and practices of providers of energy; to allow for the
securitization of stranded costs; to reduce rates; to provide for
appeals; to provide appropriations; to declare the effect and
purpose of this act; to prescribe remedies and penalties; and to
repeal acts and parts of acts,"
by amending sections 10a and 10d (MCL 460.10a and 460.10d), section
10a as amended by 2004 PA 88 and section 10d as amended by 2002 PA
609; and to repeal acts and parts of acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 10a. (1) No later than January 1, 2002, the commission
shall issue orders establishing the rates, terms, and conditions of
service that allow all retail customers of an electric utility or
provider to choose an alternative electric supplier. The orders
shall provide for full recovery of a utility's net stranded costs
and implementation costs as determined by the commission.
(2) The commission shall issue orders establishing a licensing
procedure for all alternative electric suppliers. To ensure
adequate service to customers in this state, the commission shall
require that an alternative electric supplier maintain an office
within this state, shall assure that an alternative electric
supplier has the necessary financial, managerial, and technical
capabilities, shall require that an alternative electric supplier
maintain records which the commission considers necessary, and
shall ensure an alternative electric supplier's accessibility to
the commission, to consumers, and to electric utilities in this
state. The commission also shall require alternative electric
suppliers to agree that they will collect and remit to local units
of government all applicable users, sales, and use taxes. An
alternative electric supplier is not required to obtain any
certificate, license, or authorization from the commission other
than as required by this act.
(3) As used in sections 10 through 10cc:
(a) "Alternative electric service" means the provision of
electric generation service to customers by an alternative electric
supplier.
(b) "Alternative electric supplier" means a person, other than
an electric utility, selling alternative electric service to retail
customers in this state. Alternative electric supplier does not
include a person who physically delivers electricity directly to
retail customers in this state. An alternative electric supplier is
not a public utility.
(c) "Commission" means the Michigan public service commission.
(d) "Customer" means an individual, sole proprietorship,
partnership, corporation, association, governmental entity, or
other legal entity at a single location within the electric
utility's service area.
(e) "Electric utility" means that term as defined in section 2
of the electric transmission line certification act, 1995 PA 30,
MCL 460.562.
(f) "Merchant plant" means electric generating equipment and
associated facilities with a capacity of more than 100 kilowatts
located in this state that are not owned and operated by an
electric utility.
(g) "Renewable energy source" means energy generated by solar,
wind, geothermal, biomass, including waste-to-energy and landfill
gas, or hydroelectric.
(4) (3)
The commission shall issue orders
to ensure that
customers in this state are not switched to another supplier or
billed for any services without the customer's consent.
(5) (4)
No later than December 2, 2000,
the commission shall
establish a code of conduct that shall apply to all electric
utilities. The code of conduct shall include, but is not limited
to, measures to prevent cross-subsidization, information sharing,
and preferential treatment, between a utility's regulated and
unregulated services, whether those services are provided by the
utility or the utility's affiliated entities. The code of conduct
established under this subsection shall also be applicable to
electric utilities and alternative electric suppliers consistent
with section 10, this section, and sections 10b through 10cc.
(6) (5)
An electric utility may offer its
customers an
appliance service program. Except as otherwise provided by this
section, the utility shall comply with the code of conduct
established
by the commission under subsection (4) (5). As used
in this section, "appliance service program" or "program" means a
subscription program for the repair and servicing of heating and
cooling systems or other appliances.
(7) (6)
A utility offering a program under
subsection (5)
(6) shall do all of the following:
(a) Locate within a separate department of the utility or
affiliate within the utility's corporate structure the personnel
responsible for the day-to-day management of the program.
(b) Maintain separate books and records for the program,
access to which shall be made available to the commission upon
request.
(c) Not promote or market the program through the use of
utility billing inserts, printed messages on the utility's billing
materials, or other promotional materials included with customers'
utility bills.
(8) (7)
All costs directly attributable to
an appliance
service
program allowed under subsection (5) (6) shall be
allocated to the program as required by this subsection. The direct
and indirect costs of employees, vehicles, equipment, office space,
and other facilities used in the appliance service program shall be
allocated to the program based upon the amount of use by the
program as compared to the total use of the employees, vehicles,
equipment, office space, and other facilities. The cost of the
program shall include administrative and general expense loading to
be determined in the same manner as the utility determines
administrative and general expense loading for all of the utility's
regulated and unregulated activities. A subsidy by a utility does
not exist if costs allocated as required by this subsection do not
exceed the revenue of the program.
(9) (8)
A utility may include charges for
its appliance
service program on its monthly billings to its customers if the
utility complies with all of the following requirements:
(a) All costs associated with the billing process, including
the postage, envelopes, paper, and printing expenses, are allocated
as
required under subsection (7) (8).
(b) A customer's regulated utility service is not terminated
for nonpayment of the appliance service program portion of the
bill.
(c) Unless the customer directs otherwise in writing, a
partial payment by a customer is applied first to the bill for
regulated service.
(10) (9)
In marketing its appliance service
program to the
public, a utility shall do all of the following:
(a) The list of customers receiving regulated service from the
utility shall be available to a provider of appliance repair
service upon request within 2 business days. The customer list
shall be provided in the same electronic format as such information
is provided to the appliance service program. A new customer shall
be added to the customer list within 1 business day of the date the
customer requested to turn on service.
(b)
Appropriately allocate costs as required under subsection
(7)
(8) when personnel employed
at a utility's call center provide
appliance service program marketing information to a prospective
customer.
(c) Prior to enrolling a customer into the program, the
utility shall inform the potential customer of all of the
following:
(i) That appliance service programs may be available from
another provider.
(ii) That the appliance service program is not regulated by the
commission.
(iii) That a new customer shall have 10 days after enrollment to
cancel his or her appliance service program contract without
penalty.
(iv) That the customer's regulated rates and conditions of
service provided by the utility are not affected by enrollment in
the program or by the decision of the customer to use the services
of another provider of appliance repair service.
(d) The utility name and logo may be used to market the
appliance service program provided that the program is not marketed
in conjunction with a regulated service. To the extent that a
program utilizes the utility's name and logo in marketing the
program, the program shall include language on all material
indicating that the program is not regulated by the commission.
Costs shall not be allocated to the program for the use of the
utility's name or logo.
(11) (10)
This section does not prohibit the
commission from
requiring a utility to include revenues from an appliance service
program in establishing base rates. If the commission includes the
revenues of an appliance service program in determining a utility's
base rates, the commission shall also include all of the costs of
the program as determined under this section.
(12) (11)
Except as otherwise provided in
this section, the
code of conduct with respect to an appliance service program shall
not require a utility to form a separate affiliate or division to
operate an appliance service program, impose further restrictions
on the sharing of employees, vehicles, equipment, office space, and
other facilities, or require the utility to provide other providers
of appliance repair service with access to utility employees,
vehicles, equipment, office space, or other facilities.
(13) (12)
The orders issued by the
commission before June 5,
2000 that allow customers of an electric utility to choose an
alternative electric supplier, including orders that determine and
authorize recovery of net stranded costs and implementation costs
and that confirm any voluntary commitments of electric utilities,
are in compliance with this act and enforceable by the commission.
An electric utility that has not had voluntary commitments to
provide customer choice previously approved by orders of the
commission shall file a restructuring plan to allow customers to
choose an alternative electric supplier no later than the date
ordered by the commission. The plan shall propose a methodology to
determine the electric utility's net stranded costs and
implementation costs.
(14) (13)
This act does not prohibit or
limit the right of a
person to obtain self-service power and does not impose a
transition, implementation, exit fee, or any other similar charge
on self-service power. A person using self-service power is not an
electric supplier, electric utility, or a person conducting an
electric utility business. As used in this subsection, "self-
service power" means any of the following:
(a) Electricity generated and consumed at an industrial site
or contiguous industrial site or single commercial establishment or
single residence without the use of an electric utility's
transmission and distribution system.
(b) Electricity generated primarily by the use of by-product
fuels, including waste water solids, which electricity is consumed
as part of a contiguous facility, with the use of an electric
utility's transmission and distribution system, but only if the
point or points of receipt of the power within the facility are not
greater than 3 miles distant from the point of generation.
(c) A site or facility with load existing on June 5, 2000 that
is divided by an inland body of water or by a public highway, road,
or street but that otherwise meets this definition meets the
contiguous requirement of this subdivision regardless of whether
self-service power was being generated on June 5, 2000.
(d) A commercial or industrial facility or single residence
that meets the requirements of subdivision (a) or (b) meets this
definition whether or not the generation facility is owned by an
entity different from the owner of the commercial or industrial
site or single residence.
(15) (14)
This act does not prohibit or
limit the right of a
person to engage in affiliate wheeling and does not impose a
transition, implementation, exit fee, or any other similar charge
on a person engaged in affiliate wheeling. As used in this section:
(a) "Affiliate" means a person or entity that directly, or
indirectly through 1 or more intermediates, controls, is controlled
by, or is under common control with another specified entity. As
used in this subdivision, "control" means, whether through an
ownership, beneficial, contractual, or equitable interest, the
possession, directly or indirectly, of the power to direct or to
cause the direction of the management or policies of a person or
entity or the ownership of at least 7% of an entity either directly
or indirectly.
(b) "Affiliate wheeling" means a person's use of direct access
service where an electric utility delivers electricity generated at
a person's industrial site to that person or that person's
affiliate at a location, or general aggregated locations, within
this state that was either 1 of the following:
(i) For at least 90 days during the period from January 1, 1996
to October 1, 1999, supplied by self-service power, but only to the
extent of the capacity reserved or load served by self-service
power during the period.
(ii) Capable of being supplied by a person's cogeneration
capacity within this state that has had since January 1, 1996 a
rated capacity of 15 megawatts or less, was placed in service
before December 31, 1975, and has been in continuous service since
that date. A person engaging in affiliate wheeling is not an
electric supplier, an electric utility, or conducting an electric
utility business when a person engages in affiliate wheeling.
(16) (15)
The rights of parties to existing
contracts and
agreements in effect as of January 1, 2000 between electric
utilities and qualifying facilities, including the right to have
the charges recovered from the customers of an electric utility, or
its successor, shall not be abrogated, increased, or diminished by
this act, nor shall the receipt of any proceeds of the
securitization bonds by an electric utility be a basis for any
regulatory disallowance. Further, any securitization or financing
order issued by the commission that relates to a qualifying
facility's power purchase contract shall fully consider that
qualifying facility's legal and financial interests.
(17) (16)
The commission shall, after a contested case
proceeding, issue annually an order approving for each electric
utility a true-up adjustment to reconcile any overcollections or
undercollections of the preceding 12 months to ensure the recovery
of all amounts of net stranded costs. The rates for customers
remaining with an incumbent electric utility will not be affected
by the true-up process under this subsection. The commission shall
review the electric utility's stranded cost recovery charges and
securitization charges implemented for the preceding 12 months, and
adjust the stranded cost recovery charge, by way of supplemental
surcharges or credits, to allow the netting of stranded costs.
(18) (17)
The commission shall consider the reasonableness
and appropriateness of various methods to determine net stranded
costs, including, but not limited to, all of the following:
(a) Evaluating the relationship of market value to the net
book value of generation assets and purchased power contracts.
(b) Evaluating net stranded costs based on the market price of
power in relation to prices assumed by the commission in prior
orders.
(c) Any other method the commission considers appropriate.
(19) (18)
The true-up adjustment adopted under subsection
(16)
(17) shall not result in a modification to the
securitization
charge. The commission shall not adjust or change in any manner
securitization charges authorized by the commission in a financing
order issued under section 10i as a result of its review and any
action
taken under subsection (16) (17).
(20) (19)
After the time period described in section 10d(2),
the rates for retail customers that remain with or leave and later
return to the incumbent electric utility shall be determined in the
same
manner as the rates were determined
before the effective date
of
this section June 5, 2000.
Sec. 10d. (1) Except as otherwise provided under subsection
(3) or unless otherwise reduced by the commission under subsection
(5), the commission shall establish the residential rates for each
electric utility with 1,000,000 or more retail customers in this
state as of May 1, 2000 that will result in a 5% rate reduction
from the rates that were authorized or in effect on May 1, 2000.
Notwithstanding any other provision of law or commission order,
rates for each electric utility with 1,000,000 or more retail
customers established under this subsection become effective on
June 5, 2000 and remain in effect until December 31, 2003 and all
other electric retail rates of an electric utility with 1,000,000
or more retail customers authorized or in effect as of May 1, 2000
shall remain in effect until December 31, 2003.
(2) On and after December 31, 2003, rates for an electric
utility with 1,000,000 or more retail customers in this state as of
May 1, 2000 shall not be increased until the earlier of December
31, 2013 or until the commission determines, after notice and
hearing, that the utility meets the market test under section 10f
and has completed the transmission expansion provided for in the
plan
required under section 10v. The rates for commercial or
manufacturing
customers of an electric utility with 1,000,000 or
more
retail customers with annual peak demands of less than 15
kilowatts
shall not be increased before January
1, 2005. There
shall be no cost shifting from customers with capped rates to
customers without capped rates as a result of this section. In no
event
shall residential rates be increased before January 1,
2006
2008 above the rates established under subsection (1).
(3) Subsections (1) and (2) do not apply to rates or charges
authorized by the commission under subsection (13).
(4) Beginning January 1, 2004, annual return of and on capital
expenditures in excess of depreciation levels incurred during and
before the time period described in subsection (2), and expenses
incurred as a result of changes in taxes, laws, or other state or
federal governmental actions incurred by electric utilities during
the period described in subsection (2), shall be accrued and
deferred for recovery. After notice and hearing, the commission
shall determine the amount of reasonable and prudent costs, if any,
to be recovered and the recovery period, which shall not exceed 5
years, and shall not commence until after the expiration of the
period described in subsection (2).
(5) If the commission authorizes an electric utility to use
securitization financing under section 10i, any savings resulting
from securitization shall be used to reduce retail electric rates
from those authorized or in effect as of May 1, 2000 as required
under subsection (1). A rate reduction under this subsection shall
not be less than the 5% required under subsection (1). The
financing order may provide that a utility shall only issue
securitization bonds in an amount equal to or less than requested
by the utility, but the commission shall not preclude the issuance
of an amount of securitization bonds sufficient to fund the rate
reduction required under subsection (1).
(6) Except for savings assigned to the low-income and energy
efficiency fund under subsection (7), securitization savings
greater than those used to achieve the 5% rate reduction under
subsection (1) shall be allocated by the commission to further rate
reductions or to reduce the level of any charges authorized by the
commission to recover an electric utility's stranded costs. The
commission shall allocate approved securitization, transition,
stranded, and other related charges and credits in a manner that
does not result in a reallocation of cost responsibility among the
different customer classes.
(7) If securitization savings exceed the amount needed to
achieve a 5% rate reduction for all customers, then, for a period
of 6 years, 100% of the excess savings, up to 2% of the electric
utility's commercial and industrial revenues, shall be allocated to
the low-income and energy efficiency fund administered by the
commission. The commission shall establish standards for the use of
the fund to provide shut-off and other protection for low-income
customers and to promote energy efficiency by all customer classes.
The commission shall issue a report to the legislature and the
governor every 2 years regarding the effectiveness of the fund.
(8) Except as provided under subsection (3), until the end of
the period described in subsection (2), the commission shall not
authorize any fees or charges that will cause the residential rate
reduction required under subsection (1) to be less than 5%.
(9) If an electric utility serving less than 1,000,000 retail
customers in this state as of May 1, 2000 issues securitization
bonds as allowed under this act, it shall have the same rights,
duties, and obligations under this section as an electric utility
serving 1,000,000 or more retail customers in this state as of May
1, 2000.
(10) The commission shall take the necessary steps to ensure
that all electrical power generating facilities in this state
comply with all rules, regulations, and standards of the federal
environmental protection agency regarding mercury emissions.
(11) A covered utility may apply to the commission to recover
enhanced security costs for an electric generating facility through
a security recovery factor. If the commission action under
subsection (13) is approval of a security recovery factor, the
covered utility may recover those enhanced security costs.
(12) The commission shall require that notice of the
application filed under subsection (11) be published by the covered
utility within 30 days from the date the application was filed. The
initial hearing by the commission shall be held within 20 days of
the date the notice was published in newspapers of general
circulation in the service territory of the covered utility.
(13) The commission may issue an order approving, rejecting,
or modifying the security recovery factor. If the commission issues
an order approving a security recovery factor, that order shall be
issued within 120 days of the initial hearing required under
subsection (12). In determining the security recovery factor, the
commission shall only include costs that the commission determines
are reasonable and prudent and that are jurisdictionally assigned
to retail customers of the covered utility in this state. The costs
included shall be net of any proceeds that have been or will be
received from another source, including, but not limited to, any
applicable insurance settlements received by the covered utility or
any grants or other emergency relief from federal, state, or local
governmental agencies for the purpose of defraying enhanced
security costs. In its order, the commission shall designate a
period for recovery of enhanced security costs, including a
reasonable return on the unamortized balance, over a period not to
exceed 5 years. The security recovery factor shall not be less than
zero.
(14) Within
60 days of the effective date of the amendatory
act
that added this subsection, the The
commission shall by order
prescribe the form for the filing of an application for a security
recovery factor under subsection (11). If the commission or its
designee determines that a filing is incomplete, it shall notify
the covered utility within 10 days of the filing.
(15) Records or other information supplied by the covered
utility in an application for recovery of security costs under
subsection (11) that describe security measures, including, but not
limited to, emergency response plans, risk planning documents,
threat assessments, domestic preparedness strategies, and other
plans for responding to acts of terrorism are not subject to the
freedom of information act, 1976 PA 442, MCL 15.231 to 15.246, and
shall be treated as confidential by the commission.
(16) The commission shall issue protective orders as are
necessary to protect the information found by the commission to be
confidential under this section.
(17) As used in this section:
(a) "Act of terrorism" means a willful and deliberate act that
is all of the following:
(i) An act that would be a violent felony under the laws of
this state, whether or not committed in this state.
(ii) An act that the person knows or has reason to know is
dangerous to human life.
(iii) An act that is intended to intimidate or coerce a civilian
population or influence or affect the conduct of government or a
unit of government through intimidation or coercion.
(b) "Covered utility" means an electric utility subject to the
rate freeze provisions of subsection (1), the rate cap provisions
of subsection (2), or the rate provisions of commission orders in
case numbers U-11181-R and U-12204.
(c) "Enhanced security costs" means reasonable and prudent
costs of new and enhanced security measures incurred before January
1, 2006 for an electric generating facility by a covered utility
that are required by federal or state regulatory security
requirements issued after September 11, 2001 or determined to be
necessary by the commission to provide reasonable security from an
act of terrorism. Enhanced security costs include increases in the
cost of insurance that are attributable to an increased terror
related risk and the costs of maintaining or restoring electric
service as the result of an act of terrorism.
(d) "Security recovery factor" means an unbundled charge for
all retail customers, except for customers of alternative electric
suppliers, to recover enhanced security costs that have been
approved by the commission.
Enacting section 1. Section 10g of 1939 PA 3, MCL 460.10g, is
repealed.