The Michigan Public Service Commission last Thursday granted approvals that allow Consumers Energy Co. to pursue more than $120 million in funding through the federal Infrastructure Investment and Jobs Act (IIJA) of 2021, also known as the Bipartisan Infrastructure Law.

The Commission approved orders in two cases that allow Consumers to use regulatory accounting methods for grant proposals that require matching funds, but the decisions leave to future orders, in rate cases or other applicable proceedings, the Commission’s judgement on the appropriateness of specific costs for the proposed projects.

Last Thursday's orders, while specific to Consumers, demonstrate by extension the MPSC’s support of Michigan utilities seeking to take advantage of $550 billion available in IIJA funding and the MPSC’s willingness to extend regulatory flexibility needed for utilities to be able to meet federal funding guidelines and timelines.

The Commission:

• Approved Consumers’ application for accounting authority to utilize a regulatory asset or liability for the utility’s Empowering Michigan Communities Through Distributed Energy Resource Optimization project (Case No. U-21402). This project, for which Consumers is seeking a $20,623,059 federal grant, would implement a distributed energy resource (DER) optimization platform that integrates grid-edge intelligence, an enterprise-scale DER management system and demand response management system. The goal is a uniform platform for DER monitoring, management, and dispatch allowing for a smarter and more flexible grid. If the grant is approved in full, Consumers would be required to match the amount of grant funding.

• Similarly approved Consumers’ application for accounting authority to utilize a regulatory asset or liability for the utility’s Sectionalization & Circuit Improvements to Mitigate Outage Impacts for Disadvantaged Communities project (Case No. U-21416). The project is intended to bring in $100,000,000 of federal funding to upgrade aging infrastructure and add system redundancy to mitigate outage impacts from increasingly frequent and severe storms, with the underlying work prioritizing federally designated disadvantaged communities. The project would seek to sectionalize the grid to reduce outage impacts and durations and harden the grid to prevent and minimize the impact of storm-driven outages. If the grant is approved in full, Consumers expects it would spend $100,310,996, slightly exceeding the dollar-for-dollar match requirement.

The Bipartisan Infrastructure Law earmarks funding for projects including electric generation, grid reliability, clean energy transmission and deployment, electric vehicle infrastructure, energy efficiency, and cybersecurity. The MPSC in August 2022 encouraged the use of regulatory assets and deferred accounting authorization as utilities pursue IIJA funding.

 

MPSC OKs DTE ELECTRIC CO. SECURITIZATION OF RETIREMENT COSTS OF TRENTON CHANNEL, ST. CLAIR COAL PLANTS TO SAVE CUSTOMERS AT LEAST $51.5 MILLION

The Commission approved DTE Electric Co.’s application for approval to issue securitization bonds for up to $601.6 million in costs associated with the closure of the company’s Trenton Channel and St. Clair coal-fired generation plants, both of which retired early in September 2022 (Case No. U-21338). Securitization is the process through which utilities, after the issuance of financing orders by the MPSC, replace existing debt and equity with lower-cost debt in the form of securitization bonds. This process results in lower costs for ratepayers compared to traditional cost recovery methods, since the securitization bonds have lower interest rates. Securitization is authorized under Public Act 142 of 2000. In this case, the bonds would cover a maximum $594.1 million in unrecovered net book value of the two plants that otherwise would have been recovered through continued operation of the plants, as well up to $7.5 million in qualified costs. The Commission found that DTE’s securitization in this case would save customers at least $51.5 million compared to conventional financing. The MPSC’s issue brief on securitization has more information about this type of bond. The Michigan Department of Attorney General and the Association of Businesses Advocating Tariff Equity intervened in the case. MPSC Staff participated.

 

MPSC GIVES NOD TO CONSUMERS ENERGY SOLAR POWER PURCHASE AGREEMENT WITH SUPERIOR SALES INC. IN WEST MICHIGAN

The Commission approved a 15-year power purchase agreement (PPA) between Consumers Energy Co. and Superior Sales Inc. for the output of Superior Sales’s 312-kilowatt solar plant in Hudsonville near Grand Rapids (Case No. U-20604). The contract is to run from Sept. 7, 2022, through Sept. 6, 2037, and cost approximately $76,000. Approval of the PPA will not affect rates or increase costs of service to customers.

 

COMMISSION DIRECTS SAGINAW BAY PIPELINE CO. TO FILE REVISED TRANSPORTATION AGREEMENT WITH DTE GAS CO.

The MPSC today directed Saginaw Bay Pipeline Co. to file a revised 20-year transportation agreement between it and DTE Gas Co. (Case No. U-20993). The Commission found that a transportation rate of $0.0695 per dekatherm (Dth) for firm transportation of 50,000 Dth per day is reasonable but directed Saginaw Bay to modify the agreement to clarify that Article VI, Section 6.2, applies only after the initial 20-year term of the agreement. The Michigan Department of Attorney General intervened in the case. MPSC Staff also participated.

 

INDIANA MICHIGAN POWER’S POWER SUPPLY COST RECOVERY PLAN APPROVED; COMMISSION WARNS SOME COSTS MAY NOT BE RECOVERABLE

The MPSC today approved Indiana Michigan Power Co.’s power supply cost recovery (PSCR) plan for planning year 2022, with a PSCR factor of 6.23 mils, or $0.0063, per kilowatt hour, and accepted the utility’s five-year forecast (Case No. U-21052). The Commission, however, issued a Section 7 warning that I&M may not be able to recover its full costs under the Ohio Valley Electric Corp.’s inter-company power agreement (ICPA) without demonstrating good faith efforts to minimize the ICPA’s costs, which may include renegotiation of the contract. The Commission also directed I&M to document and make available to MPSC Staff, upon request, the basis for the company’s decision to designate a generating unit as must-run when I&M’s forecast shows doing so will result in excess costs.

 

COMMISSION GRANTS CONDITIONAL ALTERNATIVE GAS SUPPLIER LICENSE TO INDRA ENERGY

The MPSC today approved a conditional license for PALMco ENERGY MI LLC, doing business as Indra Energy, to operate as an alternative gas supplier of natural gas in Michigan (Case No. U-21398). Indra agreed to conditions that require the company to file a quarterly report to MPSC Staff for six quarters detailing its Michigan operations, including any customer complaints and how they’re resolved; monthly meetings for the company’s first year of operation in Michigan; and making additional customer information available to the MPSC upon request. The conditions were based on an MPSC Staff review that found no open lawsuits or formal complaints against the company in eight other states where it operates, but there were prior lawsuits and formal investigations.