Utility regulators try to block attorneys from testifying before House energy panel

Categories: Glenn News,News

Glenn says House has subpoena power, accuses MPSC of “stonewalling” to avoid explaining why they ignored their own attorneys’ warning against policy that will eliminate Electricity Choice, hike electricity rates for public schools, manufacturers

Lansing, Mich. — The Michigan Public Service Commission is attempting to block its attorneys from testifying before the House Energy Policy Committee next month, a move committee chairman Rep. Gary Glenn, R-Williams Twp., says is an attempt by utility regulators to avoid the embarrassment of having to explain why they’re ignoring their own attorneys’ warnings against adopting a policy change Glenn says would violate state and federal energy law and drive up electricity rates for thousands of public schools and major employers.

MPSC’s technical staff in an Aug. 1st document followed commissioners’ June 15th instructions to propose a policy that will 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 higher-priced electricity that’s generated in Michigan. Final adoption of the policy is scheduled for September 28th. The move would take tens of millions of dollars out of public school classrooms each year to pay for higher electricity costs, Glenn said, and make Michigan’s business climate less attractive and competitive for new business, industry, and jobs.

Glenn on Aug. 9th wrote to three assistant attorneys general assigned to counsel the MPSC — who in a public advice letter May 26th warned commissioners not to adopt the in-state generation requirement — to request that they appear before the House Energy Policy Committee to more fully explain why. The three attorneys’ letter was made public and is available on the MPSC website.

“In your capacity as assistant attorneys general assigned to represent the MPSC, you told MPSC commissioners that you ‘advised against’ adopting an in-state generation requirement, listing multiple reasons why doing so would not be good policy or in the best interests of electricity customers in Michigan,” Glenn wrote.

“Members of the House Energy Policy Committee and other lawmakers…question why MPSC commissioners appear to be ignoring your advice and counsel in instructing their technical staff to prepare an order implementing the very locational generation requirement you advised against,” he wrote.

MPSC Chairman Sally Talberg on Aug. 15th responded to Glenn’s letter, refusing his request that the three attorneys testify before the committee. “It is inappropriate for our staff’s attorneys…to appear before the committee,” Talberg wrote, offering to testify herself instead.

Glenn rejected the offer Monday (Aug. 21st) in a pointed letter to Talberg.

He characterized Talberg’s offer to testify as “disingenuous” and “stonewalling,” saying he is “not interested in a shell game by which Public Service commissioners are obviously trying to avoid the embarrassment of explaining why they’re ignoring their own attorneys’ warning that an in-state generation requirement will drive up electricity rates and hurt electricity customers.”

“We specifically did not invite Chairman Talberg or any other MPSC commissioner to testify precisely because committee members know, as she does, that her rote answer to all relevant questions would be that as a commissioner performing a quasi-judicial function, she cannot comment on a matter still pending before the commission,” Glenn said.

On the other hand, Glenn said, the three MPSC attorneys’ May 26th letter — http://efile.mpsc.state.mi.us/efile/docs/18197/0068.pdf — is a matter of public record available for review on the MPSC website, meaning commissioners “cannot credibly claim that allowing their attorneys to answer committee members’ questions would violate attorney-client privilege, since that applies only to confidential communications and the three attorneys’ advice letter has already been made public by the MPSC itself.”

Glenn noted that the House has the authority, by simple majority vote, to issue subpoenas to compel witnesses to testify before a House committee.
In their May 26th public letter, assistant attorney generals Lauren D. Donofrio, Bryan A. Brandenburg, and Meredith R. Beidler wrote to the MPSC that imposing an in-state electricity generation requirement:

* “Would not improve (electrical grid) reliability in Michigan and could potentially be a detriment to customers” and may “actually compromise reliability for some specific Michigan customers.”

* Would contradict the rules and regulations of the federally-regulated Midcontinent Independent System Operator (MISO), the regional operator that manages electricity flow in the Midwest, including Michigan. MISO regulations allow electricity providers to purchase electricity from any source available.

* Would reduce the amount of electricity available to energy suppliers who compete with Michigan’s two regional monopoly utilities, which would “make it extremely difficult, if not impossible,” MPSC attorneys wrote, for such competing energy suppliers to continue to serve their customers, the result being that customers “left short, due to the inability of the Alternative Energy Suppliers’ previously imported capacity to count in Michigan, would be turned over to the utility for (electricity) service.”

“This is clearly a back door attempt by unelected bureaucrats — ignoring their own attorneys’ warnings of harm to Michigan customers — to eliminate our state’s Electricity Choice program by bureaucratic regulation, a protectionist scheme that was pushed by the state’s two monopoly utilities in the last legislative session but was expressly rejected by the people’s elected representatives,” Glenn said.

Glenn said “the rare sight of two corporate monopolies so vigorously defending the government agency that’s supposed to regulate them — specifically MPSC commissioners’ rejecting their own attorneys’ warnings of economic harm to customers if they allow the monopolies to squeeze their cheaper competitors out of business — should give pause to both electricity customers and policy makers.”

“Unless the elected representatives of the people of Michigan rein this agency in, it appears the MPSC is in the tank for the economic interests of two corporate electricity monopolies at the expense of higher electricity rates for Michigan customers and damage to our economy,” Glenn said.

He said 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.”

The MPSC’s proposed “local clearing requirement” would force competing electricity providers to buy more expensive energy generated exclusively in Michigan, which threatens tens of millions in higher costs each year to public schools alone.

Tuscola Intermediate School District Supt. Gene Pierce, president of the Michigan Schools Energy Cooperative, issued a statement Aug. 16th saying that the cooperative, “a coalition of 325 public school districts, stands with Rep. Gary Glenn in demanding the Michigan Public Service Commission respect legislative intent and preserve Michigan’s energy choice program.”

“If the energy choice program is eliminated, schools stand to lose as much as $17 million in energy cost savings each year,” Pierce wrote. “That’s equivalent to taking 300 teachers out of the classroom or a $35 reduction in per pupil spending. …MISEC supports Rep. Gary Glenn’s call to respect the voices of Michigan voters and the decisions made by their elected representatives in the implementation of the state’s energy policy. The MPSC’s efforts to impose local clearing requirements exceeds the authority of public service commissioners and threatens the fiscal stability of Michigan schools.”

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.

Ray Telman, the cooperative’s secretary-treasurer, had written the MPSC on July 13th: “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 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 25th letter to the MPSC 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 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,” Verheulen and Afendoulis 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 directly violate 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 MPSC ignored not only their own attorneys but clear statements of legislative intent and state and federal law, declaring in a June 15th document 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.” (See item 3 at: http://www.michigan.gov/mpsc/0,4639,7-159-80741_80743-406252–,00.html )

Glenn said such a move would not only violate 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 a Michigan Court of Appeals ruling in a 1993 lawsuit against the MPSC 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 Appeals Court ruled that the MPSC “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, have also sent letters to the Public Service Commission sharing Glenn’s view that the MPSC 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 at: http://www.michigan.gov/documents/mpsc/Capacity_Demonstration_Combined_Comments_579410_7.pdf

* 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, of which The Dow Chemical Company is also a member.

* The Grand Rapids Chamber of Commerce

* Spartan Stores

Glenn said if the MPSC proceeds with plans to violate state and federal law and exceed its legal authority, lawsuits in federal and state court are a certainty. “I will recommend that the Legislature itself go to court, if necessary, to reassert that energy policy in Michigan will be set by the Legislature, who are elected by and accountable to the people, and not by an appointed bureaucracy that seems intent on advancing the financial self interests of two corporate monopolies at the expense of Michigan ratepayers and our economy.”

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MPSC staff attorneys’ May 26th letter to MPSC commissioners, beginning at bottom of page 4: http://efile.mpsc.state.mi.us/efile/docs/18197/0068.pdf “Staff advises against introducing a new requirement in 2018 for LSEs in Michigan that would allocate some percentage of the locational clearing requirement, or effectively allocate a portion of the capacity import limit on an individual entity basis. Doing so will not improve reliability in the short term.

Moreover, assigning to large utilities in Zone 7 an allocation of the capacity import limit that AESs and smaller LSEs in Michigan have traditionally utilized will not improve reliability. The utilities already have over 98% of their resources in the zone and they do not use their pro rata share of the capacity import limit. Essentially reserving this unused portion of the capacity import limit to the utilities that do not use or need it would do little more than reduce the amount of the capacity import limit that is available to AESs and other small providers that previously have used a share of the capacity import limit.

…Artificially reducing the amount of the available capacity import limit that these small LSEs utilize may actually compromise reliability for some specific Michigan customers in the short term.

From a locational requirement perspective, if the status quo is kept for 2018 and the AESs and smaller entities are allowed to continue to utilize the unused portion of the capacity import limit, those entities could continue to source ZRCs from outside of Zone 7 and continue to serve the capacity requirements of their customers.

If a significant pro rata share of the locational clearing requirement is assigned on an individual LSE basis, the vast majority of the ECIL would be allocated to large utilities in Zone 7 that traditionally don’t utilize it, which would significantly reduce the portion of the capacity import limit available to those smaller entities that have traditionally imported capacity.

MISO has predicted that Zone 7 may possibly be short of capacity in 2018, which would make it extremely difficult, if not impossible for the smaller LSEs to source enough capacity from within Zone 7 to serve their customers. Those customers that were left short, due to the inability of the AESs’ previously imported capacity to count in Michigan, would be turned over to the utility for capacity service.

To make matters worse, the utilities are proposing to obtain 2018 capacity for those customers in the MISO PRA (which could likely have been the exact same source used by the AESs) and be forced into providing interruptible service to the utility if enough capacity cannot be secured under the utilities’ proposals. Deviating from the status quo for 2018 regarding locational requirements would not improve reliability in Michigan and could potentially be a detriment to customers.”