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A Better Partnership
December 28, 2015

COA determines that the Public Service Commission does not have the authority to uphold a settlement agreement

In Enbridge Energy Limited Partnership v. Upper Peninsula Power Company and Michigan Public Service Commission, No. 321946, the Michigan Court of Appeals held that the Michigan Public Service Commission (“PSC”) erred when it upheld a settlement agreement reached with the Upper Peninsula Power Company (“UPPC”) and dismissed a complaint filed by Enbridge Energy Limited Partnership (“Enbridge”), challenging the PSC’s approval of the settlement agreement.
 
In 2009, UPPC filed an application seeking to implement a revenue decoupling mechanism (“RDM”) and an increase in electric rates.  Subsequently, the PSC approved the application and entered into a settlement agreement with UPPC.  In 2011, UPPC filed an application to reconcile the RDM and recover a shortfall.  While their application was pending, the Michigan Court of Appeals decided In re Applications of Detroit Edison Co., 296 Mich. App. 101 (2012).  In that case, the Court held that MCL 460.1089(6) authorized the PSC to approve the use of an RDM by a natural gas utility, but that the statute did not contain a similar provision for an electric utility.  Despite the holding in Detroit Edison, the PSC upheld the settlement agreement it reached with UPPC and approved the RDM reconciliation.  Enbridge filed a petition for rehearing with the PSC, which was denied.  In response, Enbridge refiled its formal complaint, which was denied because the PSC determined that Enbridge failed to state a claim on which relief could be granted.  Enbridge appealed.
 
On appeal, Enbridge argued that because the PSC is a creature of statute and only has the powers conferred on it by the Legislature, the PSC exceeded its statutory authority under MCL 460.1089(6) and its subject-matter jurisdiction in approving the settlement agreement with UPPC.  The Court of Appeals found this argument to be misplaced because it conflated subject-matter jurisdiction and statutory authority.  Instead rather, the Court found that the question before it was whether, in approving the settlement, the PSC exceeded its statutory authority. 
 
The PSC argued that it had the authority to approve the settlement based on a prior Michigan Supreme Court case, Dodge v. Detroit Trust Co., 300 Mich. 575 (1942), which it argued allowed them to approve the agreement because it resolved a disputed legal issue.  The Court of Appeals disagreed and concluded that it was not reasonable to believe that the law was in dispute or unclear.  Ultimately, the Court held that the PSC erred when it upheld the settlement agreement with UPPC and dismissed Enbridge’s complaint, because the PSC’s authority is limited to what the Legislature dictates.  As a result, the Court reversed the PSC’s dismissal of Enbridge’s complaint and remanded the case for further proceedings.        

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