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A Better Partnership
November 20, 2015

COA affirms Michigan Public Service Commission’s orders setting rates for gas utilities

In the consolidated appeal of In re Application of Consumers Energy Company for Approval of a Gas Cost Recovery Plan, No. 322031, In re Application of Michigan Gas Utilities Corporation for Approval of a Gas Cost Recovery Plan, No. 322571, and In re Application of DTE Gas Company for Approval of Gas Cost Recovery Plan, No. 32432, the Michigan Court of Appeals held that the Michigan Attorney General did not prove, by clear and satisfactory evidence, that the orders issued by the Michigan Public Service Commission (the “Commission”), in each of three separate cases, were unlawful and unreasonable under MCL 462.26(8).
 
In Docket No. 322031, Consumers Energy (“Consumers”) applied to the Commission for approval of its recovery plan and proposed recovery factors, in December 2013.  Then, in February 2014, Consumers filed an amended recovery plan, to request a higher recovery factor due to increases in demand for natural gas.  In March 2014, Consumers moved for a temporary order approving their requested recovery factor; the Attorney General argued that the Commission lacked authority to approve the recovery factor on a temporary basis and that the Commission should not approve Consumer’s request to roll-in an under-recovery from one plan year to the next.  Later that year, the Commission issued a temporary order approving Consumer’s requested increased recovery factor; it declined to address the Attorney General’s argument regarding the roll-in of an under-recovery.
 
Similarly, in Docket No. 322571, Michigan Gas Utilities Corporation (“Michigan Gas”) filed an application and an amendment to its recovery plan and proposed recovery factors with the Commission; it also moved for a temporary order.  The Attorney General intervened in this case as well.  The Commission approved Michigan Gas’ request for a temporary order and it again declined to address the Attorney General’s argument regarding the roll-in of a recovery.
 
In Docket No. 32432, DTE Gas Company (“DTE”) applied for approval of its recovery plan and filed amendments with the Commission.  In its second amended application, DTE stated that it intended to self-implement its proposed recovery factor under MCL 460.6h(9).  In response, the Residential Ratepayers Consortium (the “Consortium”) asked the Commission to order DTE to cease self-implementation.  In a hearing on the motion, the administrative law judge agreed with the Consortium, but concluded that it did not have the authority to issue the order.  The Attorney General and Consortium sought leave to appeal from the Commission.  The Commission granted the appeal, but declined to order DTE to cease self-implementation.  The Attorney General then appealed all three of the Commission’s decisions.
 
On appeal, the Attorney General argued that the Commission erred when it decided to approve an amended recovery plan through a temporary order and declined to order DTE to cease self-implementation.  In addition, he argued that under-recoveries from a previous plan year cannot be rolled into a current recovery plan. 
 
Under MCL 462.26(8), the Attorney General must prove, by clear and satisfactory evidence, that the Commission’s orders were unlawful or unreasonable.  The Court of Appeals stated that, “[a]n order is unlawful if the Commission failed to follow some mandatory provision of the statute or abused its discretion in the exercise of its judgment.”  In its analysis, the Court looked to MCL 460.6h, which governs the Commission, and found that as long as the initial application, filed with the Commission, was a “complete gas cost recovery plan,” then it was properly before the Commission for review, notwithstanding the amendments filed in each plan.  Further, the Court concluded that, under MCL 460.6h(9), DTE was authorized to self-implement its recovery plan.  The Court went on to hold that the Attorney General did not prove, by clear and satisfactory evidence, that the Commission’s orders were unlawful or unreasonable. 
 
In regards to the Attorney General’s arguments regarding the roll-in of a recovery, the Court stated that it had already recognized that the Commission’s roll-in method was lawful in a prior case on the same issue and that it must not ignore binding published authority. 

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