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BlogsPublications | May 30, 2017
2 minute read

MSC holds municipal corporations that have not consented to MPSC jurisdiction are not subject to the MPSC’s first entitlement rule

In the consolidated cases City of Holland v. Consumers Energy Co., No. 151053, and City of Coldwater v. Consumers Energy Co., No. 151051, the Michigan Supreme Court held that a utility’s right to first entitlement, which gives the first utility company serving a facility the right to provide for the entire load to the customer, does not apply to municipally owned utilities that have not consented to the Michigan Public Service Commission’s (“MPSC”)  jurisdiction. Furthermore, the Court held that customers may receive electric utility services from municipal corporations provided that the customer is not currently receiving services from another utility.

In both cases, previously blogged here and here, electrical customers opted to receive electricity from municipal utilities rather than Consumers Energy.  Consumers Energy contended that under Michigan Public Service Commission regulation, the first utility company to serve a customer was entitled to continue serving that customer, referring to Michigan Administrative Code, R 460.3411 (“Rule 411”). Consumers Energy also argued that the Michigan Supreme Court’s decision in Great Wolf Lodge of Traverse City, LLC v. Pub Serv Comm, 489 Mich 27; 799 NW2d 155 (2011) bolstered this conclusion.  The Michigan Supreme Court disagreed.  Reviewing the language of MCL 460.6(1) and MPSC rule 102(l), the Supreme Court noted that municipalities are explicitly excluded from MPSC regulation.  It held that to the extent that case could be read to hold Rule 411 applicable to disputes involve MPSC-regulated utilities and municipal utilities, it was wrongly decided.  Rule 411 is inapplicable to municipal electric utilities, and therefore Rule 411 was inapplicable here.

Consumers Energy also argued that MCL 124.3, which prohibits a customer from switching to electrical service from a municipal corporation if it was already receiving services from another utility, barred the customers’ switching here. The Supreme Court agreed that is the case; however it needed to consider the meaning of “customers” and “already receiving” within the statute. The Court determined that a customer under MCL 124.3 is an entity that receives electric service and that “already receiving” is a customer currently receiving service.  Applying these definitions here, the Court determined that a consumer who was not currently receiving services from any utility could switch to receiving services from a municipality.  The Court concluded that in both the Coldwater and Holland cases there were not customers already receiving service and, therefore, they were not barred for using the municipal utilities.

Disclaimer:  Warner represented Consumers Energy in the City of Holland Appeal.