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Frontlines

Fortnightly Magazine - July 1 1996

rates offered by Duquense Light Co. to its largest industrial customers:

"The industrial customers that are receiving these discounts have been able to obtain them because they now have a form of customer choice. These customers can choose to self-generate."

Hanger notes the obvious inequality:

"This limited choice gives industrial customers bargaining power with their existing electric company. The challenge for this Commission is to give all customers choice, not just the lucky few."

And the problem extends beyond price. It affects how the market allocates stranded costs among customers, as Hanger explains:

"When this Commission grants special discounts as we do now, we violate many of the basic principles that most parties agree must govern recovery of stranded investments. . . . First, the customer receiving the discount is bypassing any stranded-investment recovery to the extent of the discount. Second, costs are being shifted to shareholders [or] other ratepayers. Third, not all customers have equal access to competitive rates." (Pa. PUC Dkt. Nos. R-00963610, R-00963591, R-00963621, April 25, 1996).

The Real Issue

When I talked with officials at the Michigan PSC, they confirmed that both Consumers Power and Detroit Edison have yet to offer wheeling service under the five-year experiment, a fact they attribute to the requirement for a capacity solicitation. In fact, the only wheeling agreement approved in Michigan so far involves Wisconsin Electric Power Co., which has received authority to wheel power over the transmission system of Upper Peninsula Power Co. to reach a mine operated by the Copper Range Co. in Ontonagon County.

That was before the politicians intervened.

In January, Michigan Gov. John Engler took recommendations from the Michigan Jobs Commission and forwarded them to the PSC, which in April directed Consumers Power and Detroit Edison to respond with proposals. One of those recommendations urged the PSC to allow wheeling for new industrial or commercial load. Other proposals suggested 1) a specific transmission charge to buy down stranded costs, 2) replacing rate-of-return regulation with price caps for all statewide electric and gas load not subject to retail choice, 3) negotiated bilateral rate contracts for industrial and commercial load, and 4) no PSC mandates for demand-side management, conservation, or "other similar prescriptive regulatory measures."

On May 15, Consumers Power filed wheeling tariffs with the PSC for "new load customers" (em that is, any customer locating new facilities or expanding existing facilities in the company's service territory (em conditioned on reciprocity rights.

Nevertheless, roadblocks still persist for customers that cannot qualify for the "new load" exemption. In March, a Detroit Edison customer (MasoTech Forming Technologies, Inc.) turned to the PSC for help in gaining wheeling rights. Detroit Edison opposed the request, labeling it a customer "complaint" that did not meet procedural requirements.

The case prompted Michigan Commissioner David A. Svanda to question when the wheeling experiment will ever get off the ground:

"Detroit Edison has chosen to focus only on the deficiencies . . . rather than to address the real issue: How and when will one of Detroit Edison's large customers obtain access to, and the benefits of,