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News Digest

Fortnightly Magazine - September 15 1999

open access program from going forward."

But state attorney general Jennifer Mulhern Granholm disagreed. She argued that the Supreme Court decision means that the PSC lacks jurisdiction to implement voluntary programs because "it would not be just and reasonable for the MPSC to take action to approve service and tariffs on terms unilaterally controlled by [Consumers and Detroit Edison]."

In the end, however, the PSC sided with the utilities, allowing them to proceed voluntarily.

WHITHER STRANDED COSTS? With all of the PSC restructuring orders suddenly in question, a familiar controversy resurfaced following the court decision: stranded-cost recovery. What is the fate of PSC orders authorizing stranded costs if retail choice - the reason for stranding - is no longer in effect?

Consumers Energy Co. and Detroit Edison Co., the two major public utilities in the state, sought protection for what they thought they already had won - the recovery of 100 percent of their own stranded costs. Detroit Edison emphasized that the PSC "has the authority (and duty) to permit utilities to recover their stranded costs." The utility said it wanted to protect the sanctity of the PSC orders accelerating amortization of the Fermi 2 nuclear plant and setting rates that allow for stranded-cost recovery. Those orders, Detroit Edison said, are "undiminished by the Supreme Court's decision."

The Association of Businesses Advocating Tariff Equity, which represents the biggest industrial electricity consumers in the state, didn't think so. The association made a point of saying in its brief that the Fermi 2 order should be reversed.

As a result of the Supreme Court decision, "any justification for accelerated amortization ¼ has vanished," ABATE said. The association grounded its anti-stranded-cost recovery opinion in simple "if ¼ then" reasoning: "If the PSC had no authority to require open access, then it goes without saying that there are no reasonable and prudent implementation costs and no stranded costs." On the same side of that issue was the state attorney general, who stated that the PSC has no jurisdiction over the stranded-cost issue.

CHANCES FOR COMPROMISE? While ABATE asked the PSC to cease any efforts to implement competition, it also called on the governor and legislature to develop and enact legislation giving the PSC broad authority to implement choice. Unicom Energy Inc., which sells natural gas in Michigan and wants to provide electric service in the state, agreed that state legislation is needed to institute supplier choice, and it used its brief to express a desire to help craft that legislation.

Meanwhile, at the governor's office, spokesperson Susan Shafer said that while Gov. John Engler officially backs the original PSC restructuring orders, at press time he was contemplating alternative ways, such as legislation, of implementing electric retail choice.

"The next step is to codify those orders into law," the governor said.

Carl J. Levesque is an editorial research assistant for Public Utilities Fortnightly.

1 Consumers Power Co. et al. v. Public Service Comm'n et al., Nos. 111482-3 et al., June 29, 1999 (Mich.Sup.Ct.).

2 Case No. U-11290 et al., June 30, 1999, (Mich.P.S.C.).

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