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News Analysis

Fortnightly Magazine - March 15 2000

but notes that "energy supplies are expected to be tight throughout the ECAR region, and the combination of growing electric demand and no new major generation construction will worsen the situation."

Despite these assessments, the Michigan PSC expressed dismay when Detroit Edison recently filed an application on Jan. 11 to transfer its River Rouge Unit No. 1 generating plant to an affiliate, DTE River Rouge No. 1 LLC, for $6.6 million, saying the timing of the request left the PSC with too little time for consideration of the issues. It repeated its warnings to electric companies that "the threat of blackouts not be used as a bargaining piece in the ongoing restructuring of the industry." Case No. U-12266, Feb. 3, 2000.

Intervenors such as state attorney general Jennifer M. Granholm, Energy Michigan and the advocacy group ABATE (Association of Businesses Advocating Tariff Equity) argued that the purchase price might have been too small (it was twice book value), or that the utility might acquire too much market power in generation, or that the proceeds might find their way too quickly to stockholder hands, instead of being preserved as a setoff to any eventual approval of stranded-cost recovery.

Eventually the PSC OK'd the sale but set conditions to allow a future stranded-cost setoff and reserve the output from the plant for competitive sale to retailers under a retail choice regime if restructuring legislation should be enacted in 2000.

It complained that it lacked enough time "for measured consideration of the issues," but did not really explain the alternatives that it might have considered, or what it might have done differently if given more time: "[T]he commission is essentially presented with a Hobson's choice. The restart of Rouge No. 1 has been offered as a means to help alleviate concerns about reliability this summer and as a source of supply for retail open-access customers - both laudable objectives."

At press time, Detroit Edison spokesman Scott Simons said that Senate Bill 937 could affect the unit price and other aspects of the sale, such as stranded-cost determination. But he predicted that at the earliest, a restructuring bill could be passed late this year.

For Consumers Energy president and CEO David W. Joos, legislation cannot come soon enough. In early February he told the Michigan Senate Technology and Energy Committee that "it is vitally important that legislators take the actions necessary to put into place a structure which will allow for investments in new generating plants to serve Michigan's growing power needs." He observed that "even after shutting off several Michigan industrial customers and residential air conditioning customers that have volunteered for such curtailment, expected electric capacity is projected to be just 3 percent above expected load."

Such statistics prompted Consumers Energy to ask the PSC to approve a new tariff provision allowing it to enter contractual arrangements with customers that can self-generate power, shift load from on-peak periods, or provide other forms of voluntary load reduction during times of high system demands. The PSC approved the tariff on Feb. 9, finding it would allow the