in Re Application of Indiana Michigan Power Co to Reconcile Costs
327716
| Mich. Ct. App. | Nov 29, 2016Background
- Indiana Michigan Power (I&M) obtained a Net Lost Revenue Tracker (NLRT) as part of a 2010 settlement in Docket U-16180 to recover lost revenues from its Energy Optimization (EO) program and was authorized to create a regulatory asset and reconcile annually.
- Subsequent EO reconciliations and rate cases followed: I&M filed multiple reconciliation and rate cases (notably U-16311, U-16801, U-16739, U-17283, and U-17603) where treatment of the NLRT became contested.
- I&M did not expressly seek continuation of the NLRT in its later general rate case (U-16801), which was resolved by settlement and approved in February 2012.
- After this, the PSC declined to allow I&M to reconcile NLRT amounts for 2012 and 2013, concluding the NLRT did not survive the new-rate proceeding because I&M failed to raise it in the later rate case.
- I&M argued the NLRT continued absent explicit termination (citing PSC practice and statutory provisions regarding continuing tariffs) and raised equitable-estoppel and constitutional fair-treatment claims.
- The Court of Appeals remanded the matters to the PSC for reconsideration in light of Enbridge Energy Ltd P’ship v Upper Peninsula Power Co, which held the PSC exceeded its authority by approving a revenue decoupling mechanism (RDM) for an electric utility via settlement.
Issues
| Issue | I&M's Argument | PSC's Argument | Held |
|---|---|---|---|
| Did the NLRT continue after new base rates in U-16801 or terminate because I&M did not raise it in that rate case? | NLRT continued absent affirmative termination; prior PSC practice meant trackers persist; I&M reasonably relied on that practice. | A tracker is a ratemaking mechanism tied to the rate case that authorized it; if applicant does not raise continuation in a subsequent rate case, it is not automatically continued. | Remanded for PSC reconsideration under Enbridge; court did not decide on continuation, finding reconsideration necessary. |
| Is the NLRT functionally a revenue decoupling mechanism (RDM) and thus beyond PSC authority for electric utilities? | NLRT is narrower than typical RDMs and focuses only on lost revenues from EO; it is distinguishable from RDMs held impermissible. | If NLRT is an RDM, PSC lacked statutory authority to approve it for an electric utility; prior decisions support that limitation. | Court ordered PSC to analyze whether the NLRT is sufficiently similar to an RDM in light of Enbridge; remanded for PSC fact-specific determination. |
| Is I&M entitled to equitable estoppel or constitutional relief because PSC’s action deprived it of expected revenue? | PSC’s past practices and lack of express termination justify estoppel; termination causes undue hardship and violates fair treatment. | I&M had the obligation to raise continuation in its rate filing; failure to do so is fatal; equitable claims are premature until PSC addresses statutory-authority question. | Court found these arguments premature given Enbridge’s effect; remanded to PSC to reassess in light of Enbridge before reaching estoppel/constitutional issues. |
Key Cases Cited
- In re Application of Detroit Edison Co., 296 Mich. App. 101 (court held PSC lacks statutory authority under MCL 460.1089(6) to approve RDMs for electric utilities)
- Enbridge Energy Ltd P’ship v. Upper Peninsula Power Co., 313 Mich. App. 669 (PSC exceeded statutory authority by approving an RDM for an electric utility via settlement; approval cannot be salvaged by settlement context)
- Mich Consol. Gas Co. v. Pub. Serv. Comm’n, 389 Mich. 624 (establishes presumption that PSC rates and orders are lawful; burden on aggrieved party to prove unlawfulness)