The check won’t be in the mail

Let’s suppose you were overcharged on your electric bill for a number of months.

The overcharge could have been clerical error, a misread meter or some other reason. It really doesn’t matter. What matters is you’ve paid too much and you’d like your money back.

No problem, says the electric company, we’re responsible for this mess. We’ll credit next month’s bill.

But there won’t be a next month’s bill, you say, at least not from you guys. I’m all paid up and I’ve switched to a different electric company.

Well then, we’re very sorry but we only credit bills to make up for overcharges. We don’t send checks. That would cost us a lot of money and besides, the law says we don’t have to.

So you charge off to court and learn, to your astonishment and dismay, that the electric company is right.

Huh? Whaaaatt?

Relax, that’s not the way it really goes for a typical residential electric customer.

But that’s exactly the way it went for a couple of Detroit Edison’s largest customers recently.

Detroit Edison applied to the PSC for a multi-million dollar rate increase. Under MCL 460.6a(1), if the PSC doesn’t act on the application within a certain time, the utility can “self-implement” a rate increase. Later, when the PSC acts, if a smaller-than-requested rate increase is approved, customers are due a refund.

That’s what happened with Detroit Edison’s application in this case. But when refund time came around, Detroit Edison proposed, and the PSC approved, a prospective refund scheme for its “primary customers” (entities that buy lots and lots of electricity) that would give only current primary customers a pro rate share of the refund in the form of a credit on future bills.

Two of Detroit Edison’s “primary customers” complained. Having switched electrical suppliers, they had no Detroit Edison bills upon which a credit could be made. For them, a prospective refund meant no refund at all.

We’re not talking small change. The primary customers were looking for a share in a $26 million refund.

In the Court of Appeals, the Association of Businesses Advocating Tariff Equity (ABATE) sued on behalf of the complaining primary customers.

In a 2-1 decision, Judge David Sawyer, joined by Joel Hoekstra, said the case turns on interpreting a portion of MCL 460.6a(1).

The commission shall allocate any refund required by this section among primary customers based upon their pro rata share of the total revenue collected through the applicable increase … .

That means, according to ABATE, that Detroit Edison must calculate primary customers’ refunds based on their actual overpayment and then refund an amount equal to the actual overpayment.

It might mean that, said the COA majority. But there’s a lot of ambiguity in the statute.

[MCL 460.6a(1)] calls for a “refund” to “customers” and, with respect to “primary customers” requires that the refund be “based upon their pro rata share of the total revenue collected through the applicable increase.” This could be viewed as requiring a “refund” in the traditional sense, i.e., a return of monies previously paid.”

But the majority noted that in Attorney General v. Public Service Comm’n, 215 Mich. App. 356 (1996) and Attorney General v. Public Service Comm’n,  235 Mich. App. 308 (1999), two cases dealing with refunds under MCL 460.6h(13), COA panels ruled that 6h(13):

allowed for an adjustment of future rates and did not require a return of actual monies paid. Thus, within the context of PSC statutes, the term “refund” enjoys a broader meaning. There is nothing in the statute that compels the conclusion that use of the term “refund” means the monies returned to a primary customer must be based on the individual primary customer’s actual overpayment.

Nonetheless, § 6a(1) requires that the refund to “primary customers” be based on “their” “pro rata” share of revenues collected. “Primary customers” could be interpreted to mean the individual primary customers, since the reference is to “primary customers” and not the class of primary customers. Conversely, the absence of the phrase “individual primary customers” allows for the “primary customers” to be viewed and treated as a group. Further, “their pro rata share” could be interpreted to mean the amount of self-implemented increase in rates that each individual customer actually paid. However, the statute could also be read as requiring that all of the primary customers together be given a refund based on all of the primary customers’ pro rata share of the total revenue collected.

When a statute can be reasonably read in differing ways, the COA majority noted, an agency’s interpretation is entitled to deference unless there are “cogent reasons” for not doing so.

There are no cogent reasons to overrule the way the PSC applied the statute, the majority concluded.

A PSC accountant testified that calculating refunds in the manner ABATE suggested “would result in burdensome administrative costs,” costs that would be passed on to others in future ratemaking decisions, the majority observed.

And, the primary customers who chose to switch suppliers would presumably have factored the potential loss of a refund as part of their determination whether switching made economic sense, according to the PSC.

That presumption would have been based on those two cases dealing with 6h(13), said the COA majority.

In his dissent, Judge Henry Saad wasn’t buying any of it.

I strongly dissent because the largest users of electricity who make the move to a Detroit Edison competitor end up losing the most. …

The PSC … justifies its unfair methodology on the self-serving theory that primary customers should have known that the PSC has broad discretion and that it likely would not have granted primary customers a refund (despite the act’s language which seems to guarantee a refund). According to the PSC, primary customers must have factored this in to their decisions to switch electric suppliers and, therefore, did not really lose anything at all by the PSC’s decision not to give them refunds. …

[T]his rationale [is] a form of reasoning backward from a desired result[.]

The case is ABATE v. Michigan Public Service Comm’n (majority opinion) (dissent).

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Power on

The Michigan Court of Appeals has affirmed an order of the Michigan Public Service Commission approving a renewable energy plan that will include a $5.3 billion wind power project.

The plan was submitted by Consumers Energy Co. after the state of Michigan adopted its Clean, Renewable, and Efficient Energy Act in 2008, which requires 10 percent of all energy sales to come from renewable sources by 2015.

The cost of the project, according to the July 12, 2011, opinion in The Association of Businesses Advocating Tariff Equity v. Michigan Public Service Commission, et al., will be recovered in part by charging higher energy prices, and in part by collecting a surcharge of $3 per month for residential customers, $16.58 per month for commercial customers, and $187.50 per month for industrial customers. The charges may be collected over a span of 20 years.

It’s the increased costs that (Association of Businesses Advocating Tariff Equity) ABATE  is concerned about, and it argued that the project is too large and too costly.

The group, made up of major manufacturers and energy consumers, said that there is no reason the entire project must be implemented now. It called the plan “speculative and inflated.” In other words, the project will be over-built. But Consumers argues that in order to ensure enough land acquisition and the best prices for the equipment needed for wind farms and transmission lines, now is the time to build; putting off some of the project could result in higher costs.

The Public Service Commission approved the plan, with modifications to address what it called flaws in the plan. ABATE appealed.

The Court of Appeals concluded that the commission’s “findings are supported by testimony and exhibits … and that (ABATE) has thus failed to demonstrate that the decision to allow Consumers Energy to proceed with its renewable energy plan was unreasonable and unlawful.” The 2008 law not only requires the percentage of the state’s energy to come from renewable sources, but it also allows that energy companies can meet up to half of that obligation by building their own renewable energy facilities. And the companies can seek surcharges to pay for it.