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Detroit Edison Seeks to Defer Increased Revenue Requirement Caused by Electric Choice
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November 3, 2010
Detroit Edison has asked the Michigan PSC to delay the
recognition of the recent increase in electric choice in setting base rates in its
newly filed rate case, assuming the Commission retains the Choice Invective Mechanism
(CIM) with certain modifications (U-
About $123 million of Detroit Edison's requested rate relief is due to the recent increase in electric choice sales.
"The Commission could defer, for future recovery, a portion of the required rate relief which is due to the recent increase in Electric Choice levels. Electric Choice is currently at the statutory 10 percent cap, however, as recently as last year, and reflected in Edison's current rates, Electric Choice was only about three percent of Edison's retail electric sales," Detroit Edison said.
"[T]his amount could be deferred for future recovery and reduce the Company's necessary
rate relief by $123 million ... Edison would rely on the CIM in order to recover
the impact of changes in Electric Choice levels from those established in Edison's
last rate case, Case No U-
"Given the inherent level of uncertainty and volatility in Electric Choice sales, Detroit Edison proposes to continue the CIM as ordered by the Commission in its 2010 Orders," Detroit Edison added.
Furthermore, if the PSC defers the $123 million impact from electric choice, Detroit
Edison asked for two modifications to the Choice Inventive Mechanism -
"The CIM has been, and continues to be, a critical rate making tool for the Commission and Edison since the level of Electric Choice has been highly variable in the past and the impact on Edison's revenue due to this variability is very large," Detroit Edison said.
"Depending on rate class, the migration of 1,000 GWhs of sales to or from Electric
Choice impacts Edison's non-
The Choice Inventive Mechanism base sales level would be updated to the current migration level of 4,986 GWh.
Under the current 200 GWh deadband in the Choice Incentive Mechanism, Detroit Edison absorbs the financial impact, either positive or negative, of the first 200 GWh of electric choice variance from the level reflected in Detroit Edison's base rates.
The current Choice Incentive Mechanism also has a 90/10 sharing mechanism where customers are refunded or surcharged 90 percent of the impact of Electric Choice changes beyond the deadband. Detroit Edison is responsible for the other 10 percent.
"Edison is in effect volunteering to defer recovery of lost revenue associated with customers participating in Electric Choice, therefore, if the Commission adopts Edison's proposal to defer this recovery, Edison should not be subject to the 90/10 sharing. In addition, the 200 GWh CIM deadband was designed to eliminate the need to implement a CIM credit or surcharge if there was a relatively small movement of customers to or from Electric Choice. Clearly, if the Commission adopts Edison's proposal relative to Electric Choice, there will likely be a sizable difference between the level of Electric Choice reflected in base rates and the actual level of Electric Choice," Detroit Edison testified.
Detroit Edison forecast 2011 electric choice sales at 4,987 GWh, a forecast Edison
held constant through 2020. "The Electric Choice sales forecast was held constant
at the temperature normalized sales level expected for 2010 of 4,987 GWh. Market
clearing prices are not expected to increase significantly from current levels through
2012, therefore, no change in Electric Choice sales is forecasted. Since a longer-
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