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Proposed Decision Finds Requiring Capacity Release at Detroit Edison Is, "Reasonable," But Would Defer Issue to Collaborative

December 22, 2014

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Copyright 2010-14 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

Requiring DTE Gas (f/k/a Detroit Edison) to release capacity to retail suppliers is the, "only economically reasonable long-term solution," to provide for the equitable allocation of pipeline reservation costs, a Michigan ALJ would find in a proposed decision, but the ALJ would decline to mandate a capacity release program due to unresolved questions, instead directing that a collaborative be established.

The proposal for decision concludes that the Michigan PSC does have the authority to consider a capacity release program in DTE's Gas Cost Recovery proceeding.

As to whether capacity release would be sound policy, the ALJ pointed to, "unrebutted," testimony from the Attorney General that requiring gas customer choice (GCC) customers to continue to pay the costs of pipeline capacity only used to serve those customers in the event of colder-than-normal conditions or supplier default is economically inefficient where an alternative capacity assignment program is feasible.

The Attorney General had testified that the recently implemented Reservation Charge now applicable to shopping customers, "tilts the playing field in favor of DTE Gas and its GCR [default service] program."

"GCC customers must pay the Reservation Charge for capacity that their commodity gas suppliers cannot use to serve them, and DTE Gas itself can use that capacity (paid for by GCC customers) to reduce its own cost of serving GCR customers. This tilting of the playing field is an unnecessary and inappropriate impediment to competition," the Attorney General had testified, with the ALJ citing such testimony.

However, the ALJ said that, "it is imperative that the details of any capacity release program adopted protect service to GCR and GCC customers both in the event of supplier default and in the event of colder-than-normal weather conditions or other supply limitations."

The ALJ noted that the Attorney General proposed modifications to capacity release plans proposed by retail suppliers to address these concerns, including modifications to protect DTE Gas's ability to serve isolated areas, and in colder-than-normal winters.

"[B]ecause only a well-thought out program that ensures reliable gas service to GCR and GCC customers should be adopted, and because IGS and RESA acknowledge that a collaborative or further study is required before a capacity assignment plan can be finalized, this PFD concludes that it is still premature to adopt a capacity assignment plan," the ALJ said.

"Although the ALJ is persuaded that some form of capacity assignment is the only economically reasonable long-term solution identified on this record to provide for the equitable allocation of pipeline reservation costs, this PFD recommends that the Commission set the matter for further investigation in a separate proceeding," the ALJ said.

Such new proceeding, "would allow for full consideration of the requirements of FERC Order 712, as well as consideration of operational concerns including DTE Gas's need to ensure reliable delivery to isolated areas and in colder-than-normal weather conditions, and other potential administrative issues such as contractual requirements. On investigation, Staff's and DTE Gas's concern that competition among choice suppliers will not be sufficient to ensure that choice customers benefit from capacity assignment can also be addressed," the ALJ said.

The ALJ recommended approving DTE's proposed reservation charge applicable to gas customer choice suppliers of $0.26 per Mcf. The charge would also be paid by GCR customers.

The ALJ would also approved DTE's proposed GCR factor of $4.97 per Mcf, which does not include the cost of the separate reservation charge.

The ALJ recommended that the PSC defer consideration of the interpretation and/or revision of the penalty provisions of the gas choice tariff to a complaint case or other separate proceeding.

Case No. U-17332

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