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Michigan Passes Bill Permitting Decrease in Retail Choice Cap, Revises Capacity Obligations of Retail Suppliers

December 16, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The Michigan Senate and House have passed a revised version of SB 437, which Gov. Snyder has indicated he will sign, that permits the PSC to reduce the electric choice cap to below 10% under certain circumstances, and revises the previously proposed capacity obligations to be imposed on retail suppliers

Under the bill, the 10% cap on retail electric choice is maintained except as follows: "if the Commission determines that less than 10% of an electric utility's average weather-adjusted retail sales for the preceding calendar year is taking service from alternative electric suppliers, the commission shall set as a cap on the weather-adjusted retail sales that may take service from an alternative electric supplier, for the current calendar year and 5 subsequent calendar years, the percentage amount of retail sales for the preceding calendar year rounded up to the nearest whole percentage. If the cap is not adjusted for 6 consecutive calendar years, the cap shall return to 10% in the calendar year following that sixth consecutive calendar year. If a utility that serves less than 200,000 customers in this state has not had any load served by an alternative electric supplier in the preceding 4 years, the Commission shall adjust the cap in accordance with this provision for no more than 2 consecutive calendar years."

Regarding capacity obligations for retail suppliers, the bill provides that if FERC approves a MISO-Michigan compromise regarding a forward capacity auction and state compensation mechanism, the PSC shall determine whether to rely on the forward auction or state compensation mechanism for capacity. Note that suppliers may only rely on the capacity auction if the PSC allows such compliance; it is at the PSC's discretion, not the supplier's choice

See details on the MISO-Michigan compromise here

If the PSC elects the state compensation mechanism, a contested case hearing shall be held to determine the level of the nonbypassable capacity charge applicable to retail suppliers under the state compensation mechanism

The bill also contains certain parameters on how to calculate the capacity charge, to ensure certain non-capacity generation costs recovered through bypassable rates are not included, and to reflect certain revenues and offsets received by the utilities.

To the extent FERC does not approve the MISO-Michigan capacity market compromise, the bill contains provisions requiring a four-year forward showing of capacity from retail suppliers

According to reports, the final bill does eliminate a nonbypassable charge that would have followed the customer if they left utility supply for choice service to reflect capacity commitments made while they were on utility supply service.

Reports also indicate that the final bill include a minimum stay such that a customer leaving alternative supply for utility supply must remain on utility supply for six years

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