Michigan Bill Would Raise Choice Cap to Equivalent of 20%, with Additional Future Increases

A bill has been introduced into the Michigan House, with companion legislation to be filed in the Senate, to raise Michigan's electric choice cap.

HB 5503, sponsored by Rep. Mike Shirkey (R-Clarklake), would require the PSC to set the electric choice cap to be the greatest of the following, for the remainder of the year in which the amendatory act is passed:

(A) 10%;

(B) A percentage equal to the percentage of weather-adjusted retail sales for the preceding calendar year allotted to customers taking service from an alternative electric supplier on the effective date of the amendatory act, plus the percentage of weather-adjusted retail sales for the preceding calendar year represented by additional customers requesting service from an alternative electric supplier on the effective date of the amendatory act but who have not received an allotment.

(C) The highest percentage, determined on a calendar-year basis for years 2000 through 2012, of weather-adjusted retail sales for the preceding calendar year representing customers who took service from an alternative electric supplier.

Under both subparagraphs (B) and (C), the bill provides that the PSC shall ensure that any customer requesting service from an alternative electric supplier on or before the effective date of the amendatory act is allowed to purchase electricity from an alternative electric supplier.

Under the above criteria, the amount of competitive electric load that could be served would be about 20%.

Furthermore, the bill provides that the PSC shall, "at the beginning of each calendar year, increase the electric choice·cap for a utility subject to this subdivision from its then current percentage by 6%."

On and after the beginning of the fourth calendar year following the calendar year in which the amendatory act takes effect, if the electric choice cap has been reached for an electric utility, and the allotment of retail sales represented by customers requesting service from an alternative electric supplier who cannot be served under the existing electric choice cap exceeds 2% of the electric utility's weather-adjusted retail sales for the preceding calendar year, then the PSC shall initiate a contested case to determine if the electric choice cap should be increased.

Within 180 days of the initiation of the contested case, the Commission, "shall issue an order increasing an electric utility's electric choice cap by the percentage of weather-adjusted retail sales represented by those customers requesting service from an alternative electric supplier plus 3% of the utility's weather-adjusted retail sales for the preceding calendar year unless it finds, based on the evidentiary record in the contested case, that increasing the electric choice cap will cause substantial harm to full-service customers."

"In determining whether an increase in the customer choice cap will result in substantial harm to full-service customers, the commission shall consider all the costs and savings experienced or expected to be experienced by full-service customers based on the difference between costs and savings with and without the proposed percentage increase in the electric choice cap, including, but not limited to, the costs and savings of fuel, purchased power, wholesale sales, investment in new or existing generating facilities, and purchase, lease, or acquisition of generating capacity," the bill provides.

The bill provides that the PSC shall not initiate more than one contested case for an electric utility under this subdivision in any 12-month period.

The bill also provides that the PSC shall ensure that any savings by the utility resulting from increased electric choice (e.g. fuel, purchased power, off-system revenues, etc.) are passed through to full service customers through the utility's power supply cost recovery proceedings.

Additionally, in setting rates for the utility, the PSC shall recognize the effect of an increase or decrease in the retail sales associated with customers taking service from an alternative electric supplier, either through a revenue decoupling mechanism or through a test year used for setting rates that begins after the effective date of the amendatory act.

"Michigan's hybrid 'choice' system is unique in the nation – and has proven underwhelming," said Shirkey. "Today, Michigan business and government customers are paying $1 billion more for electricity than if our electric rates were at the regional average, hindering the retention and creation of jobs in Michigan. Today, nearly 8,000 customers are languishing on waiting lists held by each utility, requesting access to competitive energy suppliers. This is clear and measurable demonstration the market is demanding more choices in their electric service."

Consumers Energy opposed the bill, stating that it would, "force the rest of the utility's electric customers to pay up to $405 million more per year by 2016."