Draft Order Would Deny Choice Incentive Mechanism at Consumers Energy, Apply Separate RDM to Choice Customers

A proposed decision in Consumers Energy's electric rate case would adopt a revenue decoupling mechanism (RDM) which differentiates between power supply and distribution revenues, and the draft would also decline to re-introduce a choice incentive mechanism at this time (U-16794).

The proposed order from the ALJ would adopt Staff's recommendation for the design of the revenue decoupling mechanism, which notably would use different calculations for full service and retail access customers such that retail access customers are not subjected to power supply revenue credits or surcharges due to decoupling.

Specifically, Staff's revenue decoupling mechanism that the ALJ recommended for adoption contains these design elements.

1) For full service customers, revenues reflected in the calculation are equal to total rate schedule revenue less customer charge, fuel and purchased power, and other surcharges;

2) For retail open access customers, revenues reflected in the calculation are equal to total rate schedule revenue less customer charge revenue and other surcharges;

3) All months associated with the projected test-year are excluded from true-up; thus,

4) The first annual reconciliation period commences with the first month following the end of the general rate case projected test-year;

5) Operation of the mechanism terminates upon utility implementation of new rates (whether or not self-implemented pursuant to 2008 PA 286) and must be re-approved in the next general rate-case order;

6) The allocation of the qualifying revenue shortfall will be by rate class (i.e. residential, primary, and secondary);

7) Weather normalized sales data should be used to calculate over- or under-recovery amounts during the reconciliation period

This design mirrors the approved revenue decoupling mechanism at Detroit Edison adopted in Case No. U-16472.

As first reported by Matters, Consumers Energy had proposed in the case re-instituting the Choice Incentive Mechanism, "in the event the Michigan Legislature increases the existing 10% cap on electric choice sales prior to the issuance of a final order in this case." No such legislation has been approved to date.

Consumers had also been seeking to implement the Choice Incentive Mechanism without an incentive mechanism or deadband, as were contained in the prior design of the mechanism before it was eliminated.

The draft order, "concludes that since Consumers has not cited legislation modifying the existing cap, its request is not ripe for consideration in this PFD."

The proposed decision would also require Consumers to add clarifying language to its tariff that Retail Open Access (ROA) customers are not eligible for Rate GSG-2 for their ROA load.

Consumers had proposed adding language to the GSG-2 tariff to ensure the company properly collects revenue for delivery service provided to customers electing to install generation in order to self-supply.

However, Hemlock Semiconductor Corporation raised concern that the language was ambiguous and could be read as requiring retail open access customers to take standby service under Rate GSG-2.

While Consumers said testified unequivocally that "The Company does not provide power supply to ROA customers and is not proposing to provide standby power to a ROA customer, with generation, who is being serviced by an alternative supplier," the proposed order would direct Consumers to clarify the tariff as described above, stating, "[t]here is no need for these ongoing disputes about how the tariffs work, when the company can resolve these issues with a well-placed sentence."