Michigan PSC Will Establish Capacity Rate to be Paid by Retail Suppliers

The Michigan PSC will establish a state compensation mechanism governing the charges paid by retail electric suppliers for capacity provided by Indiana Michigan Power Company to retail suppliers under I&M's Fixed Resource Requirement (Case No. U-17032).

As previously reported, I&M, an AEP company, has petitioned FERC to change the compensation rate from the default rate, which is the RPM clearing price, to a formula, cost-based rate.

There has historically been no competitively served load in the I&M territory, but the PSC previously told FERC that the PSC has become aware that certain customers at I&M intend to take electric service from competitive suppliers in the "near future."

In an order issued yesterday, the PSC said that it, "is persuaded that it should commence this proceeding, on its own motion, to establish a state compensation mechanism for AES [alternative electric supplier] capacity in I&M's Michigan service territory."

"It will be the goal of the Commission to issue a final order in this proceeding before the expiration of the five month stay imposed in Docket No. ER12-1173-000 by the FERC's April 30, 2012 order."

The PSC ordered I&M to file a cost of service based proposal by June 14, 2012 for the creation by the Commission of a state compensation mechanism for alternative electric supplier capacity in its Michigan service territory. "I&M's proposal shall adhere to Michigan-specific ratemaking principles," the PSC said.

The PSC directed that an ALJ shall conduct a contested case proceeding in an expedited manner so as to close the record in time to transmit the matter to the Commission no later than September 4, 2012. In doing so, the ALJ need not prepare a proposal for decision because the Commission intends to read the record.