Michigan PSC Grants Utility "Limited" Deferral of Costs Rising from Spike in Retail Choice Sales

The Michigan PSC granted Wisconsin Electric Power Company what it termed "limited authorization" to defer certain costs arising from the mass exodus of sales to competitive supply at the utility.

As first reported by EnergyChoiceMatters.com, Wisconsin Electric sought the deferral by stating that in the last 90 days, approximately 34 customers whose electric energy load comprised approximately 85% of the Michigan test year sales used in Case No. U-16830 to design the current base rates have submitted customer enrollment forms for Wisconsin Electric's Retail Access Service (RAS) program.

"According to Wisconsin Electric, the sudden and unprecedented switch of over 85% of its Michigan retail test year sale load to RAS means that the utility's ongoing annualized Michigan full-requirements retail service level will decrease to approximately 376,000 MWh, or approximately 15% of the projected energy sales levels used to design current base rates. At this level, Wisconsin Electric's annualized revenue under current rates is currently projected to be substantially less than the revenue amount used when the current rates were established," the PSC noted in granting a deferral subject to conditions.

Specifically, the PSC said that authorization for the requested deferral, "must be limited to an authorization for the company to use deferred accounting only with regard to that portion of the production costs intended to be recovered via demand and energy rates applicable to energy sold to Michigan customers that have recently indicated their intent to switch to RAS."

"This portion shall be determined by recalculating the jurisdictional average overall production allocation factor approved in Case No. U-16830 to account for the lost load and sales as described in the August 13 filing. Michigan's recalculated jurisdictional percentage resulting from this calculation shall be applied to the power supply revenue approved for recovery in Case No. U-16830 from the customers moving to RAS, with revenue associated with variable costs related to fuel (the power supply cost recovery base included in previously approved rates) removed. This fixed power supply amount should then be divided by the sales approved in the last rate case associated with the customers now moving to RAS to give a per kilowatt-hour factor. This factor should then be applied to actual RAS sales on a monthly basis beginning September 2013, resulting in the amount to be deferred," the PSC said.

The PSC approved such deferral on an ex parte basis, noting that ratemaking treatment (e.g. cost recovery) of such deferred costs shall be determined in a subsequent general rate case or other rate proceedings.

Several customers had opposed the sought deferral accounting authority, calling it an impermissible request for stranded cost recovery. Customers had also suggested that Wisconsin Electric could sell generation assets no longer needed to serve full service customers to offset any losses from shopping activity.

Case No. U-17463