Michigan Bill Includes Opt-Out Municipal Aggregation, Purchase of Receivables, Utility Corporate Separation

The Michigan bill (House Bill 5184) to expand electric choice to all customers also includes provisions requiring purchase of receivables, permitting opt-out municipal aggregation, and requiring utilities to no longer own generation.

House Bill 5184 would principally apply to the utilities with more than 1 million retail customers -- Detroit Edison and Consumers Energy. Full retail electric choice would only be available at utilities with more than 1 million retail customers; smaller utilities and munis and cooperatives would retain the 10% cap on choice sales.

Notably, House Bill 5184 would require electric utilities with more than 1 million retail customers to offer to purchase the receivables of alternative electric suppliers, for residential and small commercial customers. Use of POR would be optional for electric suppliers, the bill provides.

House Bill 5184 provides that receivables shall be purchased at a "just and reasonable" discount rate set by the PSC, reflecting all start-up and ongoing costs including uncollectibles. The discount rate shall be separate for residential and commercial customers.

Specifically, the initial discount rate shall be composed of:

• The utility's historical bad debt experience for a similar period and rate class

• Working capital arising for the lag in collection of receivables

• Estimated incremental start-up costs.

• Administrative costs

Subsequent discount rates shall be set using the average of the historical bad experience for all participating alternative electric suppliers, without accounting for the historical bad debt of the utility. The bill also contains various true-up procedures.

House Bill 5184 would also allow, "local units of government" to aggregate residential and small commercial (under 25 kW) electric customers without the written consent of the customer, with the customer permitted to opt-out.

The bill would further require electric utilities with more than 1 million customers to either divest their generation, or transfer generation to a competitive affiliate.

Per the bill, customers not electing an alternative supplier would be served on a "market-based" standard tariff with supply procured through a competitive bidding process for a wholesale product consisting of, "all competitive retail electric services necessary to maintain essential electric service to standard tariff service customers, including a firm supply of load following electric generation service" (e.g. full requirements service).