Michigan PSC Moves Forward With Adoption Of State Reliability Mechanism, Setting Charge For Retail Suppliers

With FERC rejecting the Midcontinent ISO's proposal for a forward capacity auction specific to retail choice states, the Michigan PSC, consistent with recent legislation, has established a process to establish a State Reliability Mechanism (SRM), under which retail suppliers will be required to pay for certain costs of utility-owned capacity, as established by the PSC, barring a showing of suppliers' capacity

While statute requires an SRM to be established for a period of at least four years, stakeholders differed on extending the initial SRM beyond such date. The PSC said that the length of the SRM shall be established in two newly opened cases to consider the SRM at Consumers Energy and DTE Energy, rather than being addressed through a technical conference process adopted to establish certain generic issues (such as filing requirements for the SRM applications), though the PSC welcomed stakeholder consensus on the SRM length if any is developed.

The PSC ruled that the SRM shall be developed in contested cases specific to the SRM, outside of general rate cases. DTE had proposed that SRM issues be addressed in general electric rate case proceedings.

The PSC directed DTE (U-18248) and Consumers (U-18239) to file applications to establish each's SRM by April 11, 2017

The PSC directed PSC Staff to consult with MISO and parties, including through a technical conference, to do all of the following by August 16, 2017:

1. Continue to examine resource adequacy issues as part of the annual assessment in Case No. U-18197.

2. Develop recommendations regarding requirements for capacity demonstrations for electric utilities, cooperatives, municipalities, and retail suppliers in this state subject to an SRM, including filing requirements.

3. Develop recommendations regarding load forecasts, planning reserve margin requirements and locational requirements for capacity resources.

4. Develop recommendations regarding the capacity obligations for load that pays an SRM charge to a utility, including MISO’s annual PRA.

The PSC said that it would not pursue accelerated implementation of an SRM at the Upper Peninsula utilities (Upper Michigan Energy Resources Corporation, Upper Peninsula Power Company, and Cloverland Electric Cooperative) on the same fast track as Consumers and DTE Energy. Retail suppliers and other parties had argued that the MISO Zone 2 Upper Peninsula utilities do not face the same resource adequacy issues as the Zone 7 (DTE and Consumers) utilities.

The PSC encouraged the Upper Peninsula to participate in the technical conferences addressing generic issues related to the SRM filings