S T A T E O F M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * *

Transcription

1 S T A T E O F M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * * In the matter of the application of ) MIDWEST ENERGY COOPERATIVE for a ) waiver from certain provisions of the code ) Case No. U of conduct approved by the Commission in ) Case No. U-12134, if required. ) ) At the October 9, 2007 meeting of the Michigan Public Service Commission in Lansing, Michigan. PRESENT: Hon. Orjiakor N. Isiogu, Chairman Hon. Monica Martinez, Commissioner Hon. Steven A. Transeth, Commissioner ORDER APPROVING SETTLEMENT AGREEMENT On February 9, 2007, Midwest Energy Cooperative (Midwest) filed its application in this docket in accordance with the Commission s November 9, 2006 order in Midwest s power supply cost recovery reconciliation proceeding, Case No. U R. The Commission s November 9, 2006 order approved a settlement agreement which included the following: Section II.H of the Code provides as follows: An electric utility and its affiliates or other entities within the corporate structure and an alternative electric supplier and its affiliates or other entities within the corporate structure offering both regulated and unregulated services or products in Michigan shall not engage in joint advertising, marketing, or other promotional activities related to the provision of regulated and unregulated services, nor shall they jointly sell regulated and unregulated services. Within ninety (90) days of the Commission s order adopting this Settlement Agreement, Midwest commits to seek a Commission ruling affirming that its

2 Page 2 U current billing insert practices do not violate the code of conduct or, in the alternative, formally seek a waiver therefrom. (settlement agreement, ( 6, p 6). On February 9, 2007, Midwest filed the application required by the Commission s November 9, 2006 order. Pursuant to due notice, a prehearing conference was held on June 7, 2007, before Administrative Law Judge Sharon L. Feldman. Midwest and the Commission Staff (Staff) participated in the proceedings. The parties entered into a settlement agreement resolving all issues in this case. The settlement agreement (attached as Exhibit A) by its terms, applies to all non-commission regulated activities of Midwest. The parties agree that Midwest should be granted waivers for the following sections of the code of conduct: 1. Corporate Structure. The corporate structure of Midwest and its affiliate, Midwest Energy, Inc. (MEI), through which it offers unregulated services and products, is in compliance with the II.A. clause of the code of conduct. 2. Financing. Financing for MEI s unregulated services and products is through one of three methods: (i) through arrangement by MEI with no guarantee or co-signing by Midwest, (ii) through a National Cooperative Services Corporation (NCSC) Revolving Line of Credit Continuing Guaranty (RLCCG), dated August 1, 1998, or (iii) through a NCSC Term Notes Continuing Guaranty (TNCG), dated November 5, With respect to the RLCCG, for which there is no ceiling, Midwest agrees to cap the guaranty at $5 million. Before exceeding the $5 million cap, Midwest agrees to notify the Staff at the same time it submits a request to NCSC for an increase in the $5 million cap. Unless the Staff files a complaint or a request for an order to show cause within 14 days of the notice of intent to exceed the $5 million cap, Midwest may proceed as proposed in its notice. With respect to the $2,450,000 cap for the TNCG, Midwest agrees that it will not exceed the cap without approval of the Commission.

3 3. Equity Ratio Reporting. In its annual Times Interest Earned Ratio (TIER) filings, Midwest agrees to provide information as to changes in its equity ratio from the prior year along with the reasons for any changes. 4. Separation on Provision of Unregulated Services or Products. Midwest agrees that, on its website and other comparable communications, it will clarify all of the following: (i) that the unregulated services or products are being provided through MEI, (ii) that the services or products are not regulated by the Commission, and (iii) that any use of Midwest s logo by MEI or any other unregulated business entity will be in compliance with II.K. and II.L of the code of conduct. Midwest will also advise Volunteer Energy Services, Inc. (VESI), an alternative natural gas provider, in writing, that VESI does not have permission to use Midwest s logo and advise VESI in writing to remove Midwest s logo from VESI s website. 5. Joint Marketing. MEI is the sole non-regulated subsidiary of Midwest and MEI promotes and markets certain products that are sold to retail customers by other non-regulated businesses. Due to the nature of the products and services offered, the Staff and Midwest agree that a waiver from II.H. of the code of conduct is appropriate with regard to propane services. The parties agree that the costs for promoting products or services by Midwest will be allocated to MEI and a disclaimer will be used identifying them as products and services not regulated by the Commission and Midwest will continue to apply the expense allocation manual (Exhibit B of the settlement agreement), which will be updated to reflect any changes in business and environment. With respect to its relationship with Voluntary Energy Services, Inc., an alternative gas supplier, Midwest agrees that it will not market MEI s natural gas service through bill inserts to its customers. Page 3 U-15206

4 The Commission has reviewed the settlement agreement and the records and files in this docket and finds that the settlement agreement is reasonable and in the public interest. The Commission FINDS that: a. Jurisdiction is pursuant to 1909 PA 106, as amended, MCL et seq.; 1919 PA 419, as amended, MCL et seq.; 1939 PA 3, as amended, MCL et seq.; 1982 PA 304, as amended, MCL 460.6h et seq.; 1969 PA 306, as amended, MCL et seq.; and the Commission s Rules of Practice and Procedure, 1999 AC, R et seq. b. The settlement agreement is reasonable and in the public interest, and should be approved. THEREFORE, IT IS ORDERED that the settlement agreement, attached as Exhibit A, is approved. The Commission reserves jurisdiction and may issue further orders as necessary. Page 4 U-15206

5 Any party desiring to appeal this order must do so in the appropriate court within 30 days after issuance and notice of this order, pursuant to MCL MICHIGAN PUBLIC SERVICE COMMISSION ( S E A L) /s/ Orjiakor N. Isiogu Chairman /s/ Monica Martinez Commissioner By its action of October 9, /s/ Steven A. Transeth Commissioner /s/ Mary Jo Kunkle Its Executive Secretary Page 5 U-15206

6 Any party desiring to appeal this order must do so in the appropriate court within 30 days after issuance and notice of this order, pursuant to MCL MICHIGAN PUBLIC SERVICE COMMISSION Chairman Commissioner By its action of October 9, Commissioner Its Executive Secretary Page 6 U-15206

7 EXHIBIT A STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * * DYKEMA GOSSETT A PROFESSIONAL LIMITED LIABILITY COMPANY CAPITOL VIEW 201 TOWNSEND STREET SUITE 900 LANSING, MICHIGAN In the matter of the application of ) MIDWEST ENERGY COOPERATIVE ) for a waiver from certain provisions of the ) Case No. U code of conduct approved by the Commission ) in Case No. U-12134, if required. ) ) SETTLEMENT AGREEMENT On February 9, 2007, Midwest Energy Cooperative ( Midwest ) filed its application in this docket in accordance with the Michigan Public Service Commission s ( Commission ) November 9, 2006 order in Midwest s power supply cost recovery reconciliation proceeding, Case No. U R ( PSCR recon order ). More specifically, the PSCR recon order approved a settlement agreement which included the following: Section II.H of the Code provides as follows: An electric utility and its affiliates or other entities within the corporate structure and an alternative electric supplier and its affiliates or other entities within the corporate structure offering both regulated and unregulated services or products in Michigan shall not engage in joint advertising, marketing, or other promotional activities related to the provision of regulated and unregulated services, nor shall they jointly sell regulated and unregulated services. Within ninety (90) days of the Commission s order adopting this Settlement Agreement, Midwest commits to seek a Commission ruling affirming that its current billing insert practices do not violate the code of conduct or, in the alternative, formally seek a waiver therefrom. (settlement agreement, ( 6, p 6). LAN01\ ID\AE

8 On February 9, 2007, Midwest filed the application required by the PSCR recon order. On April 19, 2007, the Commission issued its Notice of Hearing commencing the contested case process and establishing a procedural schedule for such proceeding. At the June 7, 2007 prehearing conference, Midwest presented proof of service of the DYKEMA GOSSETT A PROFESSIONAL LIMITED LIABILITY COMPANY CAPITOL VIEW 201 TOWNSEND STREET SUITE 900 LANSING, MICHIGAN Notice of Hearing on all cities, incorporated villages, townships and counties in its service area, and also presented an affidavit evidencing the notice s requisite publication. Only Midwest and the Commission Staff participated in this proceeding. The prehearing conference was conducted as a contested case matter pursuant to the Administrative Procedures Act of 1969, 1969 PA 306, as amended, MCL et seq. In this docket, Midwest prefiled testimony of Robert L. Hance, its President and Chief Executive Officer on August 15, Subsequent to the filing of Mr. Hance s testimony, the parties exchanged information and engaged in discussions resulting in this settlement agreement. In view of the foregoing, and pursuant to Section 78 of the Administrative Procedures Act of 1969, as amended (1969 PA 306, 78; MCL ), Midwest and Staff hereby agree as follows: A. This settlement agreement applies to all non-commission regulated activities of Midwest. In so stating, the parties do not agree as to what constitutes an affiliate under the code of conduct and the parties reserve the right to litigate what constitutes an affiliate under the code of conduct in another docket. B. The Commission Staff and Midwest agree to the following code of conduct determinations or that Midwest should be granted the following code of conduct waivers: LAN01\ ID\AE 2

9 1. II.A. Corporate Structure The corporate structure of Midwest and its affiliate, Midwest Energy, Inc. ( MEI ), is set forth on the organization chart attached to this settlement agreement as Exhibit A. Midwest and Staff agree that Midwest s corporate structure by which it offers the services/products set forth in Mr. Hance s prefiled testimony (e.g., Propane Services, Long Distance Phone Service Referral Program, Dial Up Internet Service Referral DYKEMA GOSSETT A PROFESSIONAL LIMITED LIABILITY COMPANY CAPITOL VIEW 201 TOWNSEND STREET SUITE 900 LANSING, MICHIGAN Program, Natural Gas Service through Volunteer Energy Services, Inc. ( VESI ), and Wild Blue Satellite Internet Service) result in compliance with II.A. of the code of conduct, i.e., the provision of unregulated services or products through one or more affiliates or through other entities with the corporate structure, such as divisions 2. II.F. Financing Financing for MEI s unregulated services or products is through one of three vehicles: (i) financing arranged by MEI with no guarantee or co-signing by Midwest, (ii) through a National Cooperative Services Corporation ( NCSC ) Revolving Line of Credit Continuing Guaranty, dated August 1, 1998 and (iii) through a NCSC Term Notes Continuing Guaranty, dated November 5, The Revolving Line of Credit Continuing Guaranty is a blanket guaranty, i.e., there is no ceiling amount set forth in the guaranty. The Term Notes Continuing Guaranty includes a $2,450,000 ceiling amount. Both the Revolving Line of Credit Continuing Guaranty and the Term Notes Continuing Guaranty require guarantees by Midwest and both the Revolving Line of Credit Continuing Guaranty and the Term Notes Continuing Guaranty pre-date the code of conduct. a. With respect to the Revolving Line of Credit Continuing Guaranty, for which there is no ceiling, Midwest agrees to cap such guaranty at $5 million. Prior to exceeding the $5 million cap set forth in the preceding sentence, Midwest agrees to notify the Commission Staff at the same time it submits a request to NCSC for an increase in the $5 million cap by submitting to the Commission Staff a copy of the documentation submitted to NCSC along with LAN01\ ID\AE 3

10 business reasons supporting same. Unless the Commission Staff files a complaint or request for order to show cause within 14 days of the notice of intent to exceed he $5 million cap, Midwest may proceed with the revised cap exceeding the $5 million cap. b. With respect to the $2,450,000 cap for the Term Notes Continuing Guaranty, Midwest shall not exceed said cap absent a Commission waiver order allowing same. DYKEMA GOSSETT A PROFESSIONAL LIMITED LIABILITY COMPANY CAPITOL VIEW 201 TOWNSEND STREET SUITE 900 LANSING, MICHIGAN Equity Ratio Reporting In its annual Times Interest Earned Ratio ( TIER ) filings, Midwest agrees to provide information as to changes in its equity ratio from the prior year along reasons for such changes. 4. II.K. and II.L. Separation on Provision of Unregulated Services or Products The Commission Staff has expressed concern as to the need to further separate Midwest from the provision of unregulated services or products. By this settlement agreement, Midwest agrees that on its website and other comparable communications, it will clarify (i) that the unregulated services or products are being provided through MEI (ii) that such services or products are not regulated by the Commission. and (iii) that any use of Midwest's logo by MEI or any other unregulated business entity will be in compliance with II.K. and II.L of the code of conduct. Midwest will also advise VESI in writing that VESI does not have permission to use Midwest's logo and advise VESI in writing to remove Midwest's logo from VESI's website 5. II.H. Re Joint Marketing This settlement agreement is based on the following representations of Midwest: (i) that MEI is the sole non-regulated subsidiary of Midwest; (ii) that MEI promotes and markets certain products that are sold to retail customers by other nonregulated businesses, e.g. Long Distance Phone Service Referral Program, Dial Up Internet Service Referral Program and Natural Gas Service through VESI; (iii) that MEI has no ownership interest in these businesses and receives a commission on the referrals and/or sales of the products/services; (iv) that these products/services are periodically promoted in Country LAN01\ ID\AE 4

11 Lines, Midwest bill inserts and Midwest s web site, etc; (v) that costs for all promotions are allocated to MEI and a disclaimer is or will be used identifying them as products/services not regulated by the Commission, and (vi) that Midwest will continue to apply the expense allocation manual (Exhibit B to this Settlement Agreement) which will be updated to reflect any changes in business and changing environment. With respect to VESI, Midwest agrees that it DYKEMA GOSSETT A PROFESSIONAL LIMITED LIABILITY COMPANY CAPITOL VIEW 201 TOWNSEND STREET SUITE 900 LANSING, MICHIGAN will not market VESI services through bill inserts. Except for VESI, the Commission Staff and Midwest agree that such actions either do not violate the code of conduct or merit a waiver from the code of conduct. With respect to Propane Services and Wild Blue Satellite Internet Service, due to the nature of the products and services offered, the Commission Staff and Midwest agree that a waiver from II.H. of the code of conduct is appropriate. C. Section 81 of the Administrative Procedures Act of 1969 is waived. D. If the Commission does not accept this settlement agreement without modification, this settlement agreement shall be withdrawn and shall not constitute any part of the record in the proceeding or be used for any purpose whatsoever. E. Except as otherwise provided in this settlement agreement and except as required to enforce this settlement agreement, this settlement agreement may not be cited as precedent in any Commission or judicial proceeding. Dated: September 7, 2007 MICHIGAN PUBLIC SERVICE COMMISSION STAFF By: Kristin Smith (P46323) Assistant Attorney General 6545 Mercantile Way, Ste. 15 Lansing, MI (517) LAN01\ ID\AE 5

12 DYKEMA GOSSETT A PROFESSIONAL LIMITED LIABILITY COMPANY CAPITOL VIEW 201 TOWNSEND STREET SUITE 900 LANSING, MICHIGAN Dated: September 7, 2007 MIDWEST ENERGY COOPERATIVE By: Albert Ernst (P24095) Shaun M. Johnson (P69036) Joseph J. Baumann (P69261) DYKEMA GOSSETT PLLC 201 Townsend, Suite 900 Lansing, Michigan (517) LAN01\ ID\AE 6

13 Exhibit A Midwest Energy Cooperative Organizational Structure Midwest Energy Cooperative Midwest Energy, Inc. Wholly Owned Subsidiary = Divisions of MWE, Inc. Midwest Propane, LLC Midwest Connections-Telecommunications Midwest Connections-Telecommunications Natuaral Gas Marketing Formed in 1998 Formed in 1999 Formed in 2005 Begun in % Owned Subsidiary Long Distant Telephone Service Wild Blue Satellite Internet Service Re-Marketing of Natural Gas Retail Propane Distribution Dial Up Internet Service Business Venture with Business Venture with Business Venture with Transworld Network, Inc. NRTC Volunteer Energy Services, Inc.

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19 P R O O F O F S E R V I C E STATE OF MICHIGAN ) Case No. U County of Ingham ) E. David Lechler being duly sworn, deposes and says that on October 9 th, 2007, A.D. he served a copy of the attached Commission order by first class mail, postage prepaid, or by inter-departmental mail, to the persons as shown on the attached service list. Subscribed and sworn to before me this 9 th day of October 2007 E. David Lechler William Brandon Notary Public - State of Michigan County of Ingham My Commission Expires January 14, 2013 Acting in the County of Ingham

20 SERVICE LIST FOR DOCKET # U CASE # DATE OF PREPARATION: 10/09/ MR. ROBERT HANCE MS. KRISTIN M. SMITH MIDWEST ENERGY COOPERATIVE ASSISTANT ATTORNEY GENERAL 901 E. STATE ST MERCANTILE WAY, 2ND FLOOR P.O. BOX 127 SUITE 15 CASSOPOLIS MI LANSING MI ID MAIL MR. ALBERT ERNST MS. SHARON L. FELDMAN DYKEMA GOSSETT PLLC PSC-ALJ DIVISION 200 CAPITOL VIEW 6545 MERCANTILE WAY, 2ND FLOOR 201 TOWNSEND ST., STE. 900 LANSING MI LANSING MI ID MAIL

21 SUBSCRIPTION LIST ALL ELECTRIC ORDERS MR. LARRY LEWIS MR. MICHAEL BYRNE GENERAL SERVICES ADMINISTRATION SENATE DEMOCRATIC STAFF 670 MORRISON ROAD, ROOM 209 ROMNEY BUILDING COLUMBUS OH LANSING MI ID MAIL MR. JOHN PESTLE VARNUM, RIDDERING, SCHMIDT & HOWLETT BRIDGEWATER PLACE P.O. BOX 352 GRAND RAPIDS MI