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 ) CONSUMERS ENERGY COMPANY ) for approval of its integrated resource ) Case No. plan pursuant to MCL 460.6t and for ) related accounting and ratemaking relief. ) ) At the October 5, 2018 meeting of the Michigan Public Service Commission in Lansing, Michigan. PRESENT: Hon. Sally A. Talberg, Chairman Hon. Norman J. Saari, Commissioner Hon. Rachael A. Eubanks, Commissioner ORDER History of Proceedings On June 15, 2018, Consumers Energy Company (Consumers) filed an application for approval of an integrated resource plan (IRP) pursuant to Section 6t of 2016 PA 341 (Act 341), MCL 460.6t, along with supporting testimony and exhibits. This is a 300-day proceeding which is currently set to conclude on April 11, MCL 460.6t(7). On July 16, 2018, a prehearing conference was held before Administrative Law Judge Sharon L. Feldman (ALJ), at which intervention was granted to, among others, the Association of Businesses Advocating Tariff Equity (ABATE); Energy Michigan, Inc. (Energy Michigan); the Independent Power Producers Coalition (IPPC); Solar Energy Industries Association, Inc. (SEIA); the Michigan Department of the Attorney General (Attorney General); the Environmental Law &

2 Policy Center (ELPC); the Ecology Center; Vote Solar; and Cadillac Renewable Energy, LLC, Genesee Power Station, LP, Grayling Generating Station, LP, Hillman Power Company, LLC, T.E.S. Filer City Station, LP, Viking Energy of Lincoln, Inc., and Viking Energy of McBain, Inc. (collectively, the biomass merchant plants or BMPs). The Commission Staff (Staff) also participated. On August 15, 2018, ELPC, the Ecology Center, and Vote Solar (collectively referred to for purposes of this order as the Joint Intervenors) filed a motion to strike portions of the testimony of certain Consumers witnesses and two exhibits. On August 29, 2018, Energy Michigan, IPPC, and SEIA filed responses in support of the motion and Consumers, the Staff, and ABATE filed responses in opposition to the motion. On August 30, 2018, the ALJ held a hearing on the motion. On September 10, 2018, the ALJ issued a written ruling granting the motion to strike (ruling). At the conclusion of the ruling the ALJ set an expedited schedule for applications for leave to appeal. See, Mich Admin Code, R (1), (2) (Rule 433). On September 17, 2018, ABATE, the Attorney General, and Consumers filed applications for leave to appeal the ruling on the motion to strike. On September 24, 2018, IPPC, the Joint Intervenors, the Staff, the BMPs, and SEIA filed responses to the applications. The Ruling on the Joint Intervenors Motion The Joint Intervenors moved to strike portions of the testimony of four Consumers witnesses and two related exhibits that support Consumers request for approval of a new avoided cost methodology under the Public Utility Regulatory Policies Act of 1978, 16 USC 2601 et seq., 16 USC 824a-3 (PURPA). Joint Intervenors motion, p. 1, and Attachment 1. The Joint Intervenors also moved to strike testimony from Consumers related to requests to change the size of qualifying facilities (QFs) eligible for the PURPA Standard Offer Tariff (from 2 megawatts (MW) to 150 Page 2

3 kilowatts (kw)), the term length of the Standard Offer Tariff (from 20 years to 5 years), and the length of the PURPA-related capacity planning horizon (from 10 years to 3 years). Id. The Joint Intervenors argued that Case No. U was commenced by the Commission for the purpose of establishing avoided cost rates and methods for Consumers, and is an ongoing proceeding wherein these issues have been (and are being) thoroughly litigated. 1 The Joint Intervenors argued that the utility should not be allowed to relitigate the identical issues in a different docket. The Joint Intervenors noted that MCL 460.6t (incorporating the IRP provisions of Act 341) and MCL 460.6v (incorporating the PURPA-related provisions of Act 341) are different statutes serving different purposes. The Joint Intervenors contended that the PURPA-related testimony is irrelevant to the determinations required to be made in this proceeding under Section 6t, and will confuse the issues and waste the parties time. The Joint Intervenors asserted that the proper forum for these PURPA issues is the biennial review mandated by the Commission in the May 31, 2017 order in Case No. U The ALJ begins by taking note of her authority, as the presiding officer, to regulate the course of this proceeding to ensure a just and expeditious determination of the issues presented, and finds that the exigencies of this case do not permit a comprehensive review of Consumers Energy s avoided cost determinations and associated parameters and tariff. Ruling, pp. 14, 15. See, MCL (1)(d); Mich Admin Code, R (5), R (n), and R (2). The ALJ s decision is grounded in five findings. The ALJ first performs a review and analysis of MCL 460.6t, noting the ambitious and complex nature of the provisions of that statute and the myriad step-by-step determinations that 1 The Commission issued a final order in that proceeding today. See, October 5, 2018 order in Case No. U Page 3

4 must be undertaken by the Commission in an IRP proceeding, all within 300 days. The ALJ notes that nowhere does Section 6t call for a determination of the avoided cost methodology, parameters, or tariff provisions; and that, instead, Section 6v of Act 341, MCL 460.6v, directly addresses the need for avoided cost determinations under PURPA where it requires that, at least every five years, the Commission conduct a contested case to reevaluate the procedures and rates schedules including avoided cost rates... to implement [PURPA], as it relates to qualifying facilities from which utilities in this state have an obligation to purchase energy and capacity. MCL 460.6v(1); MCL 460.6v(6)(a), (d), (e). Noting that applications for certificates of necessity can be consolidated with IRP proceedings (but not with Section 6v proceedings), that the IRP determinations are subject to expedited appellate review (but Section 6v proceedings are not), and the simple fact that Section 6t, despite its broad scope, makes no mention of avoided cost methods or other PURPA-related issues, the ALJ concludes that Section 6t does not require such determinations. Second, the ALJ finds that the Commission has not expressly directed that the avoided cost method, or other parameters, and tariff provisions be determined in this IRP case; and, in fact, there is another ongoing case in which those issues constitute the primary subject matter, Case No. U Ruling, p. 25. The ALJ points out that the Commission has issued a series of orders in that proceeding specifying an avoided cost method, as well as costs and other parameters, applicable to the utility s obligation to purchase capacity and energy from QFs. See, May 31, 2017 (May 31 order), July 31, 2017, November 21, 2017 (November 21 order), December 20, 2017, February 22, 2018, and October 5, 2018 orders in Case No. U The ALJ notes that the Commission has denied Consumers motion to stay its obligation to make such purchases, and that the Commission opened Case No. U for other PURPA-related inquiries. In the Page 4

5 November 21 order, p. 33, the Commission opined that PURPA avoided costs should be integrated with capacity demonstration and IRP proceedings in order to more accurately assess capacity needs. The IRP proceedings are conducive to updating avoided costs, because the Commission will already be evaluating, in detail, utility-specific plans for any incremental generation or purchases along with associated costs. The ALJ finds that this language is directed to a future time period, consistent with the ongoing exploration of issues in the Case No. U docket. The ALJ notes that updating capacity need is very different from relitigating most of the determinations that have been made to date in Case No. U-18090, and she finds no direct authorization for the utility to propose new avoided costs and other parameters in the IRP proceeding in either Case No. U or U-18090, noting that the Commission has explicitly stated that the next avoided cost review should come in the biennial PURPA review. Ruling, p. 31. Third, the ALJ finds that it is not feasible to consider the wholesale revision of the PURPA avoided cost method and related determinations in this case in the absence of an explicit requirement to do so. The ALJ notes that this IRP proceeding is a case of first impression requiring innumerable determinations within a 300-day timeframe; and Case No. U is an ongoing PURPA proceeding that is more than 860 days old, with over 800 pages of transcript, 700 pages of briefing, and 150 pages of orders. In the instant case, the ALJ points out, there are 23 parties currently participating, and the schedule allows only 38 days for the preparation of a Proposal for Decision and 31 days for the preparation of a final order. She notes that Case No. U has no accompanying statutory deadline. The ALJ points out that the application in the instant proceeding is 1,500 pages. She further notes that to fully address the PURPA-related issues included in the disputed testimony will require determinations about whether to institute Page 5

6 competitive bidding by QFs, energy waste reduction issues, demand response issues, and conservation voltage reduction issues. The ALJ finds that the burden of addressing the additional complexity that comes with these PURPA issues justifies excluding them. Fourth, the ALJ notes that in this proceeding Consumers raises arguments identical to arguments already raised and addressed in Case No. U-18090, where Consumers has had every opportunity to seek rehearing or reopening, and has participated in numerous remands. The ALJ rejects the notion of addressing the same issues in multiple forums at the same time, analogizing it to the pancaking of rate cases. Finally, the ALJ finds that Consumers made a decision to attempt to force these issues into the IRP proceeding by failing to provide a plan option that is based on the status quo that is, based on the orders to date in Case No. U The ALJ finds that the utility should be allowed to outline its plans, in the instant case, for seeking new avoided cost rates and methods in the future in Case No. U or through any other review, and to show how this will affect its IRP. Ruling, p. 38. In conclusion, the ALJ granted the motion to strike. She further granted Consumers one week to file revised testimony addressing the utility s preferred avoided cost scenarios for the future without seeking specific relief in this case, and set expedited dates for interlocutory appeals. Consumers did not file revised testimony. Applications for Leave to Appeal and Responses The Attorney General argues that the Commission should grant leave under Rule 433(2) and reverse the ruling because avoided cost determinations are relevant to the IRP. The Attorney General contends that the ALJ has misinterpreted the Commission s prior orders, in particular the November 21 order, p. 33, where the Commission states that the IRP proceeding is conducive to Page 6

7 updating avoided costs. The Attorney General posits that the Commission is acknowledging that the regulatory landscape has changed since commencement of Case No. U-18090, and has changed with the enactment of Act 341 (which did not exist when Case No. U was opened). The Attorney General contends that the February 22, 2018 order in Case No. U-20095, p. 5, also constitutes such an acknowledgment, because in that order the Commission explicitly sought comment on the role of avoided costs in IRP proceedings. The Attorney General argues that it is not uncommon for issues to be considered in more than one proceeding, and that the ruling deprives the Commission of the ability to consider relevant evidence on avoided costs in the instant case. ABATE argues that the Commission should grant leave under Rule 433(2) and reverse the ruling because the ALJ took an overly restrictive view of Section 6t. ABATE refers to the IRP stakeholder proceedings that took place in Case Nos. U and U-18461, and states that avoided costs and PURPA were addressed throughout the course of those proceedings in comments, workgroups, and stakeholder forums. ABATE contends that the motion to strike essentially serves as a motion to dismiss relevant issues from this case. ABATE further notes that Section 6t(1)(f) allows utilities to include scenarios and assumptions in their IRP filings, and that the Commission has indicated that it favors flexibility for utilities with respect to risk analysis. December 20, 2017 order in Case No. U-18461, p. 13. ABATE posits that allowing the Commission to explore all viable options increases its ability to find the most reasonable and prudent means of meeting energy and capacity needs. ABATE argues that ratepayers stand to benefit from Consumers avoided cost proposals in this case. Consumers also argues that the Commission should grant leave under Rule 433(2) and reverse the ruling because the PURPA-related testimony struck by the ALJ is highly relevant to this IRP Page 7

8 proceeding. Consumers notes that its proposed course of action (PCA) for the IRP addresses meeting energy and capacity needs through 2040, and argues that the PCA proposes a dramatic change to the utility s planning because it relies predominantly on the addition of modular solar generation resources for all future capacity needs, with the price being set through the use of competitive bidding. Consumers application, p. 1. Thus, Consumers argues, the concepts proposed in the PCA for a revised avoided cost method, a bidding process, a three-year capacity planning forecast period, and a new QF contract term length are necessary to the utility s ability to show that its proposed IRP is the most reasonable and prudent plan under MCL 460.6t(8). Consumers notes that in Case No. U the Commission approved an avoided cost calculation method that relies on capacity payments based on a natural gas combustion turbine unit as a proxy (or forecasted locational marginal prices), and energy payments based on a natural gas combined cycle unit as a proxy. Consumers contends that these no longer make sense from a cost standpoint and that the utility will be relying on demand side and solar resources for new generation. Consumers notes that its IRP necessarily includes 55 PURPA and non-purpa power purchase agreements (PPAs) currently in place, as well as calculations related to the obligation to purchase capacity and energy from QFs in the future. The utility argues that the avoided cost and forecasting methods approved in Case No. U do not provide a reasonable and prudent means of capacity planning, and thus Consumers made different proposals in the instant case. Consumers maintains that the PCA shows that a natural gas plant is not the next generating unit that the utility would bring online, that actual avoided costs are lower than the approved avoided costs, and that the approved 20-year QF contract length and 2 MW QF size limit will burden ratepayers with unnecessary costs. Page 8

9 Consumers states that between May 31, 2017, and May 31, 2018, the utility received 398 interconnection requests for 1.8 gigawatts (GW) of generation, ranging in size from 0.15 MW to 20 MW; and proposals for 260 PURPA-based PPA projects with a total nameplate capacity of 1.2 GW. Consumers application, p. 12. Consumers contends that the currently-approved avoided costs could result in overpayments by customers over a 20-year term, for capacity for which there is no need. Consumers also asserts that if the capacity lost as a result of the retirement of Karn Units 1 and 2 is backfilled with QF capacity at the approved avoided cost, then Karn Units 1 and 2 should not be retired and the utility would withdraw the retirement proposal. Consumers states that it is using the PCA to propose improvements to the currently-approved PURPA construct. Consumers argues that these proposals are consistent with MCL 460.6t, and that its PCA cannot be implemented using a 10-year capacity forecast period because incremental need cannot be filled. Consumers contends that the struck evidence is relevant and admissible under MRE 401 and 403, and notes that the Commission has liberal standards of admissibility. See, Mich Admin Code, R Consumers points out that MCL 460.6t(3), (5), and (8) require: (i) a 5-year, 10-year, and 15-year projection of the utility s load obligations and a plan to meet those obligations ; (ii) an analysis of the cost, capacity factor, and viability of all reasonable options available to meet projected energy and capacity needs ; (iii) data regarding the utility s current generation portfolio ; (iv) plans for meeting current and future capacity needs with cost estimates for all proposed construction and major investments ; and (v) a determination of the most reasonable and prudent means of meeting the energy and capacity needs, which includes consideration of resource adequacy and capacity and competitive pricing. Consumers application, pp Consumers observes that PURPA-based PPAs impact all of these categories of information, and states that it is simply not possible to consider the Company s plans to meet customer energy and capacity needs for the next 5, 10, and 15 years without considering the Company s current and potential future PURPA energy and capacity obligations. Id., pp Consumers argues that nothing in Section 6t prohibits consideration Page 9

10 of PURPA-based issues, and nothing in Section 6v precludes the Commission s ability to consider those issues in an IRP proceeding. Consumers posits that the evidence should not be struck pursuant to MRE 403, because both the ALJ and the Commission are well equipped to analyze these issues without becoming confused or wasting time. Consumers notes that, in the November 21 order, p. 33, the Commission stated Going forward, the Commission believes that PURPA avoided costs should be integrated with capacity demonstration and IRP proceedings in order to more accurately assess capacity needs. The IRP proceedings are conducive to updating avoided costs, because the Commission will already be evaluating, in detail, utility-specific plans for any incremental generation or purchases along with their associated costs; and that in the February 22, 2018 order in Case No. U-20095, p. 5, the Commission observed that an IRP may be the proper proceeding to evaluate avoided costs based on an actual plan. Consumers contends that these orders reveal the Commission s intent to review PURPA-related capacity issues in the IRP proceeding. Consumers argues that the fact that the Commission supports a biennial cost review does not mean that the evidence in this proceeding must be limited and posits that the Commission made this decision prior to being able to consider the full impact of Section 6t. See, May 31 order, pp Finally, Consumers asserts that its plan will be incomplete and can never be executed in the absence of the struck testimony because the currently-approved capacity construct requires the utility to purchase all capacity from QFs 10 years prior to any actual need. For that reason, Consumers does not offer revised testimony. Consumers avers that it is not attempting to relitigate Case No. U-18090, and that the PCA presents facts and plans never contemplated in previous Commission orders. Consumers points out that current and future generation necessarily includes QF generation, and the utility urges the Commission to allow it to take advantage of declining Page 10

11 costs for solar generation through the use of competitive bidding. 2 Consumers maintains that its avoided cost and competitive bidding proposals are directly related to the plan to add solar generation and to retire Karn Units 1 and 2, and the PCA cannot meet the reasonable and prudent standard of Section 6t(8) without the evidence on these issues, necessitating that the utility withdraw and refile its IRP application. In their response to the applications, the BMPs urge the Commission to reject relitigation of any of the issues heard in Case No. U-18090, at least with respect to any party to that case. The BMPs state: In the May 31, 2017 Order, the Commission ordered that existing QFs with expiring contracts should have their contract renewed at the full avoided cost rate, whether or not the company forecasts a capacity shortfall over the planning horizon. The Commission ordered Consumers to renew the foregoing contracts because it found that the capacity and energy supplied by these QFs is already taken into account in the company s determinations about future capacity additions. The Commission thus ordered Consumers to renew the expiring QF contracts, plus provide an additional 150 MW of new generation capacity. In Case No. U-18231, Consumers stated that it must, and will, renew the foregoing contracts. Inexplicably, Consumers now claims that expiring contracts are limited to existing QFs with PURPA-based PPAs that expire prior to the conclusion of this IRP. With that characterization, Consumers attempts to re-write the Commission s orders in Case No. U18090 in a manner that is plainly inconsistent with the Commission s Orders. BMPs response, pp. 3-4 (citations and emphasis omitted). Thus, the BMPs argue that Consumers is attempting to limit the group of contracts to which the holdings in Case No. U apply by referring to their expiration date. The BMPs further state: 2 Consumers notes that in proposing its PCA, the Company is not seeking to challenge the avoided cost rate structure established in Case No. U as it applies to: (i) existing QFs with PURPA-based PPAs that expire prior to the conclusion of this IRP; (ii) the 150 MW that the Commission has required to be purchased from certain QFs at the full avoided cost rate; and (iii) any QF at or below 20 MW that wishes to accept compensation for capacity at the MISO [Midcontinent Independent System Operator, Inc.] PRA [planning resource auction] rate. The Commission s orders in Case No. U have made clear that the facilities that fall into these three categories should receive compensation based on the Case No. U avoided cost rates. Consumers application, pp Page 11

12 Consumers also contradicts the Commission s Order in Case No. U in that Consumers claims that its obligation to renew QF contracts is limited to PURPA-based PPAs and does not apply to expired or expiring QF contracts that were entered into pursuant to a solicitation for renewable energy. This outrageous notion flaunts federal law. QFs are QFs. Id., p. 4. The BMPs claim that all parties covered by the orders in Case No. U are both QFs and renewable energy facilities, and that Consumers is obligated under PURPA to make all purchases offered by a QF providing renewable power. The BMPs take no position as to what future changes might be appropriate for entities who were not a party to MPSC Case No. U or are otherwise covered by the Commission s Orders in that proceeding. Id. p. 6. In its response to the applications, IPPC argues that the applicants seek to overturn the decisions in Case No. U IPPC contends that when the Commission opined that IRP proceedings are conducive to updating avoided costs, what it meant was updating cost inputs, not cost methods. If the Commission chooses to relitigate Case No. U in this proceeding, according to IPPC, then the Commission should relitigate all of the issues in that case including the application of zonal resource credits to QFs. IPPC contends that the instant proceeding is a confusing collateral attack on Case No. U and that the struck evidence violates MRE 403. IPPC asserts that, if the ruling is reversed, then it must have wasted its time in the summer of 2018 working on a consensus agreement regarding the tariff in Case No. U IPPC argues that the ALJ is correct to object to the all-or-nothing approach that Consumers is taking in this case. IPPC contends that IRP and PURPA proceedings should be separate and distinct, according to the Legislature s construct. IPPC notes the same issue that is highlighted by the BMPs regarding Consumers reference to PPAs that expire prior to the conclusion of the IRP, in apparent 3 The consensus agreement is adopted by the Commission today in an order issued in Case No. U Page 12

13 contravention of the May 31 order, p. 18, and argues that the Commission was referring to both expired and expiring contracts as subject to assurance of the full avoided cost rate. In its response, SEIA also asserts that this is a relitigation of decided issues which are extraneous to this IRP matter. SEIA argues that the avoided cost method, size of eligible QFs, contract term length, and length of the planning horizon are outside the scope of Section 6t. SEIA contends that the Commission s observation in the November 21 order about the relationship between avoided costs and IRP proceedings was not meant to be an authorization to relitigate Case No. U-18090, and that not every issue which may affect demand or production costs can be decided in an IRP case. SEIA avers that PURPA issues are not integrally related to the IRP, stating: The most important connection between Consumers IRP and PURPA concerns Consumers obligation to pay QFs for avoided capacity. Consumers understandably does not want to create a capacity need as a result of a plan for early retirement of existing facilities, accompanied by a plan for meeting that need through competitive procurement, and then have QFs claim that they have the right to displace Consumers competitive procurement with a PURPA must-purchase obligation to procure that capacity. The Commission can easily preclude this outcome in the way that it structures its order approving the IRP. SEIA s response, p. 10 (note omitted). SEIA notes that the Joint Intervenors did not seek to strike Consumers proposal to use competitive bidding to procure capacity. SEIA posits that using such bidding for the setting of avoided costs is fraught with legal issues, and that the bidding proposal can be heard without involving PURPA proposals which are unlikely to be adopted in any case. Id. While calling Consumers IRP bold and substantial, SEIA argues that all of the regulatory approvals that would be needed cannot be provided in this 300-day case and changes can be sought in the next biennial review. SEIA requests that, if the applicants requested relief is granted, the Commission adjust the case schedule to provide additional time to address the PURPA issues covered by the struck testimony. Page 13

14 In their response, the Joint Intervenors describe aspects of the PCA as commendable and offering health benefits to the people of Michigan, but assert that certain PURPA issues are not relevant, stating Joint Intervenors do not dispute that certain PURPA issues may be properly raised in the Company s IRP, such as: determining the Company s capacity need over the next 10 years, updating the proxy plant based on resources forecasted to meet those needs, updating avoided cost inputs, and forecasting the role of PURPA QFs in meeting capacity needs. Joint Intervenors response, p. 1. The Joint Intervenors go on to state that updating avoided cost data and inputs to refresh the avoided cost rate is a natural process for this expedited IRP case, but that the avoided cost method and the tariff are not relevant and belong in the so-called 2019 Biennial PURPA Review, which should begin at the conclusion of this proceeding. Id., p. 2. The Joint Intervenors argue, as they did in their motion to strike, that the disputed evidence is outside the scope of a Section 6t proceeding and does not appear in the plain language of the statute. 4 The Joint Intervenors contend that, if the ruling is reversed, it is hard to see that any issue could be outside the scope of Section 6t, and that Consumers may not rely on a single excerpt from a Commission order as justification for inserting these issues. The Joint Intervenors assert that the Commission was only referring to avoided cost inputs in the November 21 order, p. 33. The Joint 4 The Joint Intervenors argue that the Commission is required to review the ALJ s decision pursuant to a standard of review adopted in the October 30, 1984 order in Case No. U-7660, pp That decision applied the abuse-of-discretion standard of review to an ALJ s decision, and adopted a particular definition of abuse of discretion with an exceedingly high standard ( so palpably and grossly violative of fact and logic that it evidences perversity of will ). The Commission is not persuaded that that standard of review applies to the instant proceeding. The 1984 case (and a 2012 case referred to by the Joint Intervenors) involved a judge s determination to strike rebuttal evidence that was not true rebuttal. This is not the type of evidence at issue in this case of first impression. Additionally, the Commission does not find that the abuse of discretion standard applies herein. Rather, the Commission applies the standard of review that it has articulated many times with respect to Rule 433 (known as Rule 337 prior to 2015) of finding that a different result is more appropriate. See, pp , infra. Page 14

15 Intervenors offer a description of issues that are appropriate for inclusion in this proceeding, stating that it would be wholly appropriate for the Company to propose an update to the proxy plant used to determine avoided cost; to determine the Company s capacity need over the next 10 years; to use [updated] information in an approved IRP to update avoided cost calculations; and to make reasonable assumptions regarding avoided costs as part of its modeling runs. Id., p. 8. The Joint Intervenors argue that Consumers has failed to show that its PCA cannot be approved in the absence of this evidence, because nothing in the struck testimony addresses the proposal to retire the Karn Units or the proposal to use competitive bidding for capacity procurement. The Joint Intervenors urge the Commission to see that the competitive bidding and avoided cost rate proposals are separate. The Joint Intervenors assert that, in particular, Consumers failed to show that the three proposals related to the size of eligible QFs, the contract term, and the planning horizon are necessary to implementation of the PCA. The Joint Intervenors contend that the exclusion of these three proposals will not prevent Consumers from replacing the retired capacity with competitively-bid solar power. The Staff responds to support the applications for leave to appeal and the requested relief, arguing that these PURPA-related issues are relevant to a Section 6t proceeding, and inclusion of the issues is consistent with the Commission s November 21 order, p. 33. The Staff argues that rapid changes to the energy landscape support revisiting avoided costs in this matter, stating that the Commission may review the testimony filed by Consumers witnesses in this case to decide if the facts have changed significantly to warrant updates to any of its PURPA decisions to date or not. Staff s response, p. 5. The Staff contends that the Commission should not be hampered in making such decisions. Page 15

16 The Staff argues that the avoided cost methodology adopted in Case No. U is out of date and requires revision. The Staff notes that the Commission has approved biennial reviews, and that Case No. U is already more than two years old (though the Commission has not indicated what constitutes the start date for counting the two years). The Staff maintains that Consumers was instructed in the November 21 order to include these issues in its IRP filing. The Staff contends that PURPA resources are an integral part of capacity resource planning, and that the competitive bidding proposal is integral to the avoided cost calculation. The Staff contends that if these issues are struck from this case, Consumers will be unable to consider all potential resources for planning and unable to implement the PCA as proposed. The Staff urges the Commission not to unnecessarily complicate this matter by striking these issues, and argues that, if the ruling stands, then there will be no evidence in this case showing that there is a benefit to retiring the Karn Units. Finally, if the Commission affirms the ruling, the Staff requests that Case No. U be reopened to update avoided costs or that Consumers be directed to file a new avoided cost case, and that either proceeding be conducted simultaneously with this proceeding, or that the two proceedings be consolidated to achieve administrative efficiency. Discussion Rule 433(2) establishes the standards for reviewing applications for leave to appeal. Not every application merits immediate review. An appellant must establish one of the following conditions before the Commission will grant review: (a) A decision on the ruling before submission of the full case to the Commission for final decision will materially advance a timely resolution of the proceeding. Page 16

17 (b) A decision on the ruling before submission of the full case to the Commission for final decision will prevent substantial harm to the appellant or the public-at-large. (c) A decision on the ruling before submission of the full case to the Commission for final decision is consistent with other criteria that the Commission may establish by order. Rule 433(2)(a)-(c). If the Commission grants review, it will reverse an ALJ s determination if the Commission finds that a different result is more appropriate. November 10, 2011 order in Case No. U-16230, pp The Commission finds that the applications for leave to appeal should be granted because a decision on the ALJ s ruling before the submission of the full IRP case to the Commission will advance the timely resolution of this proceeding and will prevent substantial harm to the appellants and other parties. Rule 433(2)(a), (b). The ALJ s analysis is clear, thorough, and supremely logical, and each point that she makes is a valid one. However, due to the fact that this is not just a case of first impression, but a case of first impression arriving at a unique time and under unique circumstances, the Commission finds that it must disagree with the ruling. The Commission cannot simply ignore the changes wrought by the passage of time, even though these changes result in making a complex endeavor even more complex for all parties involved. The Commission is hopeful that not every IRP case will require the degree of consideration of PURPA issues that this case requires. But the Commission finds that Section 6t requires a comprehensive, holistic examination of resource planning and costs, and that examination cannot exclude PURPA. Like the Legislature, the Commission also believes that a holistic approach to planning and cost review produces the best result for ratepayers. See, e.g., December 20, 2016 and January 20, 2017 orders in Case No. U Page 17

18 As stated, the Commission previously opined that PURPA avoided costs should be integrated with capacity demonstration and IRP proceedings in order to more accurately assess capacity needs. The IRP proceedings are conducive to updating avoided costs, because the Commission will already be evaluating, in detail, utility-specific plans for any incremental generation or purchases along with associated costs. November 21 order, p. 33. The Commission did not, in fact, intend for this finding to apply to a future time period, as opined by the ALJ, but rather to any IRP proceeding, including this first proceeding conducted under the new legislation. The Commission is more than sympathetic to the ALJ s analysis regarding the feasibility of conducting the required IRP proceeding, including the consideration of PURPA avoided costs and the other determinations that go with finalizing the prices and terms that are available to QFs, in 300 days. Act 341 was replete with ambitious deadlines that required substantial effort from the parties, the administrative law judges, the Staff, and the Commission. The 300-day limit for IRP proceedings is another such deadline. However, and with full knowledge of the associated difficulty, the Commission finds that it cannot sanction the narrowing of the evidence that should properly be before it when making the required determination that Consumers IRP represents the most reasonable and prudent means of meeting the electric utility s energy and capacity needs. MCL 460.6t(8)(a). Section 6t(3) required Consumers to file an integrated resource plan that provides a 5-year, 10-year, and 15-year projection of the utility s load obligations and a plan to meet those obligations. And, among many other things, Section 6t(5) required Consumers to provide the following: (a) A long-term forecast of the electric utility s sales and peak demand under various reasonable scenarios. Page 18

19 (b) The type of generation technology proposed for a generation facility contained in the plan and the proposed capacity of the generation facility, including projected fuel costs under various reasonable scenarios. (c) Projected energy purchased or produced by the electric utility from a renewable energy resource.... (i) Data regarding the utility s current generation portfolio, including the age, capacity factor, licensing status, and remaining estimated time of operation for each facility in the portfolio. (j) Plans for meeting current and future capacity needs with the cost estimates for all proposed construction and major investments, including any transmission or distribution infrastructure that would be required to support the proposed construction or investment, and power purchase agreements. (k) An analysis of the cost, capacity factor, and viability of all reasonable options available to meet projected energy and capacity needs, including, but not limited to, existing electric generation facilities in this state. In order to approve an IRP, Section 6t(8) requires that the Commission find: (a) The proposed integrated resource plan represents the most reasonable and prudent means of meeting the electric utility s energy and capacity needs. To determine whether the integrated resource plan is the most reasonable and prudent means of meeting energy and capacity needs, the commission shall consider whether the plan appropriately balances all of the following factors: (i) Resource adequacy and capacity to serve anticipated peak electric load, applicable planning reserve margin, and local clearing requirement.... (iii) Competitive pricing. (iv) Reliability.... (vi) Diversity of generation supply. (vii) Whether the proposed levels of peak load reduction and energy waste reduction are reasonable and cost effective. The Commission finds that PURPA issues are integral to each of these categories of required information and each of the listed findings under Section 6t(3), (5), and (8), even without taking note of the fact that administrative agencies are not required to follow the rules of evidence but rather may admit and give probative affect to evidence of a type commonly relied upon by reasonably prudent persons in the conduct of their affairs. Mich Admin Code, R (1); MCL In light of the plain language of Section 6t, the Commission finds that the disputed evidence is neither irrelevant under MRE 401, nor likely to result in prejudice, confusion, or a waste of time under MRE 403. Page 19

20 The ALJ s point regarding the seeming undue length of the Case No. U proceeding and the number of orders issued therein is a good one and goes precisely to why the Commission welcomes the holistic review that is required for the IRP to be evaluated. While it might be possible to review these PURPA issues in either a remanded U proceeding or in an expedited biennial review, the Commission finds that it would be necessary to ensure that such a separate proceeding was on an identical track with the instant one with respect to time, so that the orders for both could issue on the same day. This would require a degree of administrative inefficiency that the Commission finds to be even more detrimental to the process than a single proceeding. In reality, such a separate proceeding would likely need to be consolidated with this one, thus leading to the same end point but entailing the administration of an additional docket and all that goes with an additional contested case. When the Commission commenced Case No. U-18090, Act 341 did not exist and PURPA avoided costs had not been reviewed for decades. Now, two-and-a-half years later, the Commission is confronted for the first time with a proposal by a large utility to procure all of its capacity needs until 2040 through competitive bidding, with a focus on solar. This is unprecedented. It is highly likely that some of this solar power will be provided by QFs. Even the Joint Intervenors concede that the proxy plant requires updating. Joint Intervenors response, p. 1. The Commission does not find any unambiguous language in Sections 6t or 6v that prohibits the Commission from considering the avoided cost, the planning horizon, the size of qualifying QFs, or the contract term in the course of determining whether the proffered IRP is the most reasonable and prudent means of meeting energy and capacity needs. To the contrary, the Commission finds that the comprehensive nature of Section 6t authorizes the Commission to include these Page 20

21 considerations. 5 And while the 300-day time limit is enormously challenging, the Commission must concede that, in today s evolving energy environment, prolonged proceedings are in danger of becoming outdated before they are final. Both Section 6t(20) and Section 6v(1) require a review at least every five years. The Commission does not find that these reviews are incompatible or must necessarily be done separately, despite the fact that the Legislature did not statutorily mandate consolidation of the two proceedings. Given the current energy landscape, five years is a very long time, and the Commission does not find the insertion of PURPA issues into an IRP proceeding to be a relitigation of a utility s avoided cost proceeding in light of the Legislature s explicit description of the comprehensive categories of evidence that are required from an IRP applicant. Even if issues decided over the course of Case No. U are re-examined in the instant IRP proceeding, the Commission finds such analysis is warranted given the significant cost implications for ratepayers and lasting impacts on resource planning and procurement. As Consumers has presented its unique PCA in the IRP, the PURPA-based issues and the Section 6t review are inextricably linked. THEREFORE, IT IS ORDERED that the applications filed by the Michigan Department of the Attorney General, the Association of Businesses Advocating Tariff Equity, and Consumers Energy Company for leave to appeal Administrative Law Judge Sharon L. Feldman s September 10, 2018 ruling on a motion to strike are granted and the requested relief is granted. 5 The IRP Parameters adopted in the November 21, 2017 order in Case No. U-18418, Exhibit A, are based on input from various workgroups, including the IRP Renewables and PURPA Workgroup. Page 21

22 The Commission reserves jurisdiction and may issue further orders as necessary. Any party desiring to appeal this order must do so by the filing of a claim of appeal in the appropriate court within 30 days of the issuance of this order, under MCL To comply with the Michigan Rules of Court s requirement to notify the Commission of an appeal, appellants shall send required notices to both the Commission s Executive Secretary and to the Commission s Legal Counsel. Electronic notifications should be sent to the Executive Secretary at mpscedockets@michigan.gov and to the Michigan Department of the Attorney General - Public Service Division at pungp1@michigan.gov. In lieu of electronic submissions, paper copies of such notifications may be sent to the Executive Secretary and the Attorney General - Public Service Division at 7109 W. Saginaw Hwy., Lansing, MI MICHIGAN PUBLIC SERVICE COMMISSION Sally A. Talberg, Chairman Norman J. Saari, Commissioner By its action of October 5, Rachael A. Eubanks, Commissioner Kavita Kale, Executive Secretary Page 22

23 P R O O F O F S E R V I C E STATE OF MICHIGAN ) Case No. County of Ingham ) Lisa Felice being duly sworn, deposes and says that on October 5, 2018 A.D. she electronically notified the attached list of this Commission Order via transmission, to the persons as shown on the attached service list (Listserv Distribution List). Subscribed and sworn to before me this 5th day of October 2018 Lisa Felice Angela P. Sanderson Notary Public, Shiawassee County, Michigan As acting in Eaton County My Commission Expires: May 21, 2024

24 Service List for Case: Name Amit T. Singh Anita Fox Anne Uitvlugt Brandon C. Hubbard Bret A. Totoraitis Brian W. Coyer Bryan A. Brandenburg Celeste R. Gill Christopher M. Bzdok Consumers Energy Company 1 of 2 Consumers Energy Company 2 of 2 Courtney F. Kissel Daniel Sonneveldt Don L. Keskey Gary A. Gensch Jr. Heather M.S. Durian Jason T. Hanselman Jennifer U. Heston John A. Janiszewski Justin Ooms Laura A. Chappelle Lydia Barbash-Riley Margrethe Kearney Michael C. Rampe Michael C. Soules Michael J. Pattwell Nolan J. Moody Richard J. Aaron Robert W. Beach Sharon Feldman Spencer A. Sattler Theresa A.G. Staley Thomas J. Waters Timothy J. Lundgren Toni L. Newell Toni L. Newell Address singha9@michigan.gov afox@fraserlawfirm.com anne.uitvlugt@cmsenergy.com bhubbard@dickinsonwright.com bret.totoraitis@cmsenergy.com bwcoyer@publiclawresourcecenter.com bbrandenburg@clarkhill.com gillc1@michigan.gov chris@envlaw.com mpsc.filings@cmsenergy.com matorrey@cmsenergy.com ckissel@dykema.com sonneveldtd@michigan.gov donkeskey@publiclawresourcecenter.com gary.genschjr@cmsenergy.com durianh@michigan.gov jhanselman@dykema.com jheston@fraserlawfirm.com jjaniszewski@dykema.com jkooms@varnumlaw.com lachappelle@varnumlaw.com lydia@envlaw.com mkearney@elpc.org michael.rampe@cmsenergy.com msoules@earthjustice.org mpattwell@clarkhill.com nmoody@dickinson-wright.com raaron@dykema.com robert.beach@cmsenergy.com feldmans@michigan.gov sattlers@michigan.gov theresa.staley@cmsenergy.com twaters@fraserlawfirm.com tjlundgren@varnumlaw.com tlnewell@varnumlaw.com tlnewell@varnumlaw.com