OLSON, BZDOK & HOWARD

Transcription

1 LAW OFFICES OF OLSON, BZDOK & HOWARD A Professional Corporation James M. Olson * Christopher M. Bzdok Scott W. Howard Jeffrey L. Jocks Michael C. Grant William Rastetter, Of Counsel N Michael H. Dettmer, Of Counsel 420 East Front Street Traverse City, MI Telephone: (231) Facsimile: (231) April 9, 2009 * Admitted in Colorado N Admitted in Indiana Ms. Mary Jo. Kunkle Michigan Public Service Commission 6545 Mercantile Way P. O. Box Lansing, MI RE: o. MPSC Case N U-15805/U (consolidated) Dear Ms. Kunkle: The following is attached for paperless electronic filing: Motion to Strike Portions of Mark T. Devereaux s Rebuttal Testimony and Exhibit A-46 (MTD-2) Electronic Service List Sincerely, Christopher M. Bzdok chris@envlaw.com /ral xc: Rebecca Stanfield, NRDC (rstanfield@nrdc.org) James Clift, MEC (james@environmentalcouncil.org)

2 STATE OF MICHIGAN MICHIGAN PUBLIC SERVICE COMMISSION In the matter, on the Commission s own motion, regarding the regulatory reviews, revisions, determinations, and/or approvals necessary for CONSUMERS ENERGY COMPANY to fully comply with Public Acts 286 and 295 of o. Case N U-15805; U (Consolidated) MOTION TO STRIKE PORTIONS OF MARK T. DEVEREAUX S REBUTTAL TESTIMONY AND EXHIBIT A-46 (MTD-2) Introduction The Michigan Environmental Council, Natural Resources Defense Council, Ecology Center, and Environmental Law and Policy Center move to strike: (a) the portions of Consumers witness Mark Devereaux s rebuttal testimony that characterize and then rely on Consumers January 2005 RFP for renewable energy; and (b) Exhibit A-46 (MTD-2) and the portions of Mr. Devereaux s testimony that rely on that exhibit. The bases for this motion are MRE 703, lack of foundation, hearsay, and completeness. Testimony about the January 2005 RFP Several witnesses for intervening parties filed direct testimony in this case about the flaws in Consumers plan to acquire renewable resource capacity and renewable energy credits. These witnesses include MEC witness Richard Polich, NRDC witness Pamela Lesh, and witnesses Dolan and Meal for the Michigan Wholesale Power Association. In attempting to rebut this testimony, Consumers witness Mark Devereaux repeatedly relies on and characterizes a January 2005 Request for Proposals issued by

3 Consumers for renewable energy, and the resulting bids and contracts. The gist of these portions of Mr. Devereaux s testimony are that the January 2005 RFP is identical in relevant respects to the RFPs Consumers is using as part of its current Renewable Energy plan; that the January 2005 RFP was highly successful, and; that the resulting bids and contracts were free of the problems that witnesses for the intervening parties predict will result from defects in the RFP process in Consumers current plan. Distilled to its essence, Mr. Devereaux s testimony is that the January 2005 RFP process proves that the current RFP process will be successful, and rebuts the testimony of experts from the intervening parties who believe that it won t be successful: The Company conducted an RFP for renewable energy as recently as 2005 for which there was no difficulty with bidder participation, contract execution or bidders obtaining project financing. Q. Please describe the 2005 RFP. A. The Company issued a request for proposals on March 11, 2005 for up to 265,000 MWh of renewable energy for contract terms of up to 20 years ("2005 RFP ). This RFP contained many of the same elements that Mr. Dolan and other witnesses now claim will discourage bidder participation, and increase bid pricing. Q. Please describe some of these elements. A. First, the 2005 RFP contained the following language: "Consumers also reserves the right to evaluate all offers received in any manner it elects to employ." Similar language was included in the January 2009 RFP. Witnesses Dolan (p 14), Meal (p 21), and Polich (p 20) all found this language to be objectionable. The 2005 RFP used the following timeline, which is comparable to those included in the January 2009 RFP: assuming two business days for the 2005 RFP packets to reach potential bidders, such bidders had seven days from receipt of the package to provide a notice of intent (same as January RFP) and 27 days to provide proposals by the submittal deadline (compared to 32 days in the January RFP). 2

4 Witnesses Dolan (p 24-25), Meal (p 8-11) and Polich (p 20) all found these "compressed" time frames objectionable. The 2005 RFP also contained, and applied in the same manner, many of the same bid price debits that Mr. Dolan (e.g., p 14) and Ms. Meal (e.g., p 17-18) assert are unreasonable and unfair. With respect to site control, the 2005 RFP also required that options to purchase or lease the project site " not be contingent upon any conditions other than execution of the PPA." (P 11, 2005 RFP). Mr. Dolan states that such a provision could raise skepticism among experienced wind developers (p 21). The bid price debit requirements for permitting and financing which Mr. Dolan finds so objectionable (e.g., p 23) were also present in the 2005 RFP. Finally, the 2005 RFP did not employ an independent monitor/evaluator, an element that witnesses Dolan (p 10-11, 13, 15-17), Lesh (p 22) and Polich (p 17, 22) indicate is important. Q. What was the result of the 2005 RFP? A. The Company received 26 proposals representing annual quantities of approximately 210,000 MWh from landfill gas, 60,000 MWh from wood-waste, 550,000 MWh from wind and 120,000 MWh from bio-diesel. The Company selected seven proposals from five bidders for total annual energy amounts of approximately 60,000 MWh from landfill gas and 180,000 MWh from wind. All of the projects selected were constructed and are in operation today. Thus, our actual recent experience supports the basic point noted above made by the NARUC/FERC report that there is no one size fits all approach to conducting a successful RFP. I firmly believe that the RFP structure that the Company intends to use to execute a portion of its renewable energy plan will produce reasonable results. Q. Do you have any other comments with respect to the similarities and differences between the 2005 RFP and the January RFP? A. Yes. The 2005 RFP required bidders to pay a minimum evaluation fee of $1,000, contained a minimum size requirement of 750 kw and the associated power purchase agreement included provisions which limited the Company's obligations for payments to only those payments for which the Commission approved for cost recovery (i.e., "regulatory out" provisions). The January RFP requires no fees for bidder participation, has a minimum size requirement of only 150 kw 3

5 and the REPA contains no regulatory out provisions. These features will also be true of the March RFP and REPA. Thus, it is even easier for bidders to participate in the January and March RFPs, and at the same time one element that has been cited as a financing concern in the past has been eliminated. Q. Are independent monitors/evaluators as important as witnesses Dolan (p 10-11, 13, 15-17), Lesh (p 22) and Polich (p 17, 22) imply and is there no independent oversight of the RFP process? A. I believe the primary justification for the use of independent monitors/evaluators is related to the participation of affiliates in utility solicitations. The 2005 RFP had no affiliate participation; the January RFP did not allow affiliate participation; and the March RFP will not allow any affiliate participation. Thus, the principal reason generally given for an independent evaluator simply does not apply. Devereaux rebuttal testimony, p 3 line 20 to p 6, line 13. Id, p 11, lines 3-5. As I indicated previously, the deadlines in the January RFP and the 2005 RFP are virtually identical and the results of the 2005 RFP did not indicate that that RFP suffered from it. The problem is, while he characterizes them and relies on them, Mr. Devereaux never puts the January 2005 RFP, or the resulting bids and contracts, into evidence. 1 The Commission s pertinent evidentiary rules are: R Evidence generally. (1) The rules of evidence as applied in nonjury civil cases in circuit court shall be followed as far as practicable, but the commission may admit and give probative effect to evidence of a type commonly relied upon by reasonably prudent persons in the conduct of their affairs. Objections to offers of evidence may be made and shall be noted in the record. (2) Evidence, including records and documents in the possession of the commission, that a party desires or intends to rely on shall be offered and made a part of the record in the proceeding and other factual information or evidence 1 The fact that some of these items may have been in evidence in some other case or cases does not provide a foundation for Mr. Devereaux s testimony in this case. See Rule 325(2): including records and documents in the possession of the commission... 4

6 shall not be considered in the determination of the case, except as otherwise permitted by law. The relevant rule of evidence from circuit court civil cases is: RULE 703. BASES OF OPINION TESTIMONY BY EXPERTS The facts or data in the particular case upon which an expert bases an opinion or inference shall be in evidence. This rule does not restrict the discretion of the court to receive expert opinion testimony subject to the condition that the factual bases of the opinion be admitted in evidence thereafter. Under MRE 703, the facts or data in the particular case upon which an expert bases an opinion or inference shall be in evidence. Therefore, a party must show that the facts or data upon which an expert relies is admissible before an expert may render an opinion. Anglers of the AuSable v Dep t of Environmental Quality, Mich App ; 2 NW2d ; 2009 WL (March 31, 2009). Because Mr. Devereaux is (a) characterizing not only the January 2005 RFP, but also the bids and contracts from the January 2005 RFP; and then (b) relying on his inadmissible characterizations of documents not in evidence to offer opinion testimony in this case, that opinion testimony is not admissible. It is true that the commission may admit and give probative effect to evidence of a type commonly relied upon by reasonably prudent persons in the conduct of their affairs. R (1). But that is beside the point, for three reasons. First, the just-quoted provision of Rule 325(1) allows the admission of documentary evidence that might not otherwise be admissible for example, reports or publications that do not fall within a hearsay exception. The quoted provision of Rule 325(1) is not a license to summarize, paraphrase, and characterize documents not in evidence, and then to offer expert testimony that relies on those characterizations. 2 It is important to note that MRE 703 was amended to impose this requirement in 2003, so cases decided before September of 2003 have no bearing on this issue. 5

7 Second, even if the reasonably prudent person catch-all abrogates the MRE 703 requirement (it does not), a catch-all that allows leeway in admitting certain evidence does not also abrogate Rule 325(2) s requirement that [e]vidence, including records and documents in the possession of the commission, that a party desires or intends to rely on... must be admitted. Third, we do not know any reasonably prudent person who would rely on characterizations and summaries of documents by a witness in lieu of the documents themselves. This is an adversarial proceeding other parties are not required to simply take the witness s word for it, nor are we required to go out and find (by discovery or otherwise) all the documents he characterizes, introduce them into evidence, and thereby provide a foundation for his testimony that he chose not to provide. Exhibit MTD-2 and Testimony Relying on It Exhibit MTD-2 is called Examples of Subjective Discretion In Other Utilities' RFPs. Exhibit MTD-2 is not the RFPs it is a collection of quotes, absent any context, from various RFPs by other utilities. None of the RFPs themselves are in evidence in this case. Mr. Devereaux relies on his own quotations of these RFPs in several places in his testimony chiefly to say that the discretion Consumers reserves to itself in the RFP process is generally typical of other utilities RFPs, or that certain specific aspects of Consumers RFP are similar to aspects of another utility s RFP: Q. Do you have anything else to add with respect to these witnesses' characterization of the Company's subjective discretion in its RFPs? A. Yes. The implication is that Consumers Energy is somehow unique in its application of discretion in the conduct of its RFPs. Exhibit A-46 (MTD-2) provides examples of discretionary powers reserved by other utilities in their RFPs. I believe that the Company's use of subjective discretion should more properly be classified as both prudent, and the norm for such RFPs. The idea that an RFP can be conducted fairly and objectively without the use of any subjective discretion is itself not reasonable. 6

8 Devereaux rebuttal testimony, p 8, lines Q. Do witnesses Meal (p 11-15) and Polich (p 17-20) mischaracterize the information bidders are required to provide pursuant to the January RFP? A. Yes. The implication is that the information requested by the Company is essentially unique and unprecedented. The information requested in the January RFP is not dissimilar from the information requested by the RFPs of other utilities identified in Exhibit A-46 (MTD-2). Id, p 13, lines Q. Are Ms. Meal's concerns about the REPA provision which conveys current and future environmental benefits to the Company valid (p 27-28)? A. No. First, this approach to these environmental benefits is typical among utilities (e.g., the American Electric Power RFP referenced in Exhibit A-46 (MTD-2) states: "For purposes of this solicitation, the sale of renewable energy to AEP Ohio includes the transfer of all capacity, ancillary services (if any) and environmental attributes including associated renewable energy certificates (RECs) and any other current or future environmental attributes, including any greenhouse gas emission reductions associated with the quantity contracted from the facility from the project for the term of the REPA.") Id, p 17, lines The exhibit suffers from the same problems under MRE 703 and Rule 325(2) discussed above: rather than documents, we are offered witness statements about what the documents say. The testimony about what the documents say is inadmissible, the documents are not in evidence, and therefore the opinion evidence that relies on the documents is not admissible. The exhibit is also hearsay within hearsay under MRE 805 even if the RFPs themselves could be admitted under the reasonably prudent person catch-all, an exhibit composed of statements about what the RFPs say cannot. Finally, under the completeness rule of MRE 106, if Exhibit MTD-2 is admitted, then the entirety of all the RFPs excerpted in the exhibit must also be admitted into evidence. 7

9 Conclusion For the reasons just discussed, MEC, NRDC, the Ecology Center, and ELPC respectfully request that the testimony quoted in this brief and Exhibit MTD-2 be stricken. OLSON, BZDOK & HOWARD, P.C. Counsel for NRDC and co-counsel for MEC, Ecology Center, and ELPC Date: April 9, 2009 By: Christopher M. Bzdok (P53094) Olson, Bzdok & Howard, P.C. 420 E. Front St. Traverse City, MI Phone: 231/ Fax: 231/

10 STATE OF MICHIGAN MICHIGAN PUBLIC SERVICE COMMISSION In the matter, on the Commission s own motion, regarding the regulatory reviews, revisions, determinations, and/or approvals necessary for CONSUMERS ENERGY COMPANY to fully comply with Public Acts 286 and 295 of o. Case N U-15805; U (Consolidated) ELECTRONIC SERVICE LIST On the date below, an electronic copy of Motion to Strike Portions of Mark T. Devereaux s Rebuttal Testimony and Exhibit A-46 (MTD-2) was served on the following: Name/Party Hon. Sharon Feldman, ALJ Counsel for MPSC Staff: Steven D. Hughey, Asst. Attorney General Kristin M. Smith, Asst. Attorney General Pat Poli, Staff Counsel for Attorney General Donald Erickson Mich. Cable Telecommunications Assn. David E. S. Marvin Counsel for Hemlock Semiconductor Corporation Jennifer Utter Heston Counsel for Energy Michigan, Inc. Eric J. Schneidewind Counsel for Constellation NewEnergy, Inc. John M. Dempsey Counsel for Consumers Energy Co. Jon R. Robinson M. Bryan Little Ray McQuillan Address feldmans@michigan.gov hugheys@michigan.gov smithkm@michigan.gov polip@michigan.gov ericksond@michigan.gov dmarvin@fraserlawfirm.com jheston@fraserlawfirm.com ejschneidewind@varnumlaw.com jdempsey@dickinsonwright.com jrrobinson@cmsenergy.com mblittle@cmsenergy.com remcquillan@cmsenergy.com mpscfilings@cmsenergy.com Counsel for Michigan Sustainable Energy Coalition Robert B. Nelson Counsel for ABATE Roderick S. Coy Leland R. Rosier Counsel for MCTA David E. S. Marvin Rnelson@fraserlawfirm.com rcoy@clarkhill.com lrrosier@clarkhill.com dmarvin@fraserlawfirm.com

11 Counsel for Midland Cogeneration Venture LP Richard J. Aaron Ross K. Bower II Midland Cogeneration Venture LP Gary B. Pasek Counsel for RES North America LLC; Lafarge Midwest Inc.; Mich. Wholesale Power Assn.; New Covert Generating Co LLC; LS Power Assoc LP; Lafarge Midwest Inc Rodger Kershner Jon D. Kreucher Counsel for MCAAA Don L. Keskey Counsel for Environmental Law & Policy Center and The Ecology Center Bradley Klein Robert J. Kelter Meleah Geertsma David Wright The statements above are true to the best of my knowledge, information and belief. OLSON, BZDOK & HOWARD, P.C. Counsel for the Environmental Coalition Date: April 9, 2009 By: Ruth Ann Liebziet, Legal Assistant Olson, Bzdok & Howard, P.C. 420 E. Front St. Traverse City, MI Phone: 231/ Fax: 231/