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Mich. regulator sets capacity charge on electric choice customers

The Michigan Public Service Commission issued an order that sets capacity charges on certain customers who choose to buy their power from alternative suppliers.

Under Public Act 341, which Michigan Gov. Rick Snyder signed into law in 2016, the state has to have a reliability mechanism, or SRM, to ensure sufficient power to meet future demand. Part of the design of the SRM is a capacity charge that would be levied on customers served by alternative providers in the event that those providers, referred to in Michigan as alternative energy suppliers, cannot show they have enough supply.

In a Nov. 21 order, the PSC allowed CMS Energy Corp. subsidiary Consumers Energy Co. to implement a capacity charge of $109,714/MW-year or $300.59/MW-day on full-service customers beginning June 1, 2018, the commission said in a press release and issue brief. (Michigan PSC Case U-18239)

DTE Energy Co. subsidiary DTE Electric Co. can implement a charge of $97,527/MW-year or $267.20/MW-day, the PSC's issue brief says. (Michigan PSC Case U-18248)

According to the issue brief, the SRM charge would be listed separately on customer bills, but only choice customers whose alternative supplier cannot demonstrate enough power supply would be subject to the charge. Three smaller utilities in Michigan's Upper Peninsula and the northern part of the state have electric choice options, and alternative suppliers will have to comply with an SRM capacity charge as well. Orders for those utilities are to be issued Dec. 1, the PSC said.

In a separate order, the commission also accepted integrated resource planning parameters that regulated utilities must follow in their long-term supply plans. The two utilities will have to file their next integrated resource plans in 2018, the PSC said in its release. (Michigan PSC Case U-18418)

In a third order, the commission also finalized new avoided cost formulas that establish the rate that utilities are required to pay owners of small renewable and cogeneration projects. The avoided cost rates are required by the federal Public Utility Regulatory Policies Act, or PURPA, which encourages development of new sources of power supply and competition. The act requires utilities to purchase power from qualifying facilities, including small renewable projects such as hydro and cogeneration projects, that produce both power and steam.

The PSC, in a separate issue brief, said the updated rates were needed given that the avoided costs have not been reviewed in more than 25 years and certain PURPA contracts that utilities entered into in the 1980s and 1990s are expiring.