October 6, 2015, Introduced by Reps. Glenn, Barrett, Lucido, Hooker and Poleski and referred to the Committee on Energy Policy.
A bill to amend 1939 PA 3, entitled
"An act to provide for the regulation and control of public and
certain private utilities and other services affected with a public
interest within this state; to provide for alternative energy
suppliers; to provide for licensing; to include municipally owned
utilities and other providers of energy under certain provisions of
this act; to create a public service commission and to prescribe
and define its powers and duties; to abolish the Michigan public
utilities commission and to confer the powers and duties vested by
law on the public service commission; to provide for the
continuance, transfer, and completion of certain matters and
proceedings; to abolish automatic adjustment clauses; to prohibit
certain rate increases without notice and hearing; to qualify
residential energy conservation programs permitted under state law
for certain federal exemption; to create a fund; to provide for a
restructuring of the manner in which energy is provided in this
state; to encourage the utilization of resource recovery
facilities; to prohibit certain acts and practices of providers of
energy; to allow for the securitization of stranded costs; to
reduce rates; to provide for appeals; to provide appropriations; to
declare the effect and purpose of this act; to prescribe remedies
and penalties; and to repeal acts and parts of acts,"
by amending the title and section 6s (MCL 460.6s), the title as
amended by 2005 PA 190 and section 6s as added by 2008 PA 286.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
TITLE
An act to provide for the regulation and control of public and
certain private utilities and other services affected with a public
interest within this state; to provide for alternative energy
suppliers; to provide for licensing; to include municipally owned
utilities and other providers of energy under certain provisions of
this act; to create a public service commission and to prescribe
and define its powers and duties; to abolish the Michigan public
utilities commission and to confer the powers and duties vested by
law on the public service commission; to provide for the
continuance, transfer, and completion of certain matters and
proceedings; to abolish automatic adjustment clauses; to prohibit
certain rate increases without notice and hearing; to qualify
residential energy conservation programs permitted under state law
for certain federal exemption; to create a fund; to provide for a
restructuring of the manner in which energy is provided in this
state; to require the competitive procurement of electric capacity
and energy; to encourage the utilization of resource recovery
facilities; to prohibit certain acts and practices of providers of
energy; to allow for the securitization of stranded costs; to
reduce rates; to provide for appeals; to provide appropriations; to
declare the effect and purpose of this act; to prescribe remedies
and penalties; and to repeal acts and parts of acts.
Sec. 6s. (1) An electric utility that proposes to acquire new
electric generation capacity, make a significant investment in an
existing electric generation facility, purchase an existing
electric generation facility, or enter into a power purchase
agreement for the purchase of electric capacity shall submit an
application for a certificate of compliance with the competitive
bidding requirements of subsection (5)(c) if the total incremental
cost of the project is $100,000,000.00 or more.
(2)
(1) An electric utility that proposes to construct an
acquire
new electric generation facility, capacity, make a
significant investment in an existing electric generation facility,
purchase an existing electric generation facility, or enter into a
power
purchase agreement for the purchase of electric capacity for
a
period of 6 years or longer may
submit an application to the
commission seeking a certificate of necessity for that
construction,
acquisition, investment, or purchase if that
construction,
acquisition, investment, or purchase costs
$500,000,000.00 or more and a portion of the costs would be
allocable to retail customers in this state. A significant
investment in an electric generation facility includes a group of
investments reasonably planned to be made over a multiple year
period
not to exceed 6 years for a singular purpose such as
increasing
that will materially increase
the net capacity of an
existing electric generation plant. The commission shall not issue
a certificate of necessity under this section for any environmental
upgrades to existing electric generation facilities or for a
renewable energy system.
(3) (2)
The commission may implement
separate review criteria
and approval standards for electric utilities with less than
1,000,000
120,000 retail customers who engage in competitive
bidding under subsection (5) for projects that cost less than
$100,000,000.00 or seek a certificate of necessity for projects
costing less than $500,000,000.00.
(4) (3)
An electric utility submitting an
application under
this
section subsection (2) may request 1 or more of the following:
(a) A certificate of necessity that the power to be supplied
as
a result of the proposed construction, acquisition, investment,
or purchase is needed.
(b) A certificate of necessity that the size, fuel type, and
other design characteristics of the existing or proposed electric
generation facility or the terms of the power purchase agreement
represent the most reasonable and prudent means of meeting that
power need.
(c) A certificate of necessity that the price specified in the
power purchase agreement will be recovered in rates from the
electric utility's customers.
(d) A certificate of necessity that the estimated purchase or
capital costs of and the financing plan for the existing or
proposed electric generation facility, including, but not limited
to, the costs of siting and licensing a new facility and the
estimated cost of power from the new or proposed electric
generation facility, will be recoverable in rates from the electric
utility's
customers subject to subsection (4)(c).(5)(c).
(5) (4)
Within 270 days of the filing of an
application under
this
section, subsection (1) or
(2), the commission shall issue an
order granting or denying a certificate of compliance filed under
subsection (1) or the requested certificate of necessity filed
under
subsection (2). The commission shall
hold a hearing on the an
application. The hearing shall be conducted as a contested case
pursuant to chapter 4 of the administrative procedures act of 1969,
1969 PA 306, MCL 24.271 to 24.287. The commission shall allow
intervention by interested persons including the regional
transmission organization, any electric customer or association of
customers, alternative electric suppliers, resource suppliers, or
others with information potentially relevant to the proceeding,
including, but not limited to, potentially competitive resource
suppliers of the electric utility. Reasonable discovery shall be
permitted before and during the hearing in order to assist parties
and interested persons in obtaining evidence concerning the
application, including, but not limited to, the reasonableness and
prudence
of the construction, acquisition,
investment, or purchase
for
which the certificate of necessity an application has been
requested. The commission shall grant the request if it determines
all of the following:
(a) That the electric utility has demonstrated a need for the
power that would be supplied by the existing or proposed electric
generation facility or pursuant to the proposed power purchase
agreement through its previously approved integrated resource plan
that
complies with subsection (11).(12).
(b) The information supplied indicates that the existing or
proposed electric generation facility will comply with all
applicable state and federal environmental standards, laws, and
rules.
(c) The estimated cost of power from the existing or proposed
electric generation facility or the price of power specified in the
proposed power purchase agreement is reasonable. The commission
shall
find that the cost is reasonable if
, in the construction
acquisition
of or investment in a new or existing
facility , to the
extent
it is commercially practicable, the estimated costs are the
result
of competitively bid engineering, procurement, and
construction
contracts, or in a or power purchase agreement ,
the
cost
is the result of a competitive solicitation. Up to 150 days
after
an electric utility makes its initial filing, it may file to
update
its cost estimates if they have materially changed. No other
aspect
of the initial filing may be modified unless the application
is
withdrawn and refiled. A utility's filing updating its cost
estimates
does not extend the period for the commission to issue an
order
granting or denying a certificate of necessity. An affiliate
of
an electric utility that serves customers in this state and at
least
1 other state may participate in the competitive bidding to
provide
engineering, procurement, and construction services to that
electric
utility for a project covered by this section.is
demonstrated to be the most advantageous to customers, considering
cost and meeting the power needs of those customers as determined
by the competitive bid process established in this subsection. The
commission shall do all of the following:
(i) Establish a form of request for proposals to be employed
by the utility for the purpose of procuring needed resources that
requests an offer price in dollars per megawatt hour, states the
term of the proposed contract, states the amount of capacity in
megawatts being sought, states whether the capacity must be
dispatchable by the purchasing utility, includes a uniform force
majeure clause, states whether the obligation to sell and deliver
must be firm or interruptible, and requests the bidder to specify
any minimum quantity in megawatt hours that must be purchased on an
annual basis.
(ii) Specify the evaluation criteria by which the preferred
proposal received under subparagraph (i) will be determined.
(iii) Establish a preferred form of contract or standardized
contract terms to be entered into by the selected resource supplier
and the electric utility.
(iv) Prescribe both of the following:
(A) The responsibilities and duties of an independent third-
party evaluator selected by the commission to issue requests for
proposals, administer a request for proposals process, receive
proposals submitted in response to a request for proposals,
identify the proposal that best meets the evaluation criteria, and
recommend to the commission the selection of 1 or more proposals.
The cost of the independent third-party evaluator shall be assessed
as a cost of regulation under 1972 PA 299, MCL 460.111 to 460.120.
(B) The means by which the independent third-party evaluator
is selected and the time following submission of proposals within
which the independent third-party evaluator shall recommend a
proposal for selection.
(v) Prescribe the conditions under which the electric utility
may submit a proposal in response to its own request for proposals.
The conditions shall ensure that an electric utility's use of
ratepayer—funded assets does not place other resource suppliers
submitting proposals at a competitive disadvantage and ensure that
the electric utility's participation is consistent with the
electric utility's code of conduct.
(vi) Prescribe the process for identification and approval of
proposals.
(vii) Prescribe the terms to be included in any contract
between an electric utility and a resource supplier that will limit
compensation to be received by the resource supplier to no more
than the amount that the utility may recover from ratepayers as set
forth in a commission order.
(viii) Identify in the request for proposals what risks are to
be assumed by utility customers and what risks are to be assumed by
persons submitting proposals in connection with each resource to be
procured.
(ix) Prescribe criteria that will permit persons proposing to
provide demand-side management, transmission service, or generating
capacity, including renewable and distributed generating capacity,
to fairly compete to provide required resources, provided that the
resources with the most predictable year-to-year cost will be
chosen before a resource with a less predictable year-to-year cost.
(x) Provide reasonable means to assure that the request for
proposals process will be open and fair to all participating
parties.
(xi) Provide that, after the commission has selected a
proposal, all proposals submitted, except the selected proposal,
are confidential and exempt from disclosure under the freedom of
information act, 1976 PA 442, MCL 15.231 to 15.246.
(xii) Provide that, in considering the relative cost of new
generating resources, all costs of transmitting power to the
electric utility, the fuel cost, the expected useful life of the
resource, and the net present value of the cost to decommission the
resource at the end of its service life are considered a part of
the cost of generation.
(xiii) Provide for all of the following:
(A) Within the time prescribed by the commission, that the
independent third-party evaluator recommends to the commission 1 or
more proposals for selection.
(B) Posting of the recommendation on the commission's Internet
website and mailing of copies to each party to the proceeding in
which the commission determined the utility's resource needs and to
each supplier submitting a proposal.
(C) Allowing any person or supplier notified under sub-
subparagraph (B), within 15 days of the date the recommendation is
posted, to submit comments on the independent third-party
evaluator's recommendation or request commission review of the
process of requesting, receiving, and selecting proposals.
(D) Within 30 days of the date the recommendation is posted,
issuing an order that selects the proposal most advantageous to the
utility's customers considering cost and the criteria in
subparagraphs (v) to (xii) unless the utility or supplier committed
fraud or the independent third-party evaluator failed to follow
commission procedures and the failure was materially detrimental to
the utility's customers.
(E) That the utility and the supplier submitting the selected
proposal shall, not later than 5 days after the commission's order
selecting a proposal, execute a contract setting forth all terms
and conditions of the request for proposals except to the extent
they have been modified in the selected proposal.
(F) That, if the order has not been stayed or suspended by a
competent court within 30 days after the date of the order, the
contract is a valid and binding contract according to its terms,
notwithstanding that the commission's procedures or selection is
later vacated, modified, or otherwise held to be invalid in whole
or in part.
(d) The existing or proposed electric generation facility or
proposed power purchase agreement represents the most reasonable
and prudent means of meeting the power need relative to other
resource options for meeting power demand, including energy
efficiency programs and electric transmission efficiencies.
(e)
To the extent practicable, the construction acquisition or
investment in a new or existing facility in this state is completed
using a workforce composed of residents of this state as determined
by the commission. This subdivision does not apply to a facility
that is located in a county that lies on the border with another
state.
(6) (5) The commission may consider any other costs or
information related to the costs associated with the power that
would be supplied by the existing or proposed electric generation
facility or pursuant to the proposed purchase agreement or
alternatives to the proposal raised by intervening parties.
(7) (6)
In a certificate of necessity under
this section, the
commission
shall specify the costs approved for the construction
acquisition of or significant investment in the electric generation
facility, the price approved for the purchase of the existing
electric generation facility, or the price approved for the
purchase of power pursuant to the terms of the power purchase
agreement.
(8) (7)
The utility shall annually file, or
more frequent if
required by the commission, reports to the commission regarding the
status of any project for which a certificate of necessity has been
granted
under subsection (4), (5),
including an update concerning
the cost and schedule of that project.
(9) (8)
If the commission denies any of the
relief requested
by an electric utility, the electric utility may withdraw its
application
or proceed with the proposed construction, acquisition,
purchase, investment, or power purchase agreement without a
certificate of necessity and the assurances granted under this
section.
(10) (9)
Once the electric generation
facility or power
purchase agreement is considered used and useful or as otherwise
provided
in subsection (12), (13), the commission shall include in
an electric utility's retail rates all reasonable and prudent costs
for an electric generation facility or power purchase agreement for
which a certificate of necessity has been granted. The commission
shall not disallow recovery of costs an electric utility incurs in
constructing,
acquiring, investing in, or purchasing an electric
generation facility or in purchasing power pursuant to a power
purchase agreement for which a certificate of necessity has been
granted, if the costs do not exceed the costs approved by the
commission in the certificate. Once the electric generation
facility or power purchase agreement is considered used and useful
or
as otherwise provided in subsection (12), (13), the commission
shall include in the electric utility's retail rates costs actually
incurred by the electric utility that exceed the costs approved by
the commission only if the commission finds that the additional
costs are reasonable and prudent. If the actual costs incurred by
the electric utility exceed the costs approved by the commission,
the electric utility has the burden of proving by a preponderance
of the evidence that the costs are reasonable and prudent. The
portion of the cost of a plant, facility, or power purchase
agreement which exceeds 110% of the cost approved by the commission
is presumed to have been incurred due to a lack of prudence. The
commission may include any or all of the portion of the cost in
excess of 110% of the cost approved by the commission if the
commission finds by a preponderance of the evidence that the costs
were prudently incurred.
(11) (10)
Within 90 days of the effective date of the
amendatory
act that added this section, the The
commission shall
adopt standard application filing forms and instructions for use in
all requests for a certificate of necessity under this section. The
commission may, in its discretion, modify the standard application
filing forms and instructions adopted under this section.
(12) (11)
The commission shall establish
standards for an
integrated resource plan that shall be filed by an electric utility
requesting
a certificate of necessity under this section. and
approved by the commission after a contested case hearing pursuant
to chapter 4 of the administrative procedures act of 1969, 1969 PA
306, MCL 24.271 to 24.287. An integrated resource plan and
proceeding shall include all of the following:
(a) A long-term forecast of the electric utility's load growth
under various reasonable scenarios.
(b)
The type of generation technology proposed for the any new
generation facility and the proposed capacity of the generation
facility, including projected fuel and regulatory costs under
various reasonable scenarios.
(c) Projected energy and capacity purchased or produced by the
electric utility pursuant to any renewable portfolio standard.
(d) Projected energy efficiency program savings under any
energy efficiency program requirements and the projected costs for
that program.
(e) Projected load management and demand response savings for
the electric utility and the projected costs for those programs.
(f) An analysis of the availability and costs of other
electric resources that could defer, displace, or partially
displace the proposed generation facility or purchased power
agreement, including additional renewable energy, energy efficiency
programs, load management, and demand response, beyond those
amounts contained in subdivisions (c) to (e).
(g) Electric transmission options for the electric utility.
(h) Notice to each regional transmission organization serving
any portion of the utility's service area that it has standing to
intervene in the integrated resource plan proceeding and a request
that the regional transmission organization participate.
(i) Notice to electric customers, alternative electric
suppliers, and other potential resource suppliers of the utility's
proposed integrated resource plan and their standing to participate
in the proceeding.
(j) The projected annual load for all customers and customer
classes connected to the utility's distribution system for at least
the next 10 years.
(k) The electric utility's projected wholesale sales and
purchases of electricity.
(l) The electric generating capacity located within the
electric utility's service area, including electric generating
facilities not owned by that electric utility.
(m) The available transmission capacity and the cost of
additional transmission capacity that could be used to serve
customers within the utility's distribution service area.
(n) The cost and reliability of resources located outside the
electric utility's distribution service area that could be used to
serve customers within the service area.
(o) The portion of the electric utility's load projected to be
served by alternative electric suppliers.
(p) An analysis of the projected market prices for power
purchased under the rules of the midcontinent independent system
operator, or applicable regional transmission organization, as
compared to the costs of new electric generation facilities and new
electric transmission facilities.
(q) The relative cost to the electric utility's full-service
customers of maintaining a 1-day interruption in 10 years
reliability standard and more or less stringent standards of
reliability.
(r) The need for additional generating or transmission
capacity to maintain electric reliability or secure economic
advantages to the utility's full-service customers.
(s) A regional and statewide evaluation of electric supply and
demand to identify sources outside of the electric utility service
area where power may be available or where there may be a
particularly favorable site for building transmission or generation
facilities.
(t) The quantity and type of resources, including reserves,
required by the open access transmission and energy markets tariffs
of the regional transmission organization or the tariff of any
successor organization in which the electric utility participates,
and resources required by reliability standards or other
requirements imposed under the authority of an electric reliability
organization to which the electric utility is subject.
(13) (12)
The commission shall allow
financing interest cost
recovery in an electric utility's base rates on construction work
in progress for capital improvements approved under this section
prior to the assets being considered used and useful. Regardless of
whether or not the commission authorizes base rate treatment for
construction work in progress financing interest expense, an
electric utility shall be allowed to recognize, accrue, and defer
the allowance for funds used during construction related to equity
capital.
(14) (13)
As used in this section,
"renewable energy system"
means that term as defined in section 11 of the clean, renewable,
and efficient energy act, 2008 PA 295, MCL 460.1011.
Enacting section 1. This amendatory act takes effect 90 days
after the date it is enacted into law.