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Michigan PSC Approves Indiana Michigan Power Co.'s Power Supply Cost Recovery Plan But Issues Warning About Future Expenses

  • Nov 19, 2021
Targeted News Service (Press Releases)

LANSING, Michigan, Nov. 19 -- The Michigan Public Service Commission issued the following news release:

The Michigan Public Service Commission approved Indiana Michigan Power Co.'s (I&M) power supply cost recovery plan for 2021 and accepted the company's five-year forecasts for providing electric service. But the Commission warned it is unlikely to approve full costs of power supply from uneconomic contracts for the output of coal-fired Ohio Valley Electric Corp. (OVEC) power plants.

The Commission's order today (Case No. U-20804) approved I&M's request for a 2021 PSCR plan and factor of 18.92 mills per kilowatt hour (kWh), resulting in a proposed Michigan jurisdictional PSCR factor of 2.85 mills per kWh for billing months of January 2021 through December 2021.

The Commission's order reaffirmed its determination that I&M, under Michigan law, is considered an affiliate of OVEC, and therefore is subject to the Commission's Code of Conduct rules governing affiliate transactions. As such, the Commission issued a warning under Section 7 of Public Act 304, MCL 460.6j, that it is unlikely to allow I&M to recover unjustified costs from Michigan ratepayers in its PSCR reconciliation proceeding for the utility's long-term agreement with OVEC, which operates two Ohio-based coal-fired electricity plants and is co-owned by several electric utilities including I&M's parent company, American Electric Power Co.

The Commission noted studies by utilities and investment monitoring agencies that have found costs for output of the two OVEC plants to be tens of millions of dollars more expensive than purchasing electricity from the wholesale markets. The order today put I&M on notice that the Michigan share of these excess costs are unlikely to be permitted without additional evidence that continuing to purchase power from the units was in the best interest of its customers, particularly as I&M had never sought approval to extend its contract with OVEC. The Commission directed I&M to describe renegotiation efforts in future integrated resource plan (IRP) cases and, in I&M's next IRP, model a sensitivity to the company's preferred course of action with and without energy and capacity purchased from OVEC, along with a model of optimized resources as potential replacements.

The Commission found that the Rockport sale capacity value and net cost of new entry (CONE) may be appropriate proxies for calculating market price and I&M's resulting PSCR factor.

In addition, the MPSC determined that I&M's decision to commit two generating units at its Rockport Plant in Indiana is uneconomical and warrants additional review in the PSCR reconciliation. The Commission directed I&M to provide the basis for the company's decision to designate a generating unit as must run when the company's forecast demonstrates the decision will result in excess costs and warned that fuel portions of all net revenue losses incurred because of imprudent unit commitment decisions at the Rockport Units would be disallowed.

The Commission also directed I&M to include the purchase of Rockport Unit 2, which the company announced in April 2021, in its 2021 power supply cost recovery reconciliation proceeding.

The Michigan Attorney General's Office and the Sierra Club intervened in the case. MPSC staff also participated.


The MPSC today approved a power purchase agreement (PPA) between Consumers Energy Co. and a west Michigan high school for the output of the school's solar power plant (Case No. U-20604). The PPA is for the output of a 550 kilowatt solar plant at South Christian High School in Byron Center beginning Oct. 1, 2021, through May 31, 2032. The cost of the 10-year PPA to Consumers is $205,000.


The MPSC approved a settlement agreement resolving all issues and approving SEMCO Energy Gas Co.'s gas cost recovery (GCR) plan and factors for the 12-month period ending March 31, 2022 (Case No. U-20822). The approval allows SEMCO Gas to implement a GCR factor of $5.6071 per dekatherm. Reflecting rising costs of natural gas, the new GCR factor could cost the average residential customer an additional $200 total for the year on their gas bills. The Michigan Attorney General's Office intervened in the case. MPSC Staff also participated.


Two amended natural gas contracts sought by SEMCO Energy Gas Co. were approved today (Case No. U-21113). The MPSC approved amended natural gas transportation service agreements between SEMCO and two of its largest industrial customers, WestRock California Inc and Post Foods LLC, which qualify for discounted rates due to their ability to bypass SEMCO's system based on proximity to interstate natural gas pipelines; keeping them as SEMCO customers helps spread SEMCO's fixed costs among a larger customer base. The amended contracts will not increase costs for other SEMCO customers.


The MPSC today approved Michigan Gas Utilities Corp.'s application to waive testing requirements for diaphragm meters (Case No. U-21114) under Rule 51 of the Commission's Technical Standards for Gas Service, allowing for alternative testing procedures. The waiver is approved effective Jan. 1, 2021, and is in effect until a final order is issued in MGU's next general rate case.

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