in Re Implementing SEC 6w of 2016 Pa 341 for Cloverland Elec Coop

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.

STATE OF MICHIGAN

COURT OF APPEALS

In re IMPLEMENTING SECTION 6W OF 2016
PA 341 FOR CLOVERLAND ELECTRIC
COOPERATIVE.

CLOVERLAND ELECTRIC COOPERATIVE, FOR PUBLICATION
July 23, 2019
Appellant, 9:05 a.m.

v No. 342552
MPSC
MICHIGAN PUBLIC SERVICE COMMISSION, LC No. 00-018258

Appellee.

Before: O’BRIEN, P.J., and FORT HOOD and CAMERON, JJ.

CAMERON, J.

Appellant, Cloverland Electric Cooperative (Cloverland), is a member-regulated electric
cooperative, which generates and delivers electricity to five counties in Michigan’s Upper
Peninsula. In 2016, the Michigan Legislature passed Public Act 341 to ensure that alternative
electric suppliers (AES)1 demonstrate that they are able to generate enough electricity to meet
their capacity obligations. If an AES cannot meet its obligations, then the electric utility, such as
Cloverland, must provide the AES’s customers with electric capacity, and in return, implement a
State Reliability Mechanism (SRM) charge, which must be paid by the AES’s customers. After
a hearing was held, the Public Service Commission (the PSC or the commission) issued an
opinion and order on November 30, 2017, requiring Cloverland to also implement an SRM
charge on Cloverland’s full-service member-customers pursuant to the newly enacted law. On

1
An AES is defined as: “[A] person selling electric generation service to retail customers in this
state. Alternative electric supplier does not include a person who physically delivers electricity
directly to retail customers in this state. An alternative electric supplier is not a public utility.”
MCL 460.10g(a).

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appeal, Cloverland challenges the PSC’s decision to require the implementation of the SRM
charge. We affirm.

I. BACKGROUND

As explained by Cloverland’s chief financial officer, Robert J. Malaski, Cloverland is a
member-regulated electric cooperative that generates, distributes, and sells electric energy to its

member-customers in the counties of Chippewa, Delta, Luce, Mackinac and
Schoolcraft in Michigan’s Upper Peninsula, including the cities of Sault Ste.
Marie, St. Ignace, Mackinac Island and Manistique. Cloverland has
approximately 42,000 member-customers, consisting of residential, farm
residential, seasonal, commercial, outdoor lighting and large power accounts.

Malaski testified that “Cloverland has a single member, UP Paper, LLC, (‘UP Paper’) which
purchases a portion of its electric energy from an AES. Cloverland also serves UP Paper for the
remainder of its electric energy needs under the terms of a special contract.”

This case is about the legal requirements for ensuring the reliability of the electric grid in
Michigan. In order for a summary of the proceedings in this case to make sense, it is necessary
to quote pertinent language from the governing statute, MCL 460.6w, which was added by 2016
PA 341 (Act 341), effective April 20, 2017, and to explain a recent opinion of this Court, In re
Reliability Plans of Electric Utilities for 2017-2021, 325 Mich App 207; 926 NW2d 584 (2018).

“At the end of 2016, our Legislature enacted new electric utility legislation that included
Act 341. That act added, among other statutory sections, MCL 460.6w.” In re Reliability Plans,
325 Mich App at 210-211.

By way of background, Michigan’s Legislature previously enacted what
was known as the Customer Choice and Electricity Reliability Act, MCL 460.10
et seq., as enacted by 2000 PA 141 and 2000 PA 142, to further the deregulation
of the electric utility industry. That act permitted customers to buy electricity
from alternative electric suppliers instead of limiting customers to purchasing
electricity from incumbent utilities . . . . Among the purposes of the act, as
amended by Act 341, is the promotion of “financially healthy and competitive
utilities in this state.” MCL 460.10(b). [In re Reliability Plans, 325 Mich App at
211 (quotation marks and citation omitted).]

As additional background information, it is noted that

the Midcontinent Independent System Operator (MISO) is the regional
transmission organization responsible for managing the transmission of electric
power in a large geographic area that spans portions of Michigan and 14 other
states. To accomplish this, MISO combines the transmission facilities of several
transmission owners into a single transmission system. In addition to the
transmission of electricity, MISO’s functions include capacity resource planning.
MISO has established ten local resource zones; most of Michigan’s lower

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 peninsula is located in MISO’s Local Resource Zone 7, while the upper peninsula
is located in MISO’s Local Resource Zone 2. [Id.]

Further, MISO “serves as a mechanism for suppliers to buy and sell electricity capacity through
an auction. This allows for the exchange of capacity resources across energy providers and
resource zones.” Id. at 212.

“At the end of 2016, our Legislature enacted Act 341, in part adding MCL 460.6w, which
imposes resource adequacy requirements on electric service providers in Michigan and imposes
certain responsibilities on the [PSC].” In re Reliability Plans, 325 Mich App at 213. MCL
460.6w(2) provides, in relevant part, “If, by September 30, 2017, the Federal Energy Regulatory
Commission [(FERC)] does not put into effect a resource adequacy tariff that includes a capacity
forward auction[2] or a prevailing state compensation mechanism, then the commission shall
establish [an SRM] under subsection (8).” It is undisputed here that the FERC did not
implement a resource adequacy tariff that included a capacity forward auction or a prevailing
state compensation mechanism by September 30, 2017. Thus, the PSC was required to establish
an SRM under MCL 460.6w(8). See MCL 460.6w(2); In re Reliability Plans, 325 Mich App at
213 (“The parties agree that because the [FERC] did not put into effect the MISO-proposed
tariff, the [PSC] is required by [MCL 460.6w(2)] to establish [an SRM].”). An SRM “means a
plan adopted by the commission in the absence of a prevailing state compensation mechanism to
ensure reliability of the electric grid in this state consistent with subsection (8).” MCL
460.6w(12)(h).

When an AES fails to demonstrate that it has sufficient capacity to meet its capacity
obligations, the electric utility must provide the AES’s customer with electric capacity, and in
return, an SRM charge must be paid. 3 In particular, MCL 460.6w(6) provides:

A capacity charge shall not be assessed for any portion of capacity
obligations for each planning year for which an alternative electric supplier can
demonstrate that it can meet its capacity obligations through owned or contractual
rights to any resource that the appropriate independent system operator allows to
meet the capacity obligation of the electric provider. The preceding sentence
shall not be applied in any way that conflicts with a federal resource adequacy
tariff, when applicable. Any electric provider that has previously demonstrated
that it can meet all or a portion of its capacity obligations shall give notice to the
commission by September 1 of the year 4 years before the beginning of the
applicable planning year if it does not expect to meet that capacity obligation and
instead expects to pay a capacity charge. The capacity charge in the utility

2
“ ‘Capacity forward auction’ means an auction-based resource adequacy construct and the
associated tariffs developed by the appropriate independent system operator for at least a portion
of this state for 3 years forward or more.” MCL 460.6w(12)(b).
3
The SRM charge is sometimes referred to in this case as a state reliability charge, or simply a
capacity charge.

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 service territory must be paid for the portion of its load taking service from the
alternative electric supplier not covered by capacity as set forth in this subsection
during the period that any such capacity charge is effective.

MCL 460.6w(7) states:

An electric provider shall provide capacity to meet the capacity obligation
for the portion of that load taking service from an alternative electric supplier in
the electric provider’s service territory that is covered by the capacity charge
during the period that any such capacity charge is effective. The alternative
electric supplier has the obligation to provide capacity for the portion of the load
for which the alternative electric supplier has demonstrated an ability to meet its
capacity obligations. If an alternative electric supplier ceases to provide service
for a portion or all of its load, it shall allow, at a cost no higher than the
determined capacity charge, the assignment of any right to that capacity in the
applicable planning year to whatever electric provider accepts that load.

MCL 460.6w(8) states, in relevant part:

If a state reliability mechanism is required to be established under
subsection (2), the commission shall do all of the following:

(a) Require, by December 1 of each year, that each electric utility
demonstrate to the commission, in a format determined by the commission, that
for the planning year beginning 4 years after the beginning of the current planning
year, the electric utility owns or has contractual rights to sufficient capacity to
meet its capacity obligations as set by the appropriate independent system
operator, or commission, as applicable.

(b) Require, by the seventh business day of February each year, that each
alternative electric supplier, cooperative electric utility, or municipally owned
electric utility demonstrate to the commission, in a format determined by the
commission, that for the planning year beginning 4 years after the beginning of
the current planning year, the alternative electric supplier, cooperative electric
utility, or municipally owned electric utility owns or has contractual rights to
sufficient capacity to meet its capacity obligations as set by the appropriate
independent system operator, or commission, as applicable. . . . By the seventh
business day of February in 2018, an alternative electric supplier shall
demonstrate to the commission, in a format determined by the commission, that
for the planning year beginning June 1, 2018, and the subsequent 3 planning
years, the alternative electric supplier owns or has contractual rights to sufficient
capacity to meet its capacity obligations as set by the appropriate independent
system operator, or commission, as applicable. If the commission finds an
electric provider has failed to demonstrate it can meet a portion or all of its
capacity obligation, the commission shall do all of the following:

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 (i) For alternative electric load, require the payment of a capacity charge
that is determined, assessed, and applied in the same manner as under subsection
(3) for that portion of the load not covered as set forth in subsections (6) and (7).
If a capacity charge is required to be paid under this subdivision in the planning
year beginning June 1, 2018 or any of the 3 subsequent planning years, the
capacity charge is applicable for each of those planning years. . . .

In short, an SRM charge is required to be paid when an AES fails to make the required capacity
demonstration.

MCL 460.6w(3) requires an SRM charge to be determined in a contested case
proceeding. Further, MCL 460.6w(3) sets forth a formula for determining an SRM charge as
follows:

In order to ensure that noncapacity electric generation services are not included in
the capacity charge, in determining the capacity charge, the commission shall do
both of the following and ensure that the resulting capacity charge does not differ
for full service load and alternative electric supplier load:

(a) For the applicable term of the capacity charge, include the capacity-
related generation costs included in the utility’s base rates, surcharges, and power
supply cost recovery factors, regardless of whether those costs result from utility
ownership of the capacity resources or the purchase or lease of the capacity
resource from a third party.

(b) For the applicable term of the capacity charge, subtract all non-
capacity-related electric generation costs, including, but not limited to, costs
previously set for recovery through net stranded cost recovery and securitization
and the projected revenues, net of projected fuel costs, from all of the following:

(i) All energy market sales.

(ii) Off-system energy sales.

(iii) Ancillary services sales.

(iv) Energy sales under unit-specific bilateral contracts. [Emphasis
added.]

In July 2017, Cloverland filed what it called an “application” in the PSC. Cloverland
argued, in relevant part:

The SRM [charge] should be designed to compensate Cloverland for the capacity
obligation it undertakes to meet the retail choice customer capacity needs that are
not proven to be satisfied by the serving AES. In Cloverland’s case, the cost of
capacity can be determined based on the costs reflected in Cloverland’s wholesale
power supply agreement with Wisconsin Electric Power Company (“WEPCO”),

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 and are intended to be revenue neutral based upon the assumption that no electric
choice load will take capacity service from Cloverland.

In support of its claim, Cloverland attached the written testimony of Malaski, “which describes
how Cloverland’s proposed SRM charge meets the requirements of Act 341 in a reasonable and
prudent manner, how a capacity charge under that mechanism should be calculated, and other
related matters.” Malaski testified that Cloverland was not proposing to impose an SRM charge
on its members-customers, as distinguished from UP Paper, the customer of the AES.

In August 2017, the PSC Staff (the Staff) filed the written testimony of Nicholas M.
Revere, who is employed by the PSC as “the Manager of the Rates and Tariff Section of the
Regulated Energy Division.” Revere stated that Cloverland’s proposal to use the WEPCO
capacity charges as a proxy did not satisfy “the requirements of the law, as it does not include all
capacity-related costs included in [Cloverland’s] rates.” The Staff had gone “through the costs in
the Cost of Service Study (COSS) and identified those that are capacity-related.” Revere stated
that the Staff disagreed with Cloverland’s proposal to not require its members-customers, also
sometimes referred to as full-service customers or bundled customers, to pay the SRM charge;
that is, the Staff did not approve Cloverland’s suggestion to limit the SRM charge to customers
of an AES, which customers are also sometimes referred to as Retail Open Access (ROA)
customers.

After entertaining the parties’ arguments through briefing, the PSC issued a 50-page
opinion and order providing, in relevant part, that Cloverland “shall implement a state reliability
mechanism capacity charge of $228,891 per megawatt-year, or $627 per megawatt-day, for full-
service customers, using the Commission Staff’s rate design[.]” Also, if an AES “fails to make a
satisfactory demonstration regarding its forward capacity obligations pursuant to MCL
460.6w(8), the resulting state reliability mechanism capacity charge shall be levied by
Cloverland . . . on the retail open access customers of that [AES] on a pro rata basis.”

After filing an appeal in this Court, Cloverland filed in the PSC a motion for a stay of
enforcement of the portion of the PSC’s November 2017 opinion and order. The Staff filed a
response to Cloverland’s motion for a stay and agreed to a limited stay to avoid the unintended
consequences of application of the November 2017 opinion and order. The Staff acknowledged
that Cloverland’s COSS was out of date and did not reflect the actual cost to serve current
customers. Thus, the Staff did not dispute that implementation of the November 2017 opinion
and order would cause some customers to be charged for capacity on the basis of outdated
information. In the Staff’s view, the stay should expire when the PSC issues an order in
Cloverland’s pending annual SRM update case, PSC Case No. U-20144. Also, the stay should
be conditioned on Cloverland’s agreement to revise its application in PSC Case No. U-20144 to
propose a method of recalculating SRM charges using one or more of certain methodologies
suggested by the Staff. In May 2018, the PSC entered an order approving Cloverland’s motion
for a stay of enforcement of the November 2017 opinion and order, subject to conditions.

In September 2018, Cloverland filed in the PSC a copy of a written settlement agreement
reached between Cloverland and the Staff regarding the stay in this case and regarding
Cloverland’s pending annual SRM update case, PSC Case No. U-20144. The settlement
agreement noted that the Staff had proposed an SRM rate schedule that avoided the negative

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effect on Cloverland’s members-customers and that used one of the possible methodologies set
forth in the PSC’s May 2018 stay order. Cloverland and the Staff agreed that Cloverland would
voluntarily implement the SRM charges proposed by the Staff for service rendered on and after
June 1, 2019. Cloverland was “to offset the SRM charges by identical reductions to its base rates
to its full-service members/customers effective at the point in time the SRM charges become
effective to make the SRM charges revenue neutral to its members/customers.” The parties
reserved the right to take different positions in future rate proceedings. The parties further
agreed that the stay of the November 2017 opinion and order should be “extended and continued
for service rendered through May 31, 2019.” The settlement agreement provided that Cloverland
would continue to pursue the instant appeal and that the settlement agreement did not constitute
an admission or waiver regarding any of the parties’ respective positions in this appeal. It was
agreed that this Court’s decision in this appeal would not affect the terms of the settlement
agreement.

On appeal, Cloverland sets forth three arguments: (1) MCL 460.6w does not confer
jurisdiction on the PSC to set SRM charges for full-service retail members-customers of an
electric cooperative that is member-regulated, (2) the SRM charge was nonetheless unlawful
because the sole customer taking from an AES is not paying an SRM charge, and therefore, a
full-service customer cannot be subject to an SRM charge, and (3) the PSC acted unreasonably
and unlawfully in setting SRM charges for Cloverland based on outdated cost studies and which
ignored it existing rate design. We consider each argument in order.

II. STANDARD OF REVIEW

This Court has explained:

The standard of review for PSC orders is narrow and well defined.
Pursuant to MCL 462.25, all rates, fares, charges, classification and joint rates,
regulations, practices, and services prescribed by the PSC are presumed, prima
facie, to be lawful and reasonable. Mich Consol Gas Co v Pub Serv Comm, 389
Mich 624, 635-636; 209 NW2d 210 (1973). A party aggrieved by an order of the
PSC has the burden of proving by clear and satisfactory evidence that the order is
unlawful or unreasonable. MCL 462.26(8). To establish that a PSC order is
unlawful, the appellant must show that the PSC failed to follow a mandatory
statute or abused its discretion in the exercise of its judgment. In re MCI Telecom
Complaint, 460 Mich 396, 427; 596 NW2d 164 (1999). An order is unreasonable
if it is not supported by the evidence. Associated Truck Lines, Inc v Pub Serv
Comm, 377 Mich 259, 279; 140 NW2d 515 (1966). [In re Application of
Consumers Energy to Increase Electric Rates (On Remand), 316 Mich App 231,
236-237; 891 NW2d 871 (2016).]

Further, “[a] final order of the PSC must be authorized by law and be supported by competent,
material, and substantial evidence on the whole record.” Id. at 237, citing Const 1963, art 6,
§ 28, and Attorney General v Pub Serv Comm, 165 Mich App 230, 235; 418 NW2d 660 (1987).

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 This Court affords due deference to the administrative expertise of the PSC and may not
substitute its judgment for that of the PSC. Consumers Energy, 316 Mich App at 237, citing
Attorney General v Pub Serv Comm No 2, 237 Mich App 82, 88; 602 NW2d 225 (1999).

We give respectful consideration to the PSC’s construction of a statute that the
PSC is empowered to execute, and this Court will not overrule that construction
absent cogent reasons. In re Complaint of Rovas Against SBC Mich, 482 Mich
90, 103, 108; 754 NW2d 259 (2008). If the language of a statute is vague or
obscure, the PSC’s construction serves as an aid in determining the legislative
intent and will be given weight if it does not conflict with the language of the
statute or the purpose of the Legislature. Id. at 103-104. However, the
construction given to a statute by the PSC is not binding on us. Id. at 103.
Whether the PSC exceeded the scope of its authority is a question of law that is
reviewed de novo. In re Complaint of Pelland Against Ameritech Mich, 254 Mich
App 675, 682; 658 NW2d 849 (2003). [Consumers Energy, 316 Mich App at
237.]

This Court has further explained:

Ultimately, the statutory language itself is controlling, and this Court will neither
abandon nor delegate its responsibility to determine legislative intent. Moreover,
we review de novo issues of statutory interpretation, including the [PSC’s]
determinations regarding the scope of its own authority. In sum, when
considering the construction given to a statute by an agency, our ultimate concern
is the proper construction of the plain language of the statute regardless of the
agency’s interpretation, and our primary obligation is to discern and give effect to
the Legislature’s intent. [In re Reliability Plans, 325 Mich App at 221 (citations
omitted).]

III. ANALYSIS

A. AUTHORITY UNDER MCL 460.6W TO SET SRM CHARGES

Cloverland first argues that MCL 460.6w does not confer jurisdiction on the PSC to set
SRM charges for full-service retail members-customers of an electric cooperative that is
member-regulated. We conclude that the PSC correctly determined that it possesses authority
under MCL 460.6w to set SRM charges for full-service members-customers of a member-
regulated electric cooperative such as Cloverland.

“The [PSC] has no common-law powers and possesses only the authority granted to it by
the Legislature.” In re Reliability Plans, 325 Mich App at 222. Further, this Court “strictly
construe[s] the statutes that confer power on the [PSC], and that power must be conferred by
clear and unmistakable language.” Id. (quotation marks and citation omitted). Hence, “powers
specifically conferred on an agency cannot be extended by inference; no other or greater power
was given than that specified.” Id. (quotation marks, ellipsis, and citation omitted).

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 The language of a statute provides the most reliable evidence of the Legislature’s intent.
Coldwater v Consumers Energy Co, 500 Mich 158, 167; 895 NW2d 154 (2017). “If the
language of the statute is unambiguous, the Legislature must have intended the meaning clearly
expressed, and the statute must be enforced as written. No further judicial construction is
required or permitted.” Id., quoting Sun Valley Foods Co v Ward, 460 Mich 230, 236; 596
NW2d 119 (1999). Statutory language is accorded its ordinary meaning within the context in
which it is used and must be read harmoniously to give effect to the statute as a whole. Johnson
v Recca, 492 Mich 169, 177; 821 NW2d 520 (2012). “Courts must give effect to every word,
phrase, and clause in a statute and avoid an interpretation that would render any part of the
statute surplusage or nugatory.” Coldwater, 500 Mich at 167-168, quoting State Farm Fire &
Cas Co v Old Republic Ins Co, 466 Mich 142, 146; 644 NW2d 715 (2002).

Statutes that relate to the same subject matter or share a common purpose are in
pari materia and must be read together as one law to effectuate the legislative
purpose as found in harmonious statutes. If two statutes lend themselves to a
construction that avoids conflict, that construction should control. When two
statutes are in pari materia but conflict with one another on a particular issue, the
more specific statute must control over the more general statute. The rules of
statutory construction also provide that a more recently enacted law has
precedence over the older statute. This rule is particularly persuasive when one
statute is both the more specific and the more recent. [Parise v Detroit
Entertainment, LLC, 295 Mich App 25, 27-28; 811 NW2d 98 (2011) (quotation
marks, ellipsis, brackets, and citations omitted).]

Under Act 167, which was enacted in 2008, a member-regulated electric cooperative has
a general authority to set its own rates. See MCL 460.36(1) (“A cooperative electing to be
member-regulated under this act shall, by board action, establish, maintain, and apply all rates,
charges, accounting standards, billing practices, and terms and conditions of service in
accordance with this act.”); MCL 460.33 (“The purpose of this act is to allow the board of
directors to elect member-regulation for rates, charges, accounting standards, billing practices,
and terms and conditions of service.”). But this general authority to self-govern is not absolute.
For example, the PSC retains authority under Act 167 to set a member-regulated cooperative’s
rates for customers who choose to obtain service from an AES. See MCL 460.36(2).4

4
In particular, MCL 460.36(2) provides:
Notwithstanding the provisions of this act, the commission shall retain
jurisdiction and control over all member-regulated cooperatives for matters
involving safety, interconnection, code of conduct including, but not limited to,
all relationships between a member-regulated cooperative and an affiliated
alternative electric supplier, customer choice including, but not limited to, the
ability of customers to elect service from an alternative electric supplier under
1939 PA 3, MCL 460.1 to 460.10cc, and the member-regulated cooperative’s
rates, terms, and conditions of service for customers electing service from an

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 Act 341, which was enacted in 2016, added MCL 460.6w, which sets forth an additional
exception to a member-regulated electric cooperative’s authority to self-govern. MCL 460.6w
applies to electric providers. This statute expressly defines “[e]lectric provider” to include “[a]
cooperative electric utility in this state.” MCL 460.6w(12)(c)(iii). MCL 460.6w(3), which
prescribes a specific formula for the PSC to use in establishing an SRM charge, states that the
PSC shall “ensure that the resulting capacity charge does not differ for full service load and
alternative electric supplier load[.]” This statutory language clearly and unmistakably authorizes
the PSC to set an SRM charge with respect to member-regulated electric cooperatives, both for
“full service load,” i.e., for full-service members-customers, as well as for “alternative electric
supplier load,” i.e., for choice or ROA customers of an AES. Any other interpretation would
render nugatory the statutory language requiring the PSC to use a specific formula and to “ensure
that the resulting capacity charge does not differ for full service load and alternative electric
supplier load[.]” MCL 460.6w(3).5 Act 341, which was enacted in 2016, is more recent than
Act 167, which was enacted in 2008. MCL 460.6w(3) is also a more specific provision because
it addresses a specific component of rates, i.e., a capacity charge, whereas Act 167 addresses the
general authority of member-regulated cooperatives to set rates. Hence, a member-regulated
cooperative’s general authority to set its own rates under Act 167 is subject to the exception set
forth in MCL 460.6w(3) regarding the PSC’s authority to set a capacity charge. Therefore,

alternative electric supplier, service area, distribution performance standards, and
quality of service, including interpretation of applicable commission rules and
resolution of complaints and disputes, except any penalties pertaining to
performance standards and quality of service shall be established by the
cooperative’s members when voting on the proposition for member-regulation or
at an annual meeting of the cooperative.
5
Cloverland says that the PSC “can assure that capacity costs are the same for full-service
customers as for alternative energy customers by determining how those costs are recovered in
[Cloverland’s] current rates without altering those rates.” But that argument makes no sense
because MCL 460.6w(3) prescribes a specific formula to use in determining the SRM charge and
requires the PSC to ensure that the SRM charge does not differ for full-service and AES
customers. In order to follow the statutory requirements, the PSC necessarily must have the
authority to set the SRM charge for both types of customers. Also, as the PSC convincingly
explains in its brief in connection with the third issue, Cloverland’s
rates do not break out the amounts included for various capacity costs so it is
impossible to know what full-service customers are actually paying for capacity
under Cloverland’s current rates. The fact that Cloverland’s current rates cover
all of its costs, including capacity costs, is not sufficient evidence to allow the
[PSC] to ensure that the capacity charges paid by full-service customers are the
same as the capacity charge set by the methodology mandated in Act 341. MCL
460.6w(3). The [PSC] did not err in requiring that Cloverland state the capacity
charge in its full-service tariff so that the [PSC] can compare and ensure that full-
service and ROA load pay the same amount for capacity.

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Cloverland’s argument is without merit, and the PSC had the authority to the set the SRM
charge.

B. SUBJECTING FULL-SERVICE CUSTOMERS TO AN SRM CHARGE

Cloverland also argues that the SRM charge was nonetheless unlawful because the sole
customer taking from an AES—UP Paper—is not paying an SRM charge, and therefore,
Cloverland, as a full-service customer, cannot be subject to an SRM charge. We conclude that
the PSC correctly determined that it was required to impose the SRM charge on full-service
customers regardless of whether the AES serving UP Paper makes the required capacity
demonstration.

MCL 460.6w(3) states, in relevant part, “After the effective date of [Act 341], the
commission shall establish a capacity charge as provided in this section.” This determination
must be conducted annually. See MCL 460.6w(3) (requiring a determination of an SRM charge
to be conducted as a contested case and concluded “by December 1 of each year[]”). The PSC is
required to “provide notice to the public of the single capacity charge as determined for each
territory.” MCL 460.6w(3). Further, “[t]he capacity charge must be applied to alternative
electric load that is not exempt as set forth under subsection (6) and (7).” MCL 460.6w(3). In
short, MCL 460.6w(3) requires the PSC to impose an SRM charge each year. There is no
triggering mechanism that must be met before an SRM charge is imposed on full-service
customers. Although an AES customer is exempt from paying the charge if the AES serving that
customer has made the required capacity demonstration, see MCL 460.6w(3) and (6), there is no
statutory language indicating that the exemption applies to full-service customers. The language
of MCL 460.6w(3) directing the PSC to ensure that the “capacity charge does not differ for full
service load and alternative electric supplier load[]” requires the charge to be the same for full-
service customers and ROA customers, but this does not mean that a statutory exemption for
customers of an AES must somehow be extended to full-service customers. Requiring a charge
to be the same does not equate with expanding a statutory exemption. The PSC thus properly
determined that Cloverland’s full-service customers are required to pay the SRM charge
regardless of whether the AES serving UP Paper met its capacity demonstration.

C. SETTING SRM CHARGES

Finally, Cloverland argues that the PSC acted unreasonably and unlawfully in setting
SRM charges for Cloverland based on outdated cost studies and ignoring its existing rate design.
We conclude that this issue is moot, and in any event, the PSC did not act unreasonably or
unlawfully in setting the SRM charge.

“This Court does not decide moot issues. A matter is moot if this Court’s ruling cannot
for any reason have a practical legal effect on the existing controversy.” Garrett, 314 Mich App
at 450 (quotation marks and citations omitted). Also, “[a]n issue becomes moot when a
subsequent event renders it impossible for the appellate court to fashion a remedy.” Id.
(quotation marks and citation omitted). Here, the PSC’s stay orders and the parties’ settlement
agreement have made it impossible for this Court to grant any relief on this issue. The PSC
entered an initial stay order in May 2018, and subsequently extended the stay to May 31, 2019,
after the parties settled the annual SRM update case regarding the SRM charge for service

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rendered on and after June 1, 2019. As a result, no customer of Cloverland, whether full-service
or ROA, will ever pay the particular charge ordered in the November 2017 opinion and order
from which the present appeal arises. Because the issue is moot, this Court does not reach it.
This case does not fall within the exception to the mootness doctrine for issues that are capable
of repetition while evading review. See City of Warren v Detroit, 261 Mich App 165, 166 n 1;
680 NW2d 57 (2004) (“We will only review a moot issue if the issue is publicly significant and
is likely to recur, yet also is likely to evade review.”). The issue here is moot because of the stay
orders and the parties’ settlement; there is no indication that such events will recur and cause the
issue to evade review.

Even if the issue was not moot, Cloverland has not established that the PSC acted
unreasonably or unlawfully in setting the SRM charge set forth in the November 2017 opinion
and order. Cloverland asserts that the 2015 COSS upon which the PSC relied was out of date,
but the COSS was submitted by Cloverland itself, and there was not sufficient updated evidence
upon which the PSC could rely in making its statutorily required calculations. Cloverland also
says that capacity costs were already embedded in Cloverland’s existing rates, but as noted in the
first issue, the PSC was required by MCL 460.6w(3) to use a specific formula and to ensure that
the SRM charge does not differ for full-service customers and AES customers. There is no
indication that Cloverland broke down the capacity costs purportedly embedded in its existing
rates with sufficient clarity such that the PSC could carry out its statutory duty without setting a
separate SRM charge. Further, as noted by the PSC, Cloverland was free to alter its existing
rates to remove any embedded capacity costs after the PSC imposed the SRM charge.

Affirmed.

/s/ Thomas C. Cameron
/s/ Colleen A. O’Brien
/s/ Karen M. Fort Hood

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