Last Thursday, the Michigan Public Service Commission (MPSC) issued an order in Indiana Michigan Power Company’s (I&M) 2021 Power Supply Cost Recovery Reconciliation case agreeing with Michigan Attorney General?Dana Nessel’s argument to disallow nearly $11.2 of unreasonable costs associated with a “sweetheart deal” I&M entered into with its own affiliate power generators. I&M was improperly seeking to recover these costs from its customers to enrich shareholders contrary to the law. Both I&M and the power generators are owned or affiliated with American Electric Power, or AEP, and therefore profits of one entity benefit the in-common interests of both.
On March 17, 2020, I&M filed its Power Supply Cost Recovery Reconciliation application with the MPSC seeking to recover the costs of supplying electricity to their customers. As part of the request, I&M detailed how part of the supply came from affiliate power plants and then requested recovery of those costs from its customers. A utility may pass reasonable power acquisition costs on to its customers in their bills, however they cannot profit from these purchases and cost pass-throughs. After reviewing the application, the attorney general filed expert testimony arguing that I&M was essentially doing just that, unreasonably and improperly charging its customers to fund the power purchases made at above-market prices and paid to generation affiliates within the same corporate ownership as I&M. By purchasing at inflated prices and passing those costs to ratepayers, they sought to use ratepayer money to enhance earnings of AEP's shareholders. The Commission Staff participates in these cases as a separate party and they also supported the Attorney General’s arguments in the case.
In its order, the Commission agreed with the attorney general's arguments and ruled that I&M cannot recover the $11.2 million in above-market rate costs for this electric power from its customers and that I&M must refund these unreasonable costs back to customers.
The Commission also agreed with its Staff to disallow another $497,000 in costs based on some energy efficiency requirements, which the attorney general supported, totaling $11.6 million in savings for I&M customers. The $11.2 million in customer savings for the above market rate costs is on top of the $1.347 million savings for I&M customers that the Attorney General won last year before the Commission on this same issue and successfully defended at the Michigan Court of Appeals this past January.
“This is a great win for I&M customers, and shines a light on the obvious problem of I&M’s self-serving affiliate deals that hurts its ratepaying customers,” said Nessel. “I’m glad the Commission once again agreed with my office that I&M customers should not have to pay for these sweetheart deals between I&M and its affiliates. I&M shareholders should bear those costs, not their customers who are forced, as result of the state granted monopoly, to trust I&M to make reasonable decisions on their behalf. This behavior should call into question management decisions of these utility monopolies, and what responsibilities they have to operate appropriately and fairly.”
I&M provides electricity to approximately 133,000 customers in southwestern Michigan.
On March 17, 2020, I&M filed its Power Supply Cost Recovery Reconciliation application with the MPSC seeking to recover the costs of supplying electricity to their customers. As part of the request, I&M detailed how part of the supply came from affiliate power plants and then requested recovery of those costs from its customers. A utility may pass reasonable power acquisition costs on to its customers in their bills, however they cannot profit from these purchases and cost pass-throughs. After reviewing the application, the attorney general filed expert testimony arguing that I&M was essentially doing just that, unreasonably and improperly charging its customers to fund the power purchases made at above-market prices and paid to generation affiliates within the same corporate ownership as I&M. By purchasing at inflated prices and passing those costs to ratepayers, they sought to use ratepayer money to enhance earnings of AEP's shareholders. The Commission Staff participates in these cases as a separate party and they also supported the Attorney General’s arguments in the case.
In its order, the Commission agreed with the attorney general's arguments and ruled that I&M cannot recover the $11.2 million in above-market rate costs for this electric power from its customers and that I&M must refund these unreasonable costs back to customers.
The Commission also agreed with its Staff to disallow another $497,000 in costs based on some energy efficiency requirements, which the attorney general supported, totaling $11.6 million in savings for I&M customers. The $11.2 million in customer savings for the above market rate costs is on top of the $1.347 million savings for I&M customers that the Attorney General won last year before the Commission on this same issue and successfully defended at the Michigan Court of Appeals this past January.
“This is a great win for I&M customers, and shines a light on the obvious problem of I&M’s self-serving affiliate deals that hurts its ratepaying customers,” said Nessel. “I’m glad the Commission once again agreed with my office that I&M customers should not have to pay for these sweetheart deals between I&M and its affiliates. I&M shareholders should bear those costs, not their customers who are forced, as result of the state granted monopoly, to trust I&M to make reasonable decisions on their behalf. This behavior should call into question management decisions of these utility monopolies, and what responsibilities they have to operate appropriately and fairly.”
I&M provides electricity to approximately 133,000 customers in southwestern Michigan.
