MARQUETTE — An organization focused on fair utility rates for Michigan ratepayers has scored a victory in a dispute with the Upper Peninsula Power Co. which could play a part in helping UPPCO residential customers see $1.3 million in billing refunds.

Citizens Against Rate Excess, or CARE, a nonprofit formed to combat excessive utility rate increases, has gained access to a memorandum detailing a 2017 settlement agreement between UPPCO and Enbridge Energy Partners. In the agreement, Enbridge was reimbursed for “unlawful surcharges” imposed on all UPPCO customers from 2010 to 2015, according to a Michigan Public Service Commission order issued Dec. 6.

The surcharges are classified as a revenue decoupling mechanism, or RDM, and were implemented via six separate MPSC general rate case settlement agreements and approved in three separate, uncontested MPSC orders, case documents show.

The MPSC defines an RDM as “a ratemaking mechanism designed to reduce the dependence of a utility’s revenues on the amount of sales of the utility’s energy commodity, thereby enabling the growth of energy efficiency measures.”

RDMs were initially designed to supplement gas utilities so that they are less dependent on gas sales for financial health, while at the same time promoting customer efforts to reduce energy consumption.

The charge helps a utility separate fixed costs and variable costs, which allows the utility to recover fixed costs to operate even if it sells less gas than it plans to sell, MPSC documentation states.

UPPCO filed an application in June 2009 for a rate increase and the implementation of an RDM for the “test year 2010.”

In May 2011, UPPCO filed an application to reconcile the RDM and recover a revenue shortfall, according to Michigan Court of Appeals documents.

During that same year in a case involving Detroit Edison, the appellate court ruled that a “plain reading” of the law allowing gas companies to collect RDMs “does not empower the (M)PSC to approve the use of an RDM for electric providers,” reversing the MPSC’s decision to allow Detroit Edison to use an RDM.

According to MPSC documents, Enbridge initially disputed the UPPCO RDM charges in 2012, asserting that state law at the time permitted RDMs for natural gas utilities, but “contained no similar provision for an electric utility.” Enbridge argued that because the MPSC is a “creature of statute” and has only those powers conferred on it by the Legislature, the commission “exceeded its authority and the subject matter jurisdiction allowed” when it approved UPPCO’s RDM reconciliation.

The commission rejected Enbridge’s complaint in 2012, in part, because the company did not seek to intervene at the time the June 2009 UPPCO rate case was being considered by the MPSC.

The Court of Appeals remanded the Enbridge case back to the MPSC in 2017. Shortly thereafter Enbridge filed a request with the MPSC to withdraw its complaint, indicating it had settled the matter with UPPCO.

“The unfiled settlement agreement is understood to provide for Enbridge receiving at least some refund of the RDM surcharges,” MPSC documents state. “On Oct. 20, 2017, CARE submitted comments asserting that UPPCO’s residential ratepayers should also be entitled to a refund of the unlawful RDM surcharge.”

CARE’s complaint, filed in April 2018 sought a copy of the settlement agreement between UPPCO and Enbridge.

UPPCO refused to produce the document, according to MPSC filings, “identifying it as inadmissible in, and irrelevant to,” the case involving CARE and sought to dismiss the case on technical grounds.

CARE went on to file a motion with an administrative law judge at the MPSC to compel UPPCO to grant access to the settlement agreement. The judge ruled in favor of the nonprofit CARE, ordering UPPCO to make the document available.

UPPCO filed an appeal on Sept. 24 with the MPSC to overrule the judge’s decision arguing that the company’s past use of RDMs had been “established and implemented through six commission orders from which no appeals were ever taken; the commission lacks authority to grant … the relief requested because the commission cannot grant refunds; CARE’s complaint is an improper collateral attack on commission orders; and the statute of limitations has passed.”

However, an MPSC staff response to UPPCO’s appeal filed Nov. 8 recommends the settlement agreement between the company and Enbridge be produced, and denied UPPCO’s request to dismiss the case.

“Despite UPPCO’s attempts to distance the settlement between UPPCO and Enbridge from the issues raised in CARE’s complaint, the agreement is relevant to the subject matter involved and is reasonably calculated to lead to admissible evidence in this case,” MPSC staff opinion reads.

CARE’s legal counsel John Liskey said the MPSC decision is a win for U.P. ratepayers.

“CARE applauds the commission’s denial of UPPCO’s appeal,” Liskey said “If Enbridge got a refund, so should residential ratepayers.”

UPPCO Vice President of Business Development and Communications Brett French declined to comment on the case.

“Questions pertaining to the RDM surcharges are currently being litigated in front of the Michigan Public Service Commission,” French said in an email Dec. 11. “Any comments being made by UPPCO during litigation will be reflected in our regulatory and legal filings.”

UPPCO serves nearly 52,000 customers in Upper Michigan.

Lisa Bowers can be reached at 906-228-2500, ext. 242. Her email address is lbowers@miningjournal.net.