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145750 - In re Application to Increase Rates (ABATE v MPSC)

In re Application of the Detroit Edison Company to Increase Rates
_____________________________
 
 
Association of Businesses Advocating Tariff Equity,
 
Robert A. W. Strong
 
Appellant,
(Appeal from Ct of Appeals)
 
v
(Michigan Public Service Commission)
 
Michigan Public Service Commission,
 
Anne M. Uitvlugt
 
Appellee,
 
and
 
 
The Detroit Edison Company,
 
Stephen J. Rhodes
 
Petitioner-Appellee.
 


Summary

Detroit Edison applied to the Michigan Public Service Commission for an increase in electrical rates. While its application was under review, Detroit Edison self-implemented an interim rate increase, which it was authorized to do under MCL 460.6a(1) (Section 6a). The rate increase that the Commission ultimately approved was less than the rate increase that Detroit Edison had implemented. As a result, under Section 6a, Detroit Edison was obligated to issue a refund to its customers. Detroit Edison proposed that it issue a refund to its customer classes based upon each customer class’s pro rata share of the total revenue collected. The Association of Businesses Advocating Tariff Equity (ABATE) objected on behalf of a category of customers known as “primary customers.” ABATE argued that Section 6a required Detroit Edison to calculate a refund for each primary customer based on that individual customer’s actual overpayment.

 

Section 6a(1) states: “If a utility implements increased rates or charges under this subjection before the commission issues a final order, that utility shall refund to customers, with interest, any portion of the total revenues collected . . . that exceed the total that would have been produced by the rates or charges subsequently ordered by the commission in its final order. The commission shall allocate any refund required by this section among primary customers based upon their pro rata share of the total revenue collected through the applicable increase, and among secondary and residential customers in a manner to be determined by the commission.” [Emphasis added.]

 

The Commission concluded that Detroit Edison’s proposed method of refunding the overpayment was consistent with the requirements of Section 6a, which did not require the refund to be “precisely tailored to each and every Detroit Edison customer who paid a self-implemented rate.” The Commission was not persuaded by ABATE’s argument that, under Detroit Edison’s plan, certain primary customers, who changed electric suppliers during the time when Detroit Edison was charging the self-implemented rate, would receive no refund because they were no longer in the class of customers eligible for a refund. Nothing was hidden from these customers, the Commission ruled, and they would have been aware of the possibility that the final rate approved by the Commission would differ from the unapproved rate self-implemented by Detroit Edison.

 

ABATE appealed to the Court of Appeals, which affirmed in a split published opinion. The majority held that Section 6a was “subject to reasonable but differing interpretations” and therefore was ambiguous. The majority concluded that nothing in Section 6a “compels the conclusion that the use of the term ‘refund’ means the monies returned to a primary customer must be based on the individual primary customer’s actual overpayment.” It noted that Section 6a’s reference to “primary customers” and “their” “pro rata” share of revenues collected could refer to individual primary customers, or to the class of primary customers, treated as a group. The majority held that there were “cogent reasons” supporting the Commission’s interpretation of the statute, including the administrative costs associated with a refund of each primary customer’s actual overpayment, and that the Commission’s ruling was both lawful and reasonable.

 

The dissenting judge concluded that Section 6a clearly set forth the primary customers’ right to a refund for their individual overpayments, and that the Commission erred in approving a contrary methodology.

 

ABATE appealed to the Supreme Court. In an order dated March 29, 2013, the Supreme Court granted leave to appeal. The order states “[t]he parties shall address: (1) whether the Court of Appeals erred in concluding that MCL 460.6a(1) is subject to “reasonable but differing interpretations” and therefore ambiguous, see Mayor of Lansing v Public Service Comm, 470 Mich 154, 166 (2004) . . . ; and (2) whether MCL 460.6a(1) requires that a refund to primary customers required after a utility implements increased rates or charges under that subsection be allocated to each primary customer that was over-charged on the basis of the amount paid by each primary customer.”