FERC Filings
Motion of EPSA for Leave to Intervene and Protest on Detroit Edison Co.'s Request of Purchases of Power from DTE East China and DTE River Rouge No. 1
III. PROTEST
EPSA applauds the Commission’s continued vigilance in protecting and promoting development of competitive wholesale electricity markets, including its enhanced scrutiny of utility-affiliate supply contracts. While the non-competitive power purchases contemplated in the instant Application may not be avoidable, EPSA urges the Commission to send a clear message that such arrangements are not acceptable as the norm. EPSA vigorously contends that all utility power purchases should include fair and equal consideration of all competitive supply options, and any regulatory approval of affiliate power deals that do not include equal opportunities for competitive options should occur only under the most extraordinary circumstances, as isolated instances conditioned on necessary steps to prevent their reoccurrence.
In contrast to the bona fide “one time only” case, in its June 3 Order, the MPSC reviewed prior exemption requests from Detroit Edison clearly indicating that this is not an isolated instance of events simply overtaking the utility, despite its best efforts. Indeed, the MPSC has felt compelled to grant exemptions to Detroit Edison twice before: once in 1998 and again in 2000. When granting the second exemption, the MPSC expressed concern about DTE’s failure to properly plan and act on its supply needs in a timely manner, stating: “[t]he situation is remarkably similar to that presented by the Commission’s Conners Creek restart order in Case No. U-10840, dated April 14, 1998. Detroit Edison has apparently not heeded the Commission’s warning in that case that ‘the threat of blackouts not be used as a bargaining piece…in the ongoing restructuring of the industry.’”
While any utility-affiliate deal excluding competitive suppliers is discouraging, EPSA applauds the MPSC’s regard for, and commitment to, competitive solicitations. In contrast to circumstances clearly indicating the absence of viable competitive supply options, the MPSC determined that “[i]t is not clear, however, that [the 150 MW DTE procured from nonaffiliated suppliers] represents all of the nonaffiliated capacity available from within its service territory. Nor is it clear how this capacity was solicited, whether through a transparent competitive solicitation or some other means.”
It is apparent that DTE’s delay put the MPSC between a rock and a hard place, and their deference to reliability concerns under these circumstances is understandable. However, EPSA welcomes the prospective conditions the MPSC established relating to any future DTE utility power purchase request. Should the utility return for a fourth exemption, it “will be required to demonstrate that it has undertaken a competitive solicitation for the power to ensure that the costs of electricity…are reasonable and that all potential suppliers have been provided an equal opportunity to provide the needed power.” Preferably, all necessary steps can be taken to avoid a fourth exemption.
If the Commission does approve the Applicants’ proposed Summer Reliability Sales filing, the Commission should audit DTE’s transactions with East China and Rouge 1 that may occur during the summer period to assure that the affiliates do not receive preferential treatment. In this regard, the Commission should further clarify that the transactions, if approved, do not constitute a waiver of applicable affiliate rules. The Applicants themselves have indicated their intention to retain all information relating to the nature of the “Reliability Condition” requiring an affiliate transaction, as well as competing offers and relevant market price data. The MPSC has indicated that it will review this information to confirm the transaction’s financial integrity and the absence of self-dealing.
EPSA recommends that the Commission condition the filing upon the Applicants submitting the same information to the Commission along with whatever other information the Commission deems reasonable, so that the Commission may also audit the Summer Reliability Sales. Moreover, EPSA recommends that the Commission make the Summer Reliability Sales subject to refund pending the Commission’s audit of the transactions. If the Commission determines that an affiliate transaction took place in spite of a feasible offer from a lower cost alternative supplier, the Commission should require East China and Rouge 1 to disgorge all revenues received above their short-run variable cost for the entire Summer Reliability Sales period. Again, as noted by the Applicants, the audit procedures will provide an additional safeguard for the benefit of ratepayers.