Behind the Meter: Rate Case Process

This month's episode on Rate Case Process was hosted by Mark Burn, the commission’s chief operating officer, and featured all three of the MPSC's Commissioners: Chair Dan Scripps, Katherine Peretick and our most recently appointed Alessandra Carreon.

Mark Burn (left) alongside Commissioner Peretick (right)

On this episode Burn starts with the question, "What is a rate case?" Chair Scripps answers, "The bread and butter of what we do here, they're the cases that typically get the most attention and it's because it directly effects both people's pocketbooks and ultimately the resources available to the utilities to invest in the infrastructure that we all rely on." He further breaks down the fundamental aspects of the rate case process: First, the utility comes up with how much they believe they need to invest in the system, including the operations and maintenance of that system. Second, the utility comes up with how much its likely to receive from customers at it's current rates. Then, third, if there's a gap between those two numbers, "That the amount needed for investment in operations and maintenance outstrips the amount that it's going to get in rates under the current rates then it can submit to the commission a proposal to increase those rates" Chair Scripps describes.

Commissioner Carreon (left) alongside Chair Scripps (right)

Commissioner Carreon adds, "The cost must be reasonable and prudent and that utilities must have the opportunity to earn a fare profit and that necessarily requires that we consider the utility, the shareholders, but ultimately our role is to also ensure that we are considering the customer throughout every step of the rate case." The legislature has determined that the MPSC has no more than ten months to conduct a rate case. This includes the review of the initial proposal and all of the parties' positions before issuing an order.

We Want Green, Too has been an active party in these cases for the past several years. Prior to that resident ratepayers, especially Detroit residents on the city's East Side, had no voice on the record for the MPSC to consider. We Want Green Too's role as a non-profit intervenor is unique to that of other parties which include municipalities like the City of Ann Arbor and large corporations like Kroger or Walmart.

In addition to these, the commission's staff also submit their opinion as apart of the rate case's filings. Even the state's Attorney General, Dana Nessel, participates in these cases. There are a variety of groups who submit rate case filings representing a diverse range of consumer interests, "The number and variety of parties is increasing too. We're seeing more and more people being interested in these rate cases and putting their positions on the record so that we can consider them," Commissioner Peretick adds.This raises a critical point, positions have to be added to the record in order for the commission to consider it's influence as apart of their final decision on whether or not to raise rates, or rather, how much to increase rates.

In 2009 there were twenty parties submitting filings as apart of DTE's rate case and that number has increased more than 3x with sixty-nine participating parties just last year. Along with the number of parties increasing the types of parties have also changed over the years. There are more types of businesses, especially electric companies like those specializing in EV products participating with the potential of DTE's increased rates threatening their profit margins. During the early 2000s, the City of Detroit was much more involved, but unfortunately that's not happening today.

We Want Green, Too has a unique perspective, especially as a Detroit based organization with the ability to involve residents, particularly on Detroit's East Side, in this process by recruiting people from marginalized communities like fixed-income seniors or low-income Black homeowners and preparing them to prepare testimony to be reviewed by the MPSC. These are communities whose perspectives have been historically neglected by the state, especially in the rate-making process. Once all of these testimonies are filed from municipalities to businesses, large corporations and marginalized rate payers with the help of WWGT, then the commissioners are able to read and review the hundreds and hundreds of pages of case filings.

Peretick explains, "We do dozens of hours of formal deliberations with the three of us talking through each one of these issues along with advice from all of our advisors and our staff members and our attorneys and we read through the transcripts that are on the record, we sift through the tables of data, read the explanations and the justifications of the arguments both for and against each one of those issues and there's a lot of issues". Peretick goes on to share that the most recent rate case had 318 different issues that needed to be decided on. From there each decision made is written up into an order that's issued during a public commission meeting where each commissioner votes on whether or not to approve that order, making it legally binding. All of this happens in a matter of ten months.

One interesting point that's made during this discussion is that if the MPSC fails to complete the case and issue a decision within their ten month window, then the utility gets the increase that they proposed as filed, "So there is a really significant driver to get all of that work done" Chair Scripps adds. He also mentions that while the greater number of parties makes the work more complex, its beneficial. "The more parties that are involved, the more complex the record is, but also the richer the record is". He speaks on the development of the Utility Consumer Participation Board (UCPB) and the fund that they administer in order to dispurse grants to organizations representing the interests of residential customers. This works to diversify the number of parties from simply focusing on large industrial customers and their interests, as was the case twenty years ago, when residential issues were neglected and not equally a part of the record. Scripps shares, "Having those issues, those voices, formerly represented in the process gives us a deeper sense of the issues involved and ultimately a better, more thorough set of evidence to ultimately base our decisions on".

As the public becomes more aware of the work of the MPSC, it's critical to understand the difference between the formal process that WWGT participates in as an intervenor and the informal processes of posting a public comment or participating in a commissioner town hall. Commissioner Carreon emphasizes, "For the proceeding itself... everything that we decide is as based on the evidentiary record. It's what the witnesses filed in their testimony that then we ultimately use to decide those 300+ decision making points".

While engaging with the commission in a variety of ways is valuable, it’s essential that residents align their expectations with their engagement, understanding public comments aren't reviewed as apart of the evidentiary record in rate cases. Public participation has grown significantly over the last decade, especially as the commission expands its meeting locations outside of Lansing with town halls across the state from Detroit to Flint and Grand Rapids. However, improving public participation with the commission should center closing gaps in understanding around their processes as well as implementing accountability measures in order to establish and build trust between the public and the MPSC.