ATTORNEY GENERAL V MPSC
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STATE OF MICHIGAN
COURT OF APPEALS
ATTORNEY GENERAL,
UNPUBLISHED
September 25, 1998
Plaintiff-Appellant,
v
MICHIGAN PUBLIC SERVICE COMMISSION
and THE DETROIT EDISON COMPANY,
No. 197052
Public Service Commission
LC No. 10427 R
Defendants-Appellees.
Before: MacKenzie, P.J., and Bandstra and Markman, JJ.
PER CURIAM.
Plaintiff Attorney General appeals as of right from orders entered on April 10, 1996, and July
16, 1996, by defendant Michigan Public Service Commission (PSC) rejecting proposed secondary
effects adjustments regarding lost profits from off-system sales and changes in the blending percentages
of coal burned at facilities operated by defendant Detroit Edison in 1994, and denying rehearing,
respectively. We affirm.
Detroit Edison’s Fermi 2 nuclear power plant is subject to a performance standard, approved in
Case No. U-8789, that provides for the imposition of a disallowance in Detroit Edison’s annual power
supply cost recovery (PSCR) reconciliation proceeding. Under the standard, the amount of the
disallowance should be equal to the net incremental cost of power, including capacity and energy, that
Detroit Edison was required to purchase or produce in order to compensate for any production shortfall
at Fermi 2.
On December 25, 1993, Fermi 2 experienced a failure in its turbine generator. The plant did
not return to service until 1995. The outage required Detroit Edison to change the fuel blends at its
Monroe and River Rouge plants in order to accommodate the higher loads produced at those facilities.
Detroit Edison’s 1993 PSCR reconciliation proceeding, Case No. U-10103-R, presented the
first opportunity to implement the Fermi 2 performance standard. In an order entered in that case on
September 8, 1994, the PSC approved a settlement agreement in which the Attorney General and the
Residential Ratepayers’ Consortium (RRC) agreed that the methodology set forth in the testimony of
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Detroit Edison witness James Byron, the company’s director of operations, should be used to determine
the net incremental cost of replacement power for Fermi 2.
The present case involves Detroit Edison’s 1994 PSCR reconciliation proceedings. The first
phase of the case resulted in a settlement order that provided for the calculation of the 1994 Fermi 2
performance standard disallowance using the methodology approved in Case No. U
-10103-R. The
second phase involved a hearing concerning several issues, including the calculation of Detroit Edison’s
1994 net incremental cost for replacement power as required under the Fermi 2 performance standard.
Detroit Edison witness James Byron presented testimony concerning the company’s calculation. The
RRC’s witnesses jointly proposed adjustments to Detroit Edison’s calculation.
On November 6, 1995, the administrative law judge issued a proposal for decision concluding
that Detroit Edison’s methodology for determining net incremental costs was accurate and reasonable,
but that the company’s proposed Fermi 2 performance standard disallowance of $55,046,000 should
be adjusted by $4,196,000. The adjustment was based on the RRC’s proposals to factor in Detroit
Edison’s increased coal costs as a result of changing fuel blends at the Monroe and River Rouge plants,
as well as the company’s lost profits from off-system sales attributable to the Fermi 2 outage.
In a decision entered on April 10, 1996, the PSC agreed with the ALJ’s finding that Detroit
Edison’s methodology for determining net incremental costs was accurate and reasonable. However,
the Commission concluded that the secondary effects adjustments (for the increased costs of coal and
the off-system profits) should not be adopted. Reasoning that these costs were non-Fermi 2 power
costs not governed by the performance standard, the PSC therefore rejected the ALJ’s recommended
disallowance of $4,196,000. The Attorney General subsequently filed a petition for rehearing under
1992 AACS, R 460.17403 (Rule 403) reiterating its substantive arguments. The PSC denied the
petition in an order dated July 16, 1996, indicating that a rehearing under Rule 403 does not provide a
party a second opportunity to put forth an argument.
On appeal, the Attorney General first argues that under Rule 403, the PSC should have granted
rehearing to allow re-argument of the parties’ respective positions. A party aggrieved by an order of
the PSC bears the burden of proving by clear and convincing evidence that the order is unlawful or
unreasonable. MCL 462.26(8); MSA 22.45(8). The term “unlawful” has been defined as
unsupported by the evidence. Associated Truck Lines, Inc v Public Service Comm, 377 Mich 259;
140 NW2d 515 (1966). In this case, the PSC’s denial of the petition for rehearing was not unlawful or
unreasonable.
The Attorney General’s position is that the PSC cannot reject claims of error raised in a petition
for rehearing solely for the reason that the claims relate to issues decided in the order from which
rehearing is sought. No statute, rule, or case supports the Attorney General’s position. MCL 460.351;
MSA 22.111 authorizes the PSC to grant a rehearing and to alter or amend a decision, but it does not
mandate that the Commission do so. Rule 403(1) requires that a petition for rehearing based on a claim
of error in the decision must specify the findings of fact and conclusions of law claimed to be erroneous,
and must briefly state the basis of the error. It does not require the PSC to address the merits of any
claim raised in a petition for rehearing. Our Supreme Court has stated that while the PSC has the
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authority to grant rehearing, it cannot be assumed that it will do so “capriciously, without good cause
shown.” Lansing v Public Service Comm, 330 Mich 608, 613; 48 NW2d 133 (1951). Thus, the
decision to grant a petition for rehearing is within the discretion of the PSC. Were we to accept the
Attorney General’s position, the PSC would be required to grant rehearing in every case in which a
petition is filed, and to restate its ruling from its previous decision even if no changes were made to those
rulings – a complete abdication of its discretionary authority. Finally, it should be noted that the
Attorney General is not without a remedy; a party claiming error is entitled to appellate review of the
PSC’s underlying decision as of right. MCL 462.26(1); MSA 22.45(1). We therefore conclude that
the PSC’s order is not unlawful or unreasonable.
The Attorney General next claims that the PSC’s order rejecting the ALJ’s recommended
disallowance of $4,196,000 for power supply costs based on the 1994 Fermi 2 outage is unlawful or
unreasonable. RRC witnesses recommended adjusting the methodology used to calculate the net
incremental cost of replacement power for Fermi 2 to capture secondary effects in the form of increased
costs incurred by virtue of changing coal blends at two facilities and lost profits resulting from decreased
off-system sales. However, the testimony of Detroit Edison witness Byron supported the PSC’s finding
that the company accurately and consistently followed the methodology for calculating the net
incremental cost of replacement power for Fermi 2 established in the settlement agreement in Case No.
U-10103-R, and that that methodology did not address the capture of secondary economic effects as
proposed by the RRC witnesses. We defer to the PSC’s administrative expertise in interpreting and
applying the settlement agreement in Case No. U-10103-R to these proceedings. Yankoviak v Public
Service Comm, 349 Mich 641, 648; 85 NW2d 75 (1957). Furthermore, the PSC’s finding - that the
proposed adjustments for secondary effects were unrelated to the cost of replacement power for Fermi
2 - was supported by Byron’s testimony. Although the testimony given by Byron was contradicted by
that given by RRC witnesses, the PSC was entitled to choose between differing views and rely on the
testimony presented by Byron. Great Lakes Steel Div of Nat’l Steel Corp v Michigan Public
Service Comm, 130 Mich App 470, 481; 344 NW2d 321 (1983). We are therefore satisfied that the
PSC’s order was not unlawful or unreasonable.
Finally, the Attorney General argues that the PSC unlawfully or unreasonably shifted the burden
of proof by concluding that Detroit Edison used the methodology approved in Case No. U-10103-R,
when the data provided to RRC were inadequate to allow it to verify the company’s claim. Again, we
disagree. The contention by RRC witness George Evans that RRC consultants were not given sufficient
information to allow them the verify the accuracy of Detroit Edison’s computation methodology was
directly contradicted by Byron, who testified that the consultants were given all necessary information.
The PSC was entitled to choose between the differing views and to rely on the testimony given by
Byron. Great Lakes Steel, supra. Moreover, the evidence supported the PSC’s decision to accept
Detroit Edison’s methodology for calculating replacement power costs for Fermi 2. Byron testified that
the company’s method of calculating costs comported with the method approved in Case No. U
10103-R, and that RRC’s alternative method was less accurate than that used by the Detroit Edison.
Again, we defer to the PSC’s exercise of its administrative expertise in this area, Yankoviak, supra.
Accordingly, we conclude that the Commission’s order accepting Detroit Edison’s methodology f
or
calculating replacement power costs for Fermi 2 was not unlawful or unreasonable.
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Affirmed.
/s/ Barbara B. MacKenzie
/s/ Richard A. Bandstra
/s/ Stephen J. Markman
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