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Mich. Commission Rejects Changes to Capital Structure and System Access Charges

The Michigan Public Service Commission has approved a $273.3 million rate increase for DTE Electric Co., but denied the company’s request to assess a system access charge for customers who have installed renewable energy projects. Rate of return on equity was set at 10%, the level employed in the company’s 2018 rate case. It rejected a proposal to use a capital structure weighted more heavily to equity, maintaining the current ratio of 50% equity and 50% debt. The commission also approved an electric vehicle pilot program. DTE will be allowed to invest $13 million in a three-year electric vehicle and school bus charging pilot program. The program is to include information campaigns for residential and commercial customers, rebates for residential customers who meet program criteria, and up to $20,000 rebates for electric charger site hosts.


The company requested a permanent capital structure of approximately 51% equity and 49% debt and a ROE of 10.50% based on concerns regarding maintaining its financial ratings as it proceeds with needed infrastructure improvements and absorbed the effects of rate reductions associated with recently enacted cuts in federal taxes. The commission found that the financial and operational risks identified by DTE Electric are not new to the utility, and that the economy of southeast Michigan has improved dramatically in the last decade, thereby lessening many of those same risks. It also pointed out that that the federal tax law changes have been in effect for more than a year and there has been no noticeable effect on DTE Electric, and the company admitted that its credit rating is unchanged.


The Commission rejected DTE’s proposed formula for determining how to pay for electricity some customers generate through renewable sources and supply to the grid. DTE had suggested a distributed generation (DG) credit based on the monthly average real-time locational marginal price for energy. The MPSC ruled that the proper customer compensation is the cost of the power supply component of retail rates minus the cost of transmission. The commission also rejected DTE’s proposed distributed generation system access contribution charge, finding that it is not based on a customer’s usage of the distribution system and it is not equitable. Recently enacted legislation phased out net metering for new DG installations while grandfathering existing installations for a set time period under the law. The new methodology for pricing of DG must reflect “equitable cost of service” as determined by the commission and must be applied in future rate cases, this instant case being the first application. Re DTE Electric Co., Case No. U-20162, May 2, 2019 (Mich.P.S.C.).


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