As Passed House 04-17-08 w/Amendments

HB-5524, As Passed Senate, June 28, 2008

SENATE SUBSTITUTE FOR

HOUSE BILL NO. 5524

A bill to amend 1939 PA 3, entitled

"An act to provide for the regulation and control of public and

certain private utilities and other services affected with a public

interest within this state; to provide for alternative energy

suppliers; to provide for licensing; to include municipally owned

utilities and other providers of energy under certain provisions of

this act; to create a public service commission and to prescribe

and define its powers and duties; to abolish the Michigan public

utilities commission and to confer the powers and duties vested by

law on the public service commission; to provide for the

continuance, transfer, and completion of certain matters and

proceedings; to abolish automatic adjustment clauses; to prohibit

certain rate increases without notice and hearing; to qualify

residential energy conservation programs permitted under state law

for certain federal exemption; to create a fund; to provide for a

restructuring of the manner in which energy is provided in this

state; to encourage the utilization of resource recovery

facilities; to prohibit certain acts and practices of providers of

energy; to allow for the securitization of stranded costs; to

reduce rates; to provide for appeals; to provide appropriations; to

declare the effect and purpose of this act; to prescribe remedies

and penalties; and to repeal acts and parts of acts,"

by amending sections 6a, 10, 10a, 10b, 10d, 10g, 10p, 10r, 10x, and

10y (MCL 460.6a, 460.10, 460.10a, 460.10b, 460.10d, 460.10g,

460.10p, 460.10r, 460.10x, and 460.10y), section 6a as amended by

1992 PA 37, sections 10, 10b, 10p, 10r, 10x, and 10y as added by

2000 PA 141, section 10a as amended by 2004 PA 88, section 10d as

amended by 2002 PA 609, and section 10g as amended by 2001 PA 48,

and by adding sections 4a, 6q, 6s, 10dd, and 11.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

Sec. 4a. (1) Except as otherwise provided under this act, the

commission is subject to Executive Reorganization Order No. 2003-1,

MCL 445.2011.

(2) Funding for the commission shall be as provided under 1972

PA 299, MCL 460.111 to 460.120, and as otherwise provided by law.

(3) The commission shall be an autonomous entity within the

department of labor and economic growth. The statutory authority,

powers, duties, and functions, including personnel, property,

budgeting, records, procurement, and other management related

functions, shall be retained by the commission. The department of

labor and economic growth shall provide support and coordinated

services as requested by the commission and shall be reimbursed for

that service as provided under subsection (2).

(4) The chairperson of the commission shall be appointed as

provided under section 2.

Sec. 6a. (1) ~~When a finding or order is sought by a~~ A gas or

electric utility to shall not increase its rates and charges or to

alter, change, or amend any rate or rate schedules, the effect of

which will be to increase the cost of services to its customers,

~~notice shall be given within the service area to be affected~~

without first receiving commission approval as provided in this

section. The utility shall place in evidence facts relied upon to

support the utility's petition or application to increase its rates

and charges, or to alter, change, or amend any rate or rate

schedules. ~~After first having given notice to the interested~~

~~parties within the service area to be affected and affording~~

~~interested parties a reasonable opportunity for a full and complete~~

~~hearing, the commission, after submission of all proofs by any~~

~~interested party, may in its discretion and upon written motion by~~

~~the utility make a finding and enter an order granting partial and~~

~~immediate relief. A finding or order shall not be authorized or~~

~~approved ex parte, nor until the commission's technical staff has~~

~~made an investigation and report.~~ The commission shall require

notice to be given to all interested parties within the service

area to be affected, and all interested parties shall have a

reasonable opportunity for a full and complete hearing. A utility

may use projected costs and revenues for a future consecutive 12-

month period in developing its requested rates and charges. The

commission shall notify the utility within 30 days of filing,

whether the utility's petition or application is complete. A

petition or application is considered complete if it complies with

the rate application filing forms and instructions adopted under

subsection (6). A petition or application pending before the

commission prior to the adoption of filing forms and instructions

pursuant to subsection (6) shall be evaluated based upon the filing

requirements in effect at the time the petition or application was

filed. If the application is not complete, the commission shall

notify the utility of all information necessary to make that filing

complete. If the commission has not notified the utility within 30

days of whether the utility's petition or application is complete,

the application is considered complete. If the commission has not

issued an order within 180 days of the filing of a complete

application, the utility may implement up to the amount of the

proposed annual rate request through equal percentage increases or

decreases applied to all base rates. For a petition or application

pending before the commission prior to the effective date of the

amendatory act that added this sentence, the 180-day period

commences on the effective date of the amendatory act that added

this sentence. If the utility uses projected costs and revenues for

a future period in developing its requested rates and charges, the

utility may not implement the equal percentage increases or

decreases prior to the calendar date corresponding to the start of

the projected 12-month period. For good cause, the commission may

issue a temporary order preventing or delaying a utility from

implementing its proposed rates or charges. If a utility implements

increased rates or charges under this subsection before the

commission issues a final order, that utility shall refund to

customers, with interest, any portion of the total revenues

collected through application of the equal percentage increase 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. The rate of interest for refunds shall equal 5%

plus the London interbank offered rate (LIBOR) for the appropriate

time period. For any portion of the refund which, exclusive of

interest, exceeds 25% of the annual revenue increase awarded by the

commission in its final order, the rate of interest shall be the

authorized rate of return on the common stock of the utility during

the appropriate period. Any refund or interest awarded under this

subsection shall not be included, in whole or in part, in any

application for a rate increase by a utility. Nothing in this

section impairs the commission's ability to issue a show cause

order as part of its rate-making authority. An alteration or

amendment in rates or rate schedules applied for by a public

utility that will not result in an increase in the cost of service

to its customers may be authorized and approved without notice or

hearing. There shall be no increase in rates based upon changes in

cost of fuel or purchased gas unless notice has been given within

the service area to be affected, and there has been an opportunity

for a full and complete hearing on the cost of fuel or purchased

gas. The rates charged by any utility pursuant to an automatic fuel

or purchased gas adjustment clause shall not be altered, changed,

or amended unless notice has been given within the service area to

be affected, and there has been an opportunity for a full and

complete hearing on the cost of the fuel or purchased gas.

(2) The commission shall adopt rules and procedures for the

filing, investigation, and hearing of petitions or applications to

increase or decrease utility rates and charges as the commission

finds necessary or appropriate to enable it to reach a final

decision with respect to petitions or applications within a period

of 9 12 months from the filing of the complete petitions or

applications. The commission shall not authorize or approve

adjustment clauses that operate without notice and an opportunity

for a full and complete hearing, and all such clauses shall be

abolished. The commission may hold a full and complete hearing to

determine the cost of fuel, purchased gas, or purchased power

separately from a full and complete hearing on a general rate case

and may be held concurrently with the general rate case. The

commission shall authorize a utility to recover the cost of fuel,

purchased gas, or purchased power only to the extent that the

purchases are reasonable and prudent. As used in this section:

(a) "Full and complete hearing" means a hearing that provides

interested parties a reasonable opportunity to present and cross-

examine evidence and present arguments relevant to the specific

element or elements of the request that are the subject of the

hearing.

(b) "General rate case" means a proceeding initiated by a

utility in an application filed with the commission that alleges a

revenue deficiency and requests an increase in the schedule of

rates or charges based on the utility's total cost of providing

service.

(3) ~~If a final decision has not been reached upon a petition~~

~~or application to increase or decrease utility rates within the 9-~~

~~month period required by subsection (2), the commission shall give~~

~~priority to the case and shall take such other action as it finds~~

~~necessary or appropriate to expedite a final decision. If~~ Except as

otherwise provided in this subsection, if the commission fails to

reach a final decision with respect to a completed petition or

application to increase or decrease utility rates within the 9-

~~month~~ 12-month period following the filing of the completed

petition or application, ~~the commission, within 15 days after~~

~~expiration of the 9-month period, shall submit a written report to~~

~~the governor and to the president of the senate and the speaker of~~

~~the house of representatives stating the reasons a decision was not~~

~~reached within the 9-month period and the actions being taken to~~

~~expedite the decision. The commission shall submit a further report~~

~~upon reaching a final decision providing full details with respect~~

~~to the conduct of the case, including the time required for~~

~~issuance of the commission's decision following the conclusion of~~

~~hearings.~~ the petition or application is considered approved. If a

utility makes any significant amendment to its filing, the

commission has an additional 12 months from the date of the

amendment to reach a final decision on the petition or application.

If the utility files for an extension of time, the commission shall

extend the 12-month period by the amount of additional time

requested by the utility.

(4) A utility shall not file a general rate case application

for an increase in rates earlier than 12 months after the date of

the filing of a complete prior general rate case application. A

utility may not file a new general rate case application until the

commission has issued a final order on a prior general rate case or

until the rates are approved under subsection (3).

(5) The commission shall, if requested by a gas utility,

establish load retention transportation rate schedules or approve

gas transportation contracts as required for the purpose of

retaining industrial or commercial customers whose individual

annual transportation volumes exceed 500,000 decatherms on the gas

utility's system. The commission shall approve these rate schedules

or approve transportation contracts entered into by the utility in

good faith if the industrial or commercial customer has the

installed capability to use an alternative fuel or otherwise has a

viable alternative to receiving natural gas transportation service

from the utility, the customer can obtain the alternative fuel or

gas transportation from an alternative source at a price which

would cause them to cease using the gas utility's system, and the

customer, as a result of their use of the system and receipt of

transportation service, makes a significant contribution to the

utility's fixed costs. The commission shall adopt accounting and

rate-making policies to ensure that the discounts associated with

the transportation rate schedules and contracts are recovered by

the gas utility through charges applicable to other customers if

the incremental costs related to the discounts are no greater than

the costs that would be passed on to those customers as the result

of a loss of the industrial or commercial customer's contribution

to a utility's fixed costs.

(6) Within 90 days of the effective date of the amendatory act

that added this subsection, the commission shall adopt standard

rate application filing forms and instructions for use in all

general rate cases filed by utilities whose rates are regulated by

the commission. For cooperative electric utilities whose rates are

House Bill No. 5524 as amended June 27, 2008 (1 of 2)

regulated by the commission, in addition to rate applications filed

under this section, the commission shall continue to allow for rate

filings based on the cooperative's times interest earned ratio. The

commission may, in its discretion, modify the standard rate

application forms and instructions adopted under this subsection.

<<(7) If, on or before January 1, 2008, a merchant plant entered into a contract with an initial term of 20 years or more to sell electricity to a utility whose rates are regulated by the commission with 1,000,000 or more retail customers in this state and if the merchant plant generated electricity under that contract, in whole or in part, from a renewable energy resource, wood, wood wastes, or landfill gas, then the merchant plant shall recover the amount, if any, by which the merchant plant's reasonably and prudently incurred actual fuel and variable operation and maintenance costs exceed the amount that the merchant plant is paid under the contract for those costs.

(8) The commission shall issue orders to permit the recovery authorized under subsection (7) through the power supply cost recovery process of the utility whose rates are regulated by the commission upon petition of the merchant plant. The merchant plant shall not be required to alter or amend the existing contract with the electric utility in order to obtain the recovery under subsection (7). The commission shall permit or require the utility whose rates are regulated by the commission to recover from its ratepayers fuel and variable operation and maintenance costs under the contract as reasonably and prudently incurred costs.>>

Sec. 6q. (1) A person shall not acquire, control, or merge,

directly or indirectly, in whole or in part, with a jurisdictional

regulated utility nor shall a jurisdictional regulated utility

sell, assign, transfer, or encumber its assets to another person

without first applying to and receiving the approval of the

commission.

(2) After notice and hearing, the commission shall issue an

order stating what constitutes acquisition, transfer of control,

merger activities, or encumbrance of assets that are subject to

this section. This section does not apply to the encumbrance,

assignment, acquisition, or transfer of assets that are encumbered,

assigned, acquired, transferred, or sold in the normal course of

business or to the issuance of securities or other financing

transactions not directly or indirectly involved in an acquisition,

merger, encumbrance, or transfer of control that is governed by

this section.

(3) The commission shall promulgate rules creating procedures

for the application process required under this section. The

application shall include, but is not limited to, all of the

following information:

(a) A concise summary of the terms and conditions of the

proposed acquisition, transfer, merger, or encumbrance.

(b) Copies of the material acquisition, transfer, merger, or

encumbrance documents if available.

transfer, merger, or encumbrance on rates and electric service in

this state.

(d) Pro forma financial statements that are relevant to the

acquisition, transfer, merger, or encumbrance.

(e) Copies of the parties' public filings with other state or

federal regulatory agencies regarding the same acquisition,

transfer, merger, or encumbrance, including any regulatory orders

issued by the agencies regarding the acquisition, transfer, merger,

or encumbrance.

(4) Within 60 days from the date an application is filed under

this section, interested parties, including the attorney general,

may file comments with the commission on the proposed acquisition,

transfer, merger, or encumbrance.

(5) After notice and hearing and within 180 days from the date

an application is filed under this section, the commission shall

issue an order approving or rejecting the proposed acquisition,

transfer of control, merger, or encumbrance.

(6) All parties to an acquisition, transfer, merger, or

encumbrance subject to this section shall provide the commission

and the attorney general access to all books, records, accounts,

documents, and any other data and information the commission

considers necessary to effectively assess the impact of the

proposed acquisition, transfer, merger, or encumbrance.

(7) The commission shall consider among other factors all of

the following in its evaluation of whether or not to approve a

proposed acquisition, transfer, merger, or encumbrance:

(a) Whether the proposed action would have an adverse impact

on the rates of the customers affected by the acquisition,

transfer, merger, or encumbrance.

(b) Whether the proposed action would have an adverse impact

on the provision of safe, reliable, and adequate energy service in

this state.

nonregulated activity of the new entity through the rates paid by

the customers of the jurisdictional regulated utility.

(d) Whether the action will significantly impair the

jurisdictional regulated utility's ability to raise necessary

capital or to maintain a reasonable capital structure.

(e) Whether the action is otherwise inconsistent with public

policy and interest.

(8) In approving an acquisition, transfer, merger, or

encumbrance under this section, the commission may impose

reasonable terms and conditions on the acquisition, transfer,

merger, or encumbrance to protect the jurisdictional regulated

utility, including the division and allocation of the utility's

assets. A jurisdictional regulated utility may reject the terms and

conditions imposed by the commission and not proceed with the

transaction.

(9) In approving an acquisition, transfer, merger, or

encumbrance under this section, the commission may impose

reasonable terms and conditions on the acquisition, transfer,

merger, or encumbrance to protect the customers of the

jurisdictional regulated utility. A jurisdictional regulated

utility may reject the terms and conditions imposed by the

commission and not proceed with the transaction.

(10) Nonpublic information and materials submitted by a

jurisdictional regulated utility under this section clearly

designated by that utility as confidential are exempt from the

freedom of information act, 1976 PA 442, MCL 15.231 to 15.246. The

commission shall issue protective orders as necessary to protect

information designated by that utility as confidential.

(11) Nothing in this section alters the authority of the

attorney general to enforce federal and state antitrust laws.

(12) As used in this section:

(a) "Commission" means the Michigan public service commission.

(b) "Jurisdictional regulated utility" means a utility whose

rates are regulated by the commission. Jurisdictional regulated

utility does not include a telecommunication provider as defined in

the Michigan telecommunications act, 1991 PA 179, MCL 484.2101 to

484.2604, or a motor carrier as defined in the motor carrier act,

1933 PA 254, MCL 475.1 to 479.43.

partnership, utility, or any other legal private or public entity.

Sec. 6s. (1) An electric utility that proposes to construct an

electric generation facility, make a significant investment in an

existing electric generation facility, purchase an existing

electric generation facility, or enter into a power purchase

agreement for the purchase of electric capacity for a period of 7

years or longer may submit an application to the commission seeking

a certificate of necessity for that construction, investment, or

purchase if that construction, investment, or purchase costs

$500,000,000.00 or more and a portion of the costs would be

allocable to retail customers in this state. A significant

investment in an electric generation facility includes a group of

investments reasonably planned to be made over a multiple year

period not to exceed 7 years for a singular purpose such as

increasing the capacity of an existing electric generation plant.

(2) The commission may implement separate review criteria and

approval standards for electric utilities with less than 1,000,000

retail customers who seek a certificate of necessity for projects

costing less than $500,000,000.00. Notwithstanding any other

provision of this section, the criteria established under this

subsection shall provide for the issuance of a certificate of

necessity for environmental upgrades to existing electric

generation facilities or for a renewable energy system not included

in a renewable energy resource plan.

(3) An electric utility submitting an application under this

section may request 1 or more of the following:

(a) A certificate of necessity that the power to be supplied

as a result of the proposed construction, investment, or purchase

is needed.

(b) A certificate of necessity that the size, fuel type, and

other design characteristics of the existing or proposed electric

generation facility or the terms of the power purchase agreement

represent the most reasonable and prudent means of meeting that

power need.

power purchase agreement will be recovered in rates from the

electric utility's customers.

(d) A certificate of necessity that the estimated purchase or

capital costs of the existing or proposed electric generation

facility, including, but not limited to, the costs of siting and

licensing a new facility and the estimated cost of power from the

new or proposed electric generation facility, will be recoverable

in rates from the electric utility's customers subject to

subsection (4)(c).

(4) Within 270 days of the filing of an application under this

section, the commission shall issue an order granting or denying

the requested certificate of necessity. The commission shall hold a

hearing on the application. The hearing shall be conducted as a

contested case pursuant to chapter 4 of the administrative

procedures act of 1969, 1969 PA 306, MCL 24.271 to 24.287. The

commission shall allow intervention by interested persons.

Reasonable discovery shall be permitted before and during the

hearing in order to assist parties and interested persons in

obtaining evidence concerning the application, including, but not

limited to, the reasonableness and prudence of the construction,

investment, or purchase for which the certificate of necessity has

been requested. The commission shall grant the request if it

determines all of the following:

(a) That the electric utility has demonstrated a need for the

power that would be supplied by the existing or proposed electric

generation facility or pursuant to the proposed power purchase

agreement through its approved integrated resource plan that

complies with subsection (11).

(b) The information supplied indicates that the existing or

proposed electric generation facility will comply with all

applicable state and federal environmental standards, laws, and

rules.

electric generation facility or the price of power specified in the

proposed power purchase agreement is reasonable. The commission

shall find that the cost is reasonable if, in the construction or

investment in a new or existing facility, to the extent it is

commercially practicable, the estimated costs are the result of

competitively bid engineering, procurement, and construction

contracts, or in a power purchase agreement, the cost is the result

of a competitive solicitation. Up to 150 days after an electric

utility makes its initial filing, it may file to update its cost

estimates if they have materially changed. No other aspect of the

initial filing may be modified unless the application is withdrawn

and refiled. A utility's filing updating its cost estimates does

not extend the period for the commission to issue an order granting

or denying a certificate of necessity. An affiliate of an electric

utility that serves customers in this state and at least 1 other

state may participate in the competitive bidding to provide

engineering, procurement, and construction services to that

electric utility for a project covered by this section.

(d) The existing or proposed electric generation facility or

proposed power purchase agreement represents the most reasonable

and prudent means of meeting the power need relative to other

resource options for meeting power demand, including energy

efficiency programs and electric transmission efficiencies.

(e) To the extent practicable, the construction or investment

in a new or existing facility in this state is completed using a

workforce composed of residents of this state as determined by the

commission. This subdivision does not apply to a facility that is

located in a county that lies on a border with another state.

(5) The commission may consider any other costs or information

related to the costs associated with the power that would be

supplied by the existing or proposed electric generation facility

or pursuant to the proposed purchase agreement or alternatives to

the proposal raised by intervening parties.

(6) In a certificate of necessity under this section, the

commission shall specify the costs approved for the construction of

or significant investment in the electric generation facility, the

price approved for the purchase of the existing electric generation

facility, or the price approved for the purchase of power pursuant

to the terms of the power purchase agreement.

(7) The utility shall annually file, or more frequent if

required by the commission, reports to the commission regarding the

status of any project for which a certificate of necessity has been

granted under subsection (4), including an update concerning the

cost and schedule of that project.

(8) If the commission denies any of the relief requested by an

electric utility, the electric utility may withdraw its application

or proceed with the proposed construction, purchase, investment, or

power purchase agreement without a certificate and the assurances

granted under this section.

(9) Once the electric generation facility or power purchase

agreement is considered used and useful or as otherwise provided in

subsection (12), the commission shall include in an electric

utility's retail rates all reasonable and prudent costs for an

electric generation facility or power purchase agreement for which

a certificate of necessity has been granted. The commission shall

not disallow recovery of costs an electric utility incurs in

constructing, investing in, or purchasing an electric generation

facility or in purchasing power pursuant to a power purchase

agreement for which a certificate of necessity has been granted, if

the costs do not exceed the costs approved by the commission. Once

the electric generation facility or power purchase agreement is

considered used and useful or as otherwise provided in subsection

(12), the commission shall include in the electric utility's retail

rates costs actually incurred by the electric utility that exceed

the costs approved by the commission only if the commission finds

that the additional costs are reasonable and prudent. If the actual

costs incurred by the electric utility exceed the costs approved by

the commission, the electric utility has the burden of proving by a

preponderance of the evidence that the costs are reasonable and

prudent. The portion of the cost of a plant, facility, or power

purchase agreement which exceeds 110% of the cost approved by the

commission is presumed to have been incurred due to a lack of

prudence. The commission may include any or all of the portion of

the cost in excess of 110% of the cost approved by the commission

if the commission finds by a preponderance of the evidence that the

costs were prudently incurred.

(10) Within 90 days of the effective date of the amendatory

act that added this section, the commission shall adopt standard

application filing forms and instructions for use in all requests

for a certificate of necessity under this section. The commission

may, in its discretion, modify the standard application filing

forms and instructions adopted under this section.

(11) The commission shall establish standards for an

integrated resource plan that shall be filed by an electric utility

requesting a certificate of necessity under this section. An

integrated resource plan shall include all of the following:

(a) A long-term forecast of the electric utility's load growth

under various reasonable scenarios.

(b) The type of generation technology proposed for the

generation facility and the proposed capacity of the generation

facility, including projected fuel and regulatory costs under

various reasonable scenarios.

electric utility pursuant to any renewable portfolio standard.

(d) Projected energy efficiency program savings under any

energy efficiency program requirements and the projected costs for

that program.

(e) Projected load management and demand response savings for

the electric utility and the projected costs for those programs.

(f) An analysis of the availability and costs of other

electric resources that could defer, displace, or partially

displace the proposed generation facility or purchased power

agreement, including additional renewable energy, energy efficiency

programs, load management, and demand response, beyond those

amounts contained in subdivisions (c) to (e).

(g) Electric transmission options for the electric utility.

(12) The commission shall allow financing interest cost

recovery in an electric utility's base rates on construction work

in progress for capital improvements approved under this section

prior to the assets being considered used and useful. Regardless of

whether or not the commission authorizes base rate treatment for

construction work in progress financing interest expense, an

electric utility shall be allowed to recognize, accrue, and defer

the allowance for funds used during construction related to equity

capital.

(13) As used in this section, "renewable energy system" means

that term as defined in the clean, renewable, and efficient energy

act.

Sec. 10. (1) Sections 10 through 10bb shall be known and may

be cited as the "customer choice and electricity reliability act".

(2) The purpose of sections 10a through 10bb is to do all of

the following:

(a) To ensure that all retail customers in this state of

electric power have a choice of electric suppliers.

(b) To allow and encourage the Michigan public service

commission to foster competition in this state in the provision of

electric supply and maintain regulation of electric supply for

customers who continue to choose supply from incumbent electric

utilities.

plants which will diversify the ownership of electric generation in

this state.

(d) To ensure that all persons in this state are afforded

safe, reliable electric power at a reasonable rate.

(e) To improve the opportunities for economic development in

this state and to promote financially healthy and competitive

utilities in this state.

(f) To maintain, foster, and encourage robust, reliable, and

economic generation, distribution, and transmission systems to

provide this state's electric suppliers and generators an

opportunity to access regional sources of generation and wholesale

power markets and to ensure a reliable supply of electricity in

this state.

~~(3) Subsection (2) does not apply after~~ ~~December 31, 2003~~.

Sec. 10a. (1) ~~No later than~~ ~~January 1, 2002, the~~ The

commission shall issue orders establishing the rates, terms, and

conditions of service that allow all retail customers of an

electric utility or provider to choose an alternative electric

supplier. ~~The orders shall provide for full recovery of a utility's~~

~~net stranded costs and implementation costs as determined by the~~

~~commission.~~ The orders shall do all of the following:

(a) Provide that no more than 10% of an electric utility's

average weather-adjusted retail sales for the preceding calendar

year may take service from an alternative electric supplier at any

time.

(b) Set forth procedures necessary to administer and allocate

the amount of load that will be allowed to be served by alternative

electric suppliers, through the use of annual energy allotments

awarded on a calendar year basis, and shall provide, among other

things, that existing customers who are taking electric service

from an alternative electric supplier at a facility on the

effective date of the amendatory act that added this subdivision

shall be given an allocated annual energy allotment for that

service at that facility, that customers seeking to expand usage at

a facility served through an alternative electric supplier will be

given next priority, with the remaining available load, if any,

allocated on a first-come first-served basis. The procedures shall

also provide how customer facilities will be defined for the

purpose of assigning the annual energy allotments to be allocated

under this section. The commission shall not allocate additional

annual energy allotments at any time when the total annual energy

allotments for the utility's distribution service territory is

greater than 10% of the utility's weather adjusted retail sales in

the calendar year preceding the date of allocation. If the sales of

a utility are less in a subsequent year or if the energy usage of a

customer receiving electric service from an alternative electric

supplier exceeds its annual energy allotment for that facility,

that customer shall not be forced to purchase electricity from a

utility, but may purchase electricity from an alternative electric

supplier for that facility during that calendar year.

House Bill No. 5524 as amended June 27, 2008

customers seeking to expand usage at a facility that has been

continuously served through an alternative electric supplier since

April 1, 2008 shall be permitted to purchase electricity from an

alternative electric supplier for both the existing and any

expanded load at that facility <<as well as any new facility constructed

after the effective date of the amendatory act that added this

subdivision that is similar in nature and under common ownership with the

existing facility>>.

(2) The commission shall issue orders establishing a licensing

procedure for all alternative electric suppliers. To ensure

adequate service to customers in this state, the commission shall

require that an alternative electric supplier maintain an office

within this state, shall assure that an alternative electric

supplier has the necessary financial, managerial, and technical

capabilities, shall require that an alternative electric supplier

maintain records which the commission considers necessary, and

shall ensure an alternative electric supplier's accessibility to

the commission, to consumers, and to electric utilities in this

state. The commission also shall require alternative electric

suppliers to agree that they will collect and remit to local units

of government all applicable users, sales, and use taxes. An

alternative electric supplier is not required to obtain any

certificate, license, or authorization from the commission other

than as required by this act.

(3) The commission shall issue orders to ensure that customers

in this state are not switched to another supplier or billed for

any services without the customer's consent.

(4) No later than December 2, 2000, the commission shall

establish a code of conduct that shall apply to all electric

utilities. The code of conduct shall include, but is not limited

to, measures to prevent cross-subsidization, information sharing,

and preferential treatment, between a utility's regulated and

unregulated services, whether those services are provided by the

utility or the utility's affiliated entities. The code of conduct

established under this subsection shall also be applicable to

electric utilities and alternative electric suppliers consistent

with section 10, this section, and sections 10b through 10cc.

(5) An electric utility may offer its customers an appliance

service program. Except as otherwise provided by this section, the

utility shall comply with the code of conduct established by the

commission under subsection (4). As used in this section,

"appliance service program" or "program" means a subscription

program for the repair and servicing of heating and cooling systems

or other appliances.

(6) A utility offering a program under subsection (5) shall do

all of the following:

(a) Locate within a separate department of the utility or

affiliate within the utility's corporate structure the personnel

responsible for the day-to-day management of the program.

(b) Maintain separate books and records for the program,

access to which shall be made available to the commission upon

request.

utility billing inserts, printed messages on the utility's billing

materials, or other promotional materials included with customers'

utility bills.

(7) All costs directly attributable to an appliance service

program allowed under subsection (5) shall be allocated to the

program as required by this subsection. The direct and indirect

costs of employees, vehicles, equipment, office space, and other

facilities used in the appliance service program shall be allocated

to the program based upon the amount of use by the program as

compared to the total use of the employees, vehicles, equipment,

office space, and other facilities. The cost of the program shall

include administrative and general expense loading to be determined

in the same manner as the utility determines administrative and

general expense loading for all of the utility's regulated and

unregulated activities. A subsidy by a utility does not exist if

costs allocated as required by this subsection do not exceed the

revenue of the program.

(8) A utility may include charges for its appliance service

program on its monthly billings to its customers if the utility

complies with all of the following requirements:

(a) All costs associated with the billing process, including

the postage, envelopes, paper, and printing expenses, are allocated

as required under subsection (7).

(b) A customer's regulated utility service is not terminated

for nonpayment of the appliance service program portion of the

bill.

partial payment by a customer is applied first to the bill for

regulated service.

(9) In marketing its appliance service program to the public,

a utility shall do all of the following:

(a) The list of customers receiving regulated service from the

utility shall be available to a provider of appliance repair

service upon request within 2 business days. The customer list

shall be provided in the same electronic format as such information

is provided to the appliance service program. A new customer shall

be added to the customer list within 1 business day of the date the

customer requested to turn on service.

(b) Appropriately allocate costs as required under subsection

(7) when personnel employed at a utility's call center provide

appliance service program marketing information to a prospective

customer.

utility shall inform the potential customer of all of the

following:

(i) That appliance service programs may be available from

another provider.

(ii) That the appliance service program is not regulated by the

commission.

(iii) That a new customer shall have 10 days after enrollment to

cancel his or her appliance service program contract without

penalty.

(iv) That the customer's regulated rates and conditions of

service provided by the utility are not affected by enrollment in

the program or by the decision of the customer to use the services

of another provider of appliance repair service.

(d) The utility name and logo may be used to market the

appliance service program provided that the program is not marketed

in conjunction with a regulated service. To the extent that a

program utilizes the utility's name and logo in marketing the

program, the program shall include language on all material

indicating that the program is not regulated by the commission.

Costs shall not be allocated to the program for the use of the

utility's name or logo.

(10) This section does not prohibit the commission from

requiring a utility to include revenues from an appliance service

program in establishing base rates. If the commission includes the

revenues of an appliance service program in determining a utility's

base rates, the commission shall also include all of the costs of

the program as determined under this section.

(11) Except as otherwise provided in this section, the code of

conduct with respect to an appliance service program shall not

require a utility to form a separate affiliate or division to

operate an appliance service program, impose further restrictions

on the sharing of employees, vehicles, equipment, office space, and

other facilities, or require the utility to provide other providers

of appliance repair service with access to utility employees,

vehicles, equipment, office space, or other facilities.

~~(12) The orders issued by the commission before~~ ~~June 5, 2000~~

~~that allow customers of an electric utility to choose an~~

~~alternative electric supplier, including orders that determine and~~

~~authorize recovery of net stranded costs and implementation costs~~

~~and that confirm any voluntary commitments of electric utilities,~~

~~are in compliance with this act and enforceable by the commission.~~

~~An electric utility that has not had voluntary commitments to~~

~~provide customer choice previously approved by orders of the~~

~~commission shall file a restructuring plan to allow customers to~~

~~choose an alternative electric supplier no later than the date~~

~~ordered by the commission. The plan shall propose a methodology to~~

~~determine the electric utility's net stranded costs and~~

~~implementation costs.~~

(12) ~~(13)~~ This act does not prohibit or limit the right of a

person to obtain self-service power and does not impose a

transition, implementation, exit fee, or any other similar charge

on self-service power. A person using self-service power is not an

electric supplier, electric utility, or a person conducting an

electric utility business. As used in this subsection, "self-

service power" means any of the following:

(a) Electricity generated and consumed at an industrial site

or contiguous industrial site or single commercial establishment or

single residence without the use of an electric utility's

transmission and distribution system.

(b) Electricity generated primarily by the use of by-product

fuels, including waste water solids, which electricity is consumed

as part of a contiguous facility, with the use of an electric

utility's transmission and distribution system, but only if the

point or points of receipt of the power within the facility are not

greater than 3 miles distant from the point of generation.

is divided by an inland body of water or by a public highway, road,

or street but that otherwise meets this definition meets the

contiguous requirement of this subdivision regardless of whether

self-service power was being generated on June 5, 2000.

(d) A commercial or industrial facility or single residence

that meets the requirements of subdivision (a) or (b) meets this

definition whether or not the generation facility is owned by an

entity different from the owner of the commercial or industrial

site or single residence.

(13) ~~(14)~~ This act does not prohibit or limit the right of a

person to engage in affiliate wheeling and does not impose a

transition, implementation, exit fee, or any other similar charge

on a person engaged in affiliate wheeling. As used in this section:

(a) "Affiliate" means a person or entity that directly, or

indirectly through 1 or more intermediates, controls, is controlled

by, or is under common control with another specified entity. As

used in this subdivision, "control" means, whether through an

ownership, beneficial, contractual, or equitable interest, the

possession, directly or indirectly, of the power to direct or to

cause the direction of the management or policies of a person or

entity or the ownership of at least 7% of an entity either directly

or indirectly.

(b) "Affiliate wheeling" means a person's use of direct access

service where an electric utility delivers electricity generated at

a person's industrial site to that person or that person's

affiliate at a location, or general aggregated locations, within

this state that was either 1 of the following:

(i) For at least 90 days during the period from January 1, 1996

to October 1, 1999, supplied by self-service power, but only to the

extent of the capacity reserved or load served by self-service

power during the period.

(ii) Capable of being supplied by a person's cogeneration

capacity within this state that has had since January 1, 1996 a

rated capacity of 15 megawatts or less, was placed in service

before December 31, 1975, and has been in continuous service since

that date. A person engaging in affiliate wheeling is not an

electric supplier, an electric utility, or conducting an electric

utility business when a person engages in affiliate wheeling.

(14) ~~(15)~~ The rights of parties to existing contracts and

agreements in effect as of January 1, 2000 between electric

utilities and qualifying facilities, including the right to have

the charges recovered from the customers of an electric utility, or

its successor, shall not be abrogated, increased, or diminished by

this act, nor shall the receipt of any proceeds of the

securitization bonds by an electric utility be a basis for any

regulatory disallowance. Further, any securitization or financing

order issued by the commission that relates to a qualifying

facility's power purchase contract shall fully consider that

qualifying facility's legal and financial interests.

~~(16) The commission shall, after a contested case proceeding,~~

~~issue annually an order approving for each electric utility a true-~~

~~up adjustment to reconcile any overcollections or undercollections~~

~~of the preceding 12 months to ensure the recovery of all amounts of~~

~~net stranded costs. The rates for customers remaining with an~~

~~incumbent electric utility will not be affected by the true-up~~

~~process under this subsection. The commission shall review the~~

~~electric utility's stranded cost recovery charges and~~

~~securitization charges implemented for the preceding 12 months, and~~

~~adjust the stranded cost recovery charge, by way of supplemental~~

~~surcharges or credits, to allow the netting of stranded costs.~~

~~(17) The commission shall consider the reasonableness and~~

~~appropriateness of various methods to determine net stranded costs,~~

~~including, but not limited to, all of the following:~~

~~(a) Evaluating the relationship of market value to the net~~

~~book value of generation assets and purchased power contracts.~~

~~(b) Evaluating net stranded costs based on the market price of~~

~~power in relation to prices assumed by the commission in prior~~

~~orders.~~

~~(c) Any other method the commission considers appropriate.~~

~~(18) The true-up adjustment adopted under subsection (16)~~

~~shall not result in a modification to the securitization charge.~~

~~The commission shall not adjust or change in any manner~~

~~securitization charges authorized by the commission in a financing~~

~~order issued under section 10i as a result of its review and any~~

~~action taken under subsection (16).~~

~~(19) After the time period described in section 10d(2), the~~

~~rates for retail customers that remain with or leave and later~~

~~return to the incumbent electric utility shall be determined in the~~

~~same manner as the rates were determined before the effective date~~

~~of this section.~~

(15) A customer who elects to receive service from an

alternative electric supplier may subsequently provide notice to

the electric utility of the customer's desire to receive standard

tariff service from the electric utility. The procedures in place

for each electric utility as of January 1, 2008 that set forth the

terms pursuant to which a customer receiving service from an

alternative electric supplier may return to full service from the

electric utility are ratified and shall remain in effect and may be

amended by the commission as needed. If an electric utility did not

have the procedures in place as of January 1, 2008, the commission

shall adopt those procedures.

(16) The commission shall authorize rates that will ensure

that an electric utility that offered retail open access service

from 2002 through the effective date of the amendatory act that

added this subsection fully recovers its restructuring costs and

any associated accrued regulatory assets. This includes, but is not

limited to, implementation costs, stranded costs, and costs

authorized pursuant to section 10d(4) as it existed prior to the

effective date of the amendatory act that added this subsection,

that have been authorized for recovery by the commission in orders

issued prior to the effective date of the amendatory act that added

this subsection. The commission shall approve surcharges that will

ensure full recovery of all such costs within 5 years of the

effective date of the amendatory act that added this subsection.

(17) As used in subsections (1) and (15):

(a) "Customer" means the building or facilities served through

a single existing electric billing meter and does not mean the

person, corporation, partnership, association, governmental body,

or other entity owning or having possession of the building or

facilities.

(b) "Standard tariff service" means, for each regulated

electric utility, the retail rates, terms, and conditions of

service approved by the commission for service to customers who do

not elect to receive generation service from alternative electric

suppliers.

Sec. 10b. (1) The commission shall establish rates, terms, and

conditions of electric service that promote and enhance the

development of new generation, transmission, and distribution

technologies.

(2) No later than 1 year from ~~the effective date of the~~

~~amendatory act that added this section~~ June 5, 2000, each electric

utility shall file an application with the commission to unbundle

its existing commercial and industrial rate schedules and

separately identify and charge for their discrete services. No

earlier than 1 year from ~~the effective date of the amendatory act~~

~~that added this section~~ June 5, 2000, the commission may order the

electric utility to file an application to unbundle existing

residential rate schedules. The commission may allow the unbundled

rates to be expressed on residential billings in terms of

percentages in order to simplify residential billing. The

commission shall allow recovery by electric utilities of all just

and reasonable costs incurred by electric utilities to implement

and administer the provisions of this subsection.

(3) The orders issued under this act shall include, but are

not limited to, the providing of reliable and lower cost

competitive rates for all customers in this state.

(4) An electric utility is obligated, with commission

oversight, to provide standby generation service for open access

load on a best efforts basis until December 31, 2001 or the date

established under section 10d(2) as it existed prior to the

effective date of the amendatory act that added this sentence,

whichever is later. The pricing for the electric generation standby

service is equal to the retail market price of comparable standby

service allowed under subsection (5). An electric utility is not

required to interrupt firm off-system sales or firm service

customers to provide standby generation service. Until the date

established under section 10d(2) as it existed prior to the

effective date of the amendatory act that added this sentence,

standby generation service shall continue to be provided to nonopen

access customers under regulated tariffs.

(5) The methodology for identifying the retail market price

for electric generation service to be applied under this section

shall be determined by the commission based upon market indices

commonly relied upon in the electric generation industry, adjusted

as appropriate to reflect retail market prices in the relevant

market.

Sec. 10d. ~~(1) Except as otherwise provided under subsection~~

~~(3) or unless otherwise reduced by the commission under subsection~~

~~(5), the commission shall establish the residential rates for each~~

~~electric utility with 1,000,000 or more retail customers in this~~

~~state as of~~ ~~May 1, 2000~~ ~~that will result in a 5% rate reduction~~

~~from the rates that were authorized or in effect on~~ ~~May 1, 2000~~.

~~Notwithstanding any other provision of law or commission order,~~

~~rates for each electric utility with 1,000,000 or more retail~~

~~customers established under this subsection become effective on~~

~~June 5, 2000~~ ~~and remain in effect until~~ ~~December 31, 2003~~ ~~and all~~

~~other electric retail rates of an electric utility with 1,000,000~~

~~or more retail customers authorized or in effect as of~~ ~~May 1, 2000~~

~~shall remain in effect until~~ ~~December 31, 2003~~.

~~(2) On and after~~ ~~December 31, 2003, rates for an electric~~

~~utility with 1,000,000 or more retail customers in this state as of~~

~~May 1, 2000~~ ~~shall not be increased until the earlier of December~~

~~31, 2013 or until the commission determines, after notice and~~

~~hearing, that the utility meets the market test under section 10f~~

~~and has completed the transmission expansion provided for in the~~

~~plan required under section 10v. The rates for commercial or~~

~~manufacturing customers of an electric utility with 1,000,000 or~~

~~more retail customers with annual peak demands of less than 15~~

~~kilowatts shall not be increased before~~ ~~January 1, 2005. There~~

~~shall be no cost shifting from customers with capped rates to~~

~~customers without capped rates as a result of this section. In no~~

~~event shall residential rates be increased before~~ ~~January 1, 2006~~

~~above the rates established under subsection (1).~~

~~(3) Subsections (1) and (2) do not apply to rates or charges~~

~~authorized by the commission under subsection (13).~~

~~(4) Beginning~~ ~~January 1, 2004, annual return of and on capital~~

~~expenditures in excess of depreciation levels incurred during and~~

~~before the time period described in subsection (2), and expenses~~

~~incurred as a result of changes in taxes, laws, or other state or~~

~~federal governmental actions incurred by electric utilities during~~

~~the period described in subsection (2), shall be accrued and~~

~~deferred for recovery. After notice and hearing, the commission~~

~~shall determine the amount of reasonable and prudent costs, if any,~~

~~to be recovered and the recovery period, which shall not exceed 5~~

~~years, and shall not commence until after the expiration of the~~

~~period described in subsection (2).~~

~~(5) If the commission authorizes an electric utility to use~~

~~securitization financing under section 10i, any savings resulting~~

~~from securitization shall be used to reduce retail electric rates~~

~~from those authorized or in effect as of May 1, 2000 as required~~

~~under subsection (1). A rate reduction under this subsection shall~~

~~not be less than the 5% required under subsection (1). The~~

~~financing order may provide that a utility shall only issue~~

~~securitization bonds in an amount equal to or less than requested~~

~~by the utility, but the commission shall not preclude the issuance~~

~~of an amount of securitization bonds sufficient to fund the rate~~

~~reduction required under subsection (1).~~

~~(6) Except for savings assigned to the low-income and energy~~

~~efficiency fund under subsection (7), securitization savings~~

~~greater than those used to achieve the 5% rate reduction under~~

~~subsection (1) shall be allocated by the commission to further rate~~

~~reductions or to reduce the level of any charges authorized by the~~

~~commission to recover an electric utility's stranded costs. The~~

~~commission shall allocate approved securitization, transition,~~

~~stranded, and other related charges and credits in a manner that~~

~~does not result in a reallocation of cost responsibility among the~~

~~different customer classes.~~

~~(7) If securitization savings exceed the amount needed to~~

~~achieve a 5% rate reduction for all customers, then, for a period~~

~~of 6 years, 100% of the excess savings, up to 2% of the electric~~

~~utility's commercial and industrial revenues, shall be allocated to~~

~~the low-income and energy efficiency fund administered by the~~

~~commission. The commission shall establish standards for the use of~~

~~the fund to provide shut-off and other protection for low-income~~

~~customers and to promote energy efficiency by all customer classes.~~

~~The commission shall issue a report to the legislature and the~~

~~governor every 2 years regarding the effectiveness of the fund.~~

~~(8) Except as provided under subsection (3), until the end of~~

~~the period described in subsection (2), the commission shall not~~

~~authorize any fees or charges that will cause the residential rate~~

~~reduction required under subsection (1) to be less than 5%.~~

(1) ~~(9)~~ If an electric utility serving less than 1,000,000

retail customers in this state as of May 1, 2000 issues

securitization bonds as allowed under this act, it shall have the

same rights, duties, and obligations under this section as an

electric utility serving 1,000,000 or more retail customers in this

state as of May 1, 2000.

(2) ~~(10)~~ The commission shall take the necessary steps to

ensure that all electrical power generating facilities in this

state comply with all rules, regulations, and standards of the

federal environmental protection agency regarding mercury

emissions.

(3) ~~(11)~~ A covered utility may apply to the commission to

recover enhanced security costs for an electric generating facility

through a security recovery factor. If the commission action under

subsection ~~(13)~~ (5) is approval of a security recovery factor, the

covered utility may recover those enhanced security costs.

(4) ~~(12)~~ The commission shall require that notice of the

application filed under subsection ~~(11)~~ (3) be published by the

covered utility within 30 days from the date the application was

filed. The initial hearing by the commission shall be held within

20 days of the date the notice was published in newspapers of

general circulation in the service territory of the covered

utility.

(5) ~~(13)~~ The commission may issue an order approving,

rejecting, or modifying the security recovery factor. If the

commission issues an order approving a security recovery factor,

that order shall be issued within 120 days of the initial hearing

required under subsection ~~(12)~~ (4). In determining the security

recovery factor, the commission shall only include costs that the

commission determines are reasonable and prudent and that are

jurisdictionally assigned to retail customers of the covered

utility in this state. The costs included shall be net of any

proceeds that have been or will be received from another source,

including, but not limited to, any applicable insurance settlements

received by the covered utility or any grants or other emergency

relief from federal, state, or local governmental agencies for the

purpose of defraying enhanced security costs. In its order, the

commission shall designate a period for recovery of enhanced

security costs, including a reasonable return on the unamortized

balance, over a period not to exceed 5 years. The security recovery

factor shall not be less than zero.

(6) ~~(14) Within 60 days of the effective date of the~~

~~amendatory act that added this subsection~~ No later than February

18, 2003, the commission shall by order prescribe the form for the

filing of an application for a security recovery factor under

subsection ~~(11)~~ (3). If the commission or its designee determines

that a filing is incomplete, it shall notify the covered utility

within 10 days of the filing.

(7) ~~(15)~~ Records or other information supplied by the covered

utility in an application for recovery of security costs under

subsection ~~(11)~~ (3) that describe security measures, including, but

not limited to, emergency response plans, risk planning documents,

threat assessments, domestic preparedness strategies, and other

plans for responding to acts of terrorism are not subject to the

freedom of information act, 1976 PA 442, MCL 15.231 to 15.246, and

shall be treated as confidential by the commission.

(8) ~~(16)~~ The commission shall issue protective orders as are

necessary to protect the information found by the commission to be

confidential under this section.

(9) ~~(17)~~ As used in this section:

(a) "Act of terrorism" means a willful and deliberate act that

is all of the following:

(i) An act that would be a violent felony under the laws of

this state, whether or not committed in this state.

(ii) An act that the person knows or has reason to know is

dangerous to human life.

(iii) An act that is intended to intimidate or coerce a civilian

population or influence or affect the conduct of government or a

unit of government through intimidation or coercion.

(b) "Covered utility" means an electric utility ~~subject to the~~

~~rate freeze provisions of subsection (1), the rate cap provisions~~

~~of subsection (2),~~ with 1,000,000 or more retail customers in this

state as of May 1, 2000 or an electric utility subject to the rate

provisions of commission orders in case numbers U-11181-R and U-

12204.

costs of new and enhanced security measures incurred before January

1, 2006 for an electric generating facility by a covered utility

that are required by federal or state regulatory security

requirements issued after September 11, 2001 or determined to be

necessary by the commission to provide reasonable security from an

act of terrorism. Enhanced security costs include increases in the

cost of insurance that are attributable to an increased terror

related risk and the costs of maintaining or restoring electric

service as the result of an act of terrorism.

(d) "Security recovery factor" means an unbundled charge for

all retail customers, except for customers of alternative electric

suppliers, to recover enhanced security costs that have been

approved by the commission.

Sec. 10g. (1) As used in sections 10 through 10bb:

(a) "Alternative electric supplier" means a person selling

electric generation service to retail customers in this state.

Alternative electric supplier does not include a person who

physically delivers electricity directly to retail customers in

this state. An alternative electric supplier is not a public

utility.

(b) "Commission" means the Michigan public service commission

~~in the department of consumer and industry services~~ created in

section 1.

of the electric transmission line certification act, 1995 PA 30,

MCL 460.562.

(d) "Independent transmission owner" means an independent

transmission company as that term is defined in section 2 of the

electric transmission line certification act, 1995 PA 30, MCL

460.562.

(e) ~~(d)~~ "Merchant plant" means electric generating equipment

and associated facilities with a capacity of more than 100

kilowatts located in this state that are not owned and operated by

an electric utility.

(f) ~~(e)~~ "Relevant market" means either the Upper Peninsula or

the Lower Peninsula of this state.

(g) ~~(f)~~ "Renewable energy source" means energy generated by

solar, wind, geothermal, biomass, including waste-to-energy and

landfill gas, or hydroelectric.

(2) A school district aggregating electricity for school

properties or an exclusive aggregator for public or private school

properties is not an electric utility or a public utility for the

purpose of that aggregation.

Sec. 10p. (1) Each electric utility operating in this state

shall establish an industry worker transition program that shall,

in consultation with employees or applicable collective bargaining

representatives, provide skills upgrades, apprenticeship and

training programs, voluntary separation packages consistent with

reasonable business practices, and job banks to coordinate and

assist placement of employees into comparable employment at no less

than the wage rates and substantially equivalent fringe benefits

received before the transition.

(2) ~~Stranded~~ The costs resulting from subsection (1) shall

include audited and verified employee-related restructuring costs

that are incurred as a result of the amendatory act that added this

section or as a result of prior commission restructuring orders,

including employee severance costs, employee retraining programs,

early retirement programs, outplacement programs, and similar costs

and programs, that have been approved and found to be prudently

incurred by the commission.

(3) In the event of a sale, purchase, or any other transfer of

ownership of 1 or more Michigan divisions or business units, or

generating stations or generating units, of an electric utility, to

either a third party or a utility subsidiary, the electric

utility's contract and agreements with the acquiring entity or

persons shall require all of the following for a period of at least

30 months:

(a) That the acquiring entity or persons hire a sufficient

number of nonsupervisory employees to safely and reliably operate

and maintain the station, division, or unit by making offers of

employment to the nonsupervisory workforce of the electric

utility's division, business unit, generating station, or

generating unit.

(b) That the acquiring entity or persons not employ

nonsupervisory employees from outside the electric utility's

workforce unless offers of employment have been made to all

qualified nonsupervisory employees of the acquired business unit or

facility.

resolution mechanism culminating in a final and binding decision by

a neutral third party for resolving employee complaints or disputes

over wages, fringe benefits, and working conditions.

(d) That the acquiring entity or persons offer employment at

no less than the wage rates and substantially equivalent fringe

benefits and terms and conditions of employment that are in effect

at the time of transfer of ownership of the division, business

unit, generating station, or generating unit. The wage rates and

substantially equivalent fringe benefits and terms and conditions

of employment shall continue for at least 30 months from the time

of the transfer of ownership unless the employees, or where

applicable collective bargaining representative, and the new

employer mutually agree to different terms and conditions of

employment within that 30-month period.

(4) The electric utility shall offer a transition plan to

those employees who are not offered jobs by the entity because the

entity has a need for fewer workers. If there is litigation

concerning the sale, or other transfer of ownership of the electric

utility's divisions, business units, generating stations, or

generating units, the 30-month period under subsection (3) ~~will~~

~~begin~~ begins on the date the acquiring entity or persons take

control or management of the divisions, business units, generating

stations, or generating units of the electric utility.

(5) The commission shall adopt generally applicable service

quality and reliability standards for the transmission, generation,

and distribution systems of electric utilities and other entities

subject to its jurisdiction, including, but not limited to,

standards for service outages, distribution facility upgrades,

repairs and maintenance, telephone service, billing service,

operational reliability, and public and worker safety. In setting

service quality and reliability standards, the commission shall

consider safety, costs, local geography and weather, applicable

codes, national electric industry practices, sound engineering

judgment, and experience. The commission shall also include

provisions to upgrade the service quality of distribution circuits

that historically have experienced significantly below-average

performance in relationship to similar distribution circuits.

(6) Annually, each jurisdictional utility or entity shall file

its report with the commission detailing actions to be taken to

comply with the service quality and reliability standards during

the next calendar year and its performance in relation to the

service quality and reliability standards during the prior calendar

year. The annual reports shall contain that data as required by the

commission, including the estimated cost of achieving improvements

in the jurisdictional utility's or entity's performance with

respect to the service quality and reliability standards.

(7) The commission shall analyze the data to determine whether

the jurisdictional entities are properly operating and maintaining

their systems ~~, assess the impact of deregulation on reliability,~~

and take corrective action if needed.

(8) The commission shall submit a report to the governor and

the legislature by September 1, 2009. In preparing the report, the

commission should review and consider relevant existing customer

surveys and examine what other states have done. This report shall

include all of the following:

(a) An assessment of the major types of end-use customer power

quality disturbances, including, but not limited to, voltage sags,

overvoltages, oscillatory transients, voltage swells, distortion,

power frequency variations, and interruptions, caused by both the

distribution and transmission systems within this state.

(b) An assessment of utility power plant generating cost

efficiency, including, but not limited to, operational efficiency,

economic generating cost efficiency, and schedules for planned and

unplanned outages.

enforce standards pertaining to end-use customer power quality

disturbances and utility power plant generating cost efficiency

either through current practice, statute, policy, or rule.

(d) Recommendations for use of common characteristics,

measures, and indices to monitor power quality disturbances and

power plant generating cost efficiency, such as expert customer

service assessments, frequency of disturbance occurrence, duration

of disturbance, and voltage magnitude.

(e) Recommendations for statutory changes that would be

necessary to enable the commission to properly monitor and enforce

standards to optimize power plant generating cost efficiency and

minimize power quality disturbances. These recommendations shall

include recommendations to provide methods to ensure that this

state can obtain optimal and cost-effective end-use customer power

quality to attract economic development and investment into the

state.

(9) By December 31, 2009, the commission shall, based on its

findings in subsection (8), review its existing rules under this

section and amend the rules, if needed, under the administrative

procedures act of 1969, 1969 PA 306, MCL 24.201 to 24.328, to

implement performance standards for generation facilities and for

distribution facilities to protect end-use customers from power

quality disturbances.

(10) Any standards or rules developed under this section shall

be designed to do the following, as applicable:

(a) Establish different requirements for each customer class,

whenever those different requirements are appropriate to carry out

the provisions of this section, and to reflect different load and

service characteristics of each customer class.

(b) Consider the availability and associated cost of necessary

equipment and labor required to maintain or upgrade distribution

and generating facilities.

power quality disturbances are promoted for each utility, including

consideration of the installation of equipment or adoption of

operating practices at the end-user's location.

(d) Take into account the extent to which the benefits

associated with achieving a specified standard or improvement are

House Bill No. 5524 as amended June 27, 2008

offset by the incremental capital, fuel, and operation and

maintenance expenses associated with meeting the specified standard

or improvement.

(e) Carefully consider the time frame for achieving a

specified standard, taking into account the time required to

implement needed investments or modify operating practices.

(11) The commission shall also create benchmarks for

individual jurisdictional entities within their rate-making process

in order to accomplish the goals of this section to alleviate end-

use customer power quality disturbances and promote power plant

generating cost efficiency.

(12) The commission shall establish a method for gathering

data from the industrial customer class to assist in monitoring

power quality and reliability standards related to service

characteristics of the industrial customer class.

(13) ~~(8)~~ The commission ~~shall be~~ is authorized to levy

financial incentives and penalties upon any jurisdictional entity

which exceeds or fails to meet the service quality and reliability

standards.

<<(14) AS USED IN THIS SECTION, "JURISDICTIONAL UTILITY" OR "JURISDICTIONAL ENTITY" MEANS JURISDICTIONAL REGULATED UTILITY AS THAT TERM IS DEFINED IN SECTION 6Q.>>

Sec. 10r. (1) The commission shall establish minimum standards

for the form and content of all disclosures, explanations, or sales

information disseminated by a person selling electric service to

ensure that the person provides adequate, accurate, and

understandable information about the service that enables a

customer to make an informed decision relating to the source and

type of electric service purchased. The standards shall be

developed to do all of the following:

(a) Not be unduly burdensome.

(b) Not unnecessarily delay or inhibit the initiation and

development of competition for electric generation service in any

market.

explanations, or sales information relating to different services

or similar services to different classes of customers, whenever

~~such~~ the different requirements are appropriate to carry out the

purposes of this section.

~~(2) Before~~ ~~January 1, 2002, the commission shall establish a~~

~~funding mechanism for electric utilities and alternative electric~~

~~suppliers to carry out an educational program for customers to do~~

~~all of the following:~~

~~(a) Inform customers of the changes in the provision of~~

~~electric service, including, but not limited to, the availability~~

~~of alternative electric suppliers.~~

~~(b) Inform customers of the requirements relating to~~

~~disclosures, explanations, or sales information for alternative~~

~~electric suppliers.~~

~~(c) Provide assistance to customers in understanding and using~~

~~the information to make reasonably informed choices about which~~

~~service to purchase and from whom to purchase it.~~

(2) ~~(3)~~ The commission shall require that, starting January 1,

2002, all electric suppliers disclose in standardized, uniform

format on the customer's bill with a bill insert, on customer

contracts, or, for cooperatives, in periodicals issued by an

association of rural electric cooperatives, information about the

environmental characteristics of electricity products purchased by

the customer, including all of the following:

(a) The average fuel mix, including categories for oil, gas,

coal, solar, hydroelectric, wind, biofuel, nuclear, solid waste

incineration, biomass, and other fuel sources. If a source fits

into the other category, the specific source must be disclosed. A

regional average, determined by the commission, may be used only

for that portion of the electricity purchased by the customer for

which the fuel mix cannot be discerned. For the purposes of this

subdivision, "biomass" means dedicated crops grown for energy

production and organic waste.

(b) The average emissions, in pounds per megawatt hour, sulfur

dioxide, carbon dioxide, and oxides of nitrogen. An emissions

default, determined by the commission, may be used if the regional

average fuel mix is being disclosed.

pounds per megawatt hour.

(d) The regional average fuel mix and emissions profile as

referenced in ~~subsection (3)(a)~~ subdivisions (a), (b), and (c).

(3) ~~(4)~~ The information required by subsection ~~(3)~~ (2) shall

be provided no more than twice annually, and be based on a rolling

annual average. Emissions factors will be based on annual publicly

available data by generation source.

(4) ~~(5)~~ All of the information required to be provided under

subsection (1) shall also be provided to the commission to be

included on the commission's internet site.

(5) ~~(6)~~ The commission shall establish the Michigan renewables

energy program. The program shall be designed to inform customers

in this state of the availability and value of using renewable

energy generation and the potential of reduced pollution. The

program shall also be designed to promote the use of existing

renewable energy sources and encourage the development of new

facilities.

(6) Within 2 years of the effective date of the amendatory act

that added this subsection, the commission shall conduct a study

and report to the governor and the house and senate standing

committees with oversight of public utilities issues on the

advisability of separating electric distribution and generation

within electric utilities, taking into account the costs, benefits,

efficiencies to be gained or lost, effects on customers, effects on

reliability or quality of service, and other factors which the

commission determines are appropriate. The report shall include,

but is not limited to, the advisability of locating within separate

departments of the utility the personnel responsible for the day-

to-day management of electric distribution and generation and

maintaining separate books and records for electric distribution

and generation.

(7) Two years after the effective date of the amendatory act

that added this subsection, the commission shall conduct a study

and report to the governor and the house and senate standing

committees with oversight of public utilities issues on whether the

state would benefit from the creation of a purchasing pool in which

electric generation in this state is purchased and then resold. The

report shall include, but is not limited to, whether the purchasing

pool shall be a separate entity from electric utilities, the impact

of such a pool on electric utilities' management of their

electrical generating assets, and whether ratepayers would benefit

from spreading the cost of new electric generation across all or a

portion of this state.

(8) Within 270 days of the effective date of the amendatory

act that added this subsection, each electric utility regulated by

the commission shall file with the commission a plan for utilizing

dispatchable customer-owned distributed generation within the

context of its integrated resource planning process. Included in

the utility's filing shall be proposals for enrolling and

compensating customers for the utility's right to dispatch at-will

the distributed generation assets owned by those customers and

provisions requiring the customer to maintain these assets in a

dispatchable condition. If an electric utility already has programs

addressing the subject of the filing required under this

subsection, the utility may refer to and take credit for those

existing programs in its proposed plan.

Sec. 10x. (1) ~~The commission shall not require a cooperative~~

~~electric utility to provide its retail customers the ability to~~

~~choose an alternative electric supplier before~~ ~~January 1, 2005, nor~~

~~unbundle its rates as required under section 10b before July 1,~~

~~2004.~~ Any retail customer of a cooperative with a peak load of 1

megawatt or greater shall be provided the opportunity to choose an

alternative electric supplier ~~no later than~~ ~~January 1, 2002~~ subject

to the provisions in section 10a.

(2) The commission shall not require a cooperative electric

utility or an independent investor-owned utility with fewer than 60

employees to maintain separate facilities, operations, or

personnel, used to deliver electricity to retail customers, provide

retail electric service, or to be an alternative electric supplier.

(3) Any debt service recovery charge, or other charge approved

by the commission for a cooperative electric utility serving

primarily at wholesale may, upon application by its member

cooperative or cooperatives, be assessed by and collected through

its member cooperative or cooperatives.

(4) The commission shall not prohibit a cooperative electric

utility from metering and billing its customers for electric

services provided by the cooperative electric utility.

~~(5) A cooperative electric utility shall not be required to~~

~~provide funding under section 10r(2) until~~ ~~July 1, 2004~~ ~~or such~~

~~time as it is providing choice to all of its retail customers,~~

~~whichever is earlier.~~

Sec. 10y. (1) The governing body of a municipally owned

utility shall determine whether it will permit retail customers

receiving delivery service from the municipally owned utility the

opportunity of choosing an alternative electric supplier, subject

to the implementation of rates, charges, terms, and conditions

referred to in subsection ~~(7)~~ (5).

(2) Except with the written consent of the municipally owned

utility, a person shall not provide delivery service or customer

account service to a retail customer that was receiving that

service from a municipally owned utility as of ~~the effective date~~

~~of the amendatory act that added this section~~ June 5, 2000, or is

receiving the service from a municipally owned utility. ~~and has the~~

~~opportunity to choose an alternative electric supplier under terms~~

~~consistent with this section.~~ For purposes of this subsection,

"customer" means the building or facilities served rather than the

individual, association, partnership, corporation, governmental

body, or any other entity taking service.

~~(3) After~~ ~~December 31, 2007, subsection (2) does not apply if~~

~~the governing body of the municipally owned utility does not permit~~

~~all of its retail customers receiving delivery service from the~~

~~municipally owned utility located outside of the boundaries of the~~

~~municipality that owns the utility the opportunity to choose an~~

~~alternative electric supplier.~~

~~(4) If a municipally owned utility elects to provide electric~~

~~generation service to retail customers receiving delivery service~~

~~from an electric utility, all of the following apply:~~

~~(a) The municipally owned utility shall provide all of its~~

~~retail customers receiving delivery service from the municipally~~

~~owned utility located outside of the boundaries of the municipality~~

~~that owns the utility the opportunity of choosing an alternative~~

~~electric supplier. The rates, charges, terms, and conditions of~~

~~delivery service for customers choosing an alternative electric~~

~~supplier shall be established by the governing body of the~~

~~municipally owned utility as provided under subsection (7).~~

~~(b) If a municipally owned utility and an electric utility~~

~~both provide delivery service to retail customers in the same~~

~~municipality located outside of the boundaries of the municipality~~

~~that owns the municipal utility, then the municipally owned utility~~

~~shall do 1 of the following:~~

(i~~) Make a filing as provided under subsection (5).~~

(ii~~) Enter into a written agreement as provided under~~

~~subsection (6).~~

~~(c) The municipally owned utility shall comply with orders~~

~~issued pursuant to sections 10a(3), 10q, 10r, and 10t with respect~~

~~to customers located outside of the municipality that owns the~~

~~municipally owned utility. Upon a complaint or on the commission's~~

~~own motion, if the commission finds, after notice and hearing, that~~

~~the municipally owned utility has not complied with a provision or~~

~~order issued under sections 10a(3), 10q, 10r, and 10t the~~

~~commission shall order such remedies and penalties as necessary to~~

~~make whole a customer or other person who has suffered damages as a~~

~~result of the violation, including, but not limited to, 1 or more~~

~~of the following:~~

(i~~) Order the municipally owned utility to pay a fine of not~~

~~less than $1,000.00 or more than $20,000.00 for the first offense~~

~~and not less than $40,000.00 for a second and any subsequent~~

~~offense.~~

(ii~~) Order a refund to the customer of any excess charges.~~

(~~iii~~~~) Order any other remedies that would make whole a person~~

~~harmed, including, but not limited to, payment of reasonable~~

~~attorney fees.~~

(iv~~) Revoke the license of the municipally owned utility if the~~

~~commission finds a pattern of violations.~~

(v~~) Issue cease and desist orders.~~

~~(d) The municipally owned utility may provide electric~~

~~generation service to serve electric retail customers receiving~~

~~delivery service from an electric utility up to an amount equal to~~

~~the municipally owned utility's retail customer load that has the~~

~~opportunity of choosing from an alternative electric supplier.~~

~~(e) The municipally owned utility shall obtain a license under~~

~~section 10a(2). The commission shall issue a license unless it~~

~~determines that the municipally owned utility has adopted rates,~~

~~charges, terms, and conditions for delivery service that are unduly~~

~~discriminatory or reflect recovery of stranded costs in an amount~~

~~considered unjust and unreasonable by the commission. A municipally~~

~~owned utility operating under a license issued by the commission~~

~~shall notify the commission before modifying rates, charges, terms,~~

~~and conditions for delivery services. This subsection does not~~

~~grant the commission authority to set rates for a municipally owned~~

~~utility. The commission, after notice and opportunity for hearing,~~

~~may revoke a license issued to a municipally owned utility if it~~

~~determines that the municipally owned utility is not in compliance~~

~~with this subsection.~~

(3) ~~(5)~~ With respect to any electric utility regarding

delivery service to customers located outside of the municipal

boundaries of the municipality that owns the utility, a governing

body of a municipally owned utility may elect to operate in

compliance with R 460.3411 of the Michigan administrative code, as

in effect on ~~the effective date of the amendatory act that added~~

~~this section~~ June 5, 2000. However, compliance with R 460.3411(13)

of the Michigan administrative code is not required for the

municipally owned utility. Concurrent with the filing of an

election under this subsection with the commission, the municipally

owned utility shall serve a copy of the election on the electric

utility. Beginning 30 days after service of the copy of the

election, the electric utility shall, as to the electing

municipally owned utility, be subject to the terms of R 460.3411 of

the Michigan administrative code as in effect on ~~the effective date~~

~~of the amendatory act that added this section~~ June 5, 2000. The

commission shall decide disputes arising under this subsection

subject to judicial review and enforcement.

(4) ~~(6)~~ A municipally owned utility and an electric utility

that provides delivery service in the same municipality as the

municipally owned utility may enter into a written agreement to

define the territorial boundaries of each utility's delivery

service area and any other terms and conditions as necessary to

provide delivery service. The agreement is not effective unless

approved by the governing body of the municipally owned utility and

the commission. The governing body of the municipally owned utility

and the commission shall annually review and supervise compliance

with the terms of the agreement. At the request of a party to the

agreement, disputes arising under the agreement shall be decided by

the commission subject to judicial review and enforcement.

(5) ~~(7)~~ If the governing body of a municipally owned utility

establishes a program to permit any of its customers the

opportunity to choose an alternative electric supplier, the

governing body of the municipally owned utility shall have

exclusive jurisdiction to do all of the following:

(a) Set delivery service rates applicable to services provided

by the municipally owned utility that shall not be unduly

discriminatory.

(b) Determine the amount and types of, and recovery mechanism

for, stranded and transition costs that will be charged.

considers appropriate for the implementation of a program to allow

customers the opportunity of choosing an alternative electric

supplier.

(6) ~~(8)~~ Complaints alleging unduly discriminatory rates or

other noncompliance arising under subsection ~~(7)~~ (5) shall be filed

in the circuit court for the county in which the municipally owned

utility is located. ~~Complaints arising under subsection (4) shall~~

~~be decided by the commission subject to judicial review and~~

~~enforcement.~~

(7) ~~(9)~~ This section does not prevent or limit a municipally

owned utility from selling electricity at wholesale. A municipally

owned utility selling at wholesale is not considered to be an

alternative electric supplier and is not subject to regulation by

the commission.

~~(10) If a municipally owned utility complies with subsection~~

~~(4)(a), (b), and (e) and is a member of a joint agency established~~

~~under the~~ ~~Michigan~~ ~~energy employment act of 1976, 1976 PA 448, MCL~~

~~460.801 to 460.848, it may with the consent of the joint agency~~

~~assign to the joint agency an amount of load up to the amount that~~

~~it is allowed to serve as an electric supplier under subsection~~

~~(4)(d), for the purpose of allowing the joint agency the~~

~~opportunity to sell retail electric generation as an electric~~

~~supplier, if the joint agency complies with sections 10a(3), 10q,~~

~~10r, and 10t and obtains a license under section 10a(2).~~

(8) ~~(11)~~ This section shall not be construed to impair the

contractual rights of a municipally owned utility or customer under

an existing contract.

(9) ~~(12)~~ Contracts or other records pertaining to the sale of

electricity by a municipally owned utility that are in the

possession of a public body and that contain specific pricing or

other confidential or proprietary information may be exempted from

public disclosure requirements by the governing body of a

municipally owned utility. Upon a showing of good cause, disclosure

subject to appropriate confidentiality provisions may be ordered by

a court or the commission.

(10) ~~(13)~~ This section does not affect the validity of the

order relating to the terms and conditions of service in the

Traverse City area that was issued August 25, 1994, by the

commission at the request of consumers power company and the light

and power board of the city of Traverse City.

(11) ~~(14) Except as otherwise provided under subsections~~

~~(4)(c), (4)(e), and (10), sections~~ Sections 6l, 10 through 10x, and

10z through 10bb do not apply to a municipally owned utility.

(12) ~~(15)~~ As used in this section:

(a) "Delivery service" means the providing of electric

transmission or distribution to a retail customer.

(b) "Municipality" means any city, village, or township.

provision of a meter, meter maintenance and testing, meter reading,

and other administrative activity associated with maintaining a

customer account.

(13) ~~(16)~~ In the event that an entity purchases 1 or more

divisions or business units, or generating stations or generating

units, of a municipal electric utility, the acquiring entity's

contract and agreements with the selling municipality shall require

all of the following for a period of at least 30 months:

(a) That the acquiring entity or persons hires a sufficient

number of employees to safely and reliably operate and maintain the

station, division, or unit by first making offers of employment to

the workforce of the municipal electric utility's division,

business unit, or generating unit.

(b) That the acquiring entity or persons not employ employees

from outside the municipal electric utility's workforce unless

offers of employment have been made to all qualified employees of

the acquired business unit or facility.

resolution mechanism culminating in a final and binding decision by

a neutral third party for resolving employee complaints or disputes

over wages, fringe benefits, and working conditions.

(d) That the acquiring entity or persons offer employment at

no less than the wage rates and substantially equivalent fringe

benefits and terms and conditions of employment that are in effect

at the time of transfer of ownership of the division, business

unit, generating station, or generating unit. The wage rates and

substantially equivalent fringe benefits and terms and conditions

of employment shall continue for at least 30 months from the time

House Bill No. 5524 as amended June 27, 2008

of the transfer of ownership unless the employees, or where

applicable collective bargaining representative, and the new

employer mutually agree to different terms and conditions of the

employment within that 30-month period.

(e) An acquiring entity is exempt from the obligations in this

subsection if the selling municipality transfers all displaced

municipal electric utility employees to positions of employment

within the municipality at no less than the wage rates and

substantially equivalent fringe benefits and terms and conditions

of employment that are in effect at the time of transfer. The wage

rates and substantially equivalent fringe benefits and terms and

conditions of employment shall continue for at least 30 months from

the time of the transfer unless the employees, or where applicable

collective bargaining representative, and the municipality mutually

agree to different terms and conditions of the employment within

that 30-month period.

Sec. 10dd. For the fiscal year ending September 30, 2008,

there is appropriated to the commission from the assessments

imposed under 1972 PA 299, MCL 460.111 to 460.120, the amount of

$1,000,000.00 to hire 25.0 full-time equated positions to implement

the provisions of the amendatory act that added this section.

Sec. 11. (1) <<This subsection applies beginning January 1, 2009.>>

The commission shall phase in electric rates

equal to the cost of providing service to industrial and commercial

customers over a period of 5 years from the effective date of the

amendatory act that added this section. <<The cost of providing service

to each customer class shall be based on the production-related and transmission costs based on the 50-25-25 method of cost allocation. The commission may modify this method to better ensure rates are equal to the cost of service if this method does not result in a greater amount of production-related and transmission costs allocated to primary customers.>> The commission shall phase

in cost-based rates for residential customers <<within >> 10

years from the effective date of the amendatory act that added this

House Bill No. 5524 as amended June 27, 2008 (1 of 2)

section.

(2) The commission shall <<ensure that the impact on rates due

to the phase-in period in subsection (1) is no more than 2.5% per year or

Issue a financing order to allow a utility to recover qualified costs. In determining whether to issue a financing order, the commission shall review the following:

(a) Whether a financing order is in the best interests of residential customers.

(b) The total cost to residential customers of the issuance of securitization bonds.

(C) The effect on residential customers of any additional costs because of the issuance of a certificate of necessity under section 6s.

(d) Any other factors affecting residential rates.>>

(3) In a financing order, the commission shall ensure all of

the following:

(a) That the proceeds of the securitization bonds are used

solely to pay for the costs due to the phase-in period described in

subsection (1).

(b) That the expected structuring and expected pricing of the

securitization bonds will result in the lowest securitization

charges consistent with market conditions and the terms of the

financing order.

present value of the revenue requirement over the life of the

proposed securitization bonds associated with the qualified costs

sought to be securitized.

<<(d) Except as otherwise provided in this subdivision, that the period over which the securitization charges are to be recovered shall not exceed 10 years after the effective date of the amendatory act that added this section. If the commission determines that it is in the best interests of residential ratepayers, the commission may allow securitization charges to be recovered up to 18 years after the effective date of the amendatory act that added this section.>>

(4) The financing order shall detail the amount of qualified

costs to be recovered and the period over which the securitization

charges are to be recovered.

(5) A financing order is effective in accordance with its

terms, and the financing order, together with the securitization

charges authorized in the order, shall be irrevocable and not

subject to reduction, impairment, or adjustment by further action

of the commission, except as provided under subsection (16).

(6) Stocks, bonds, notes, or other evidence of indebtedness

issued under a financing order of the commission shall be binding

in accordance with their terms notwithstanding that the order of

the commission is later vacated, modified, or otherwise held to be

invalid in whole or in part.

(7) The commission shall after an expedited contested case

proceeding issue a financing order or an order rejecting the

application for a financing order no later than 90 days after the

electric utility files its application.

(8) A financing order is only subject to rehearing by the

commission on the motion of the applicant for securitization.

(9) Notwithstanding any other provision of law, a financing

order may be reviewed by the court of appeals upon a filing by a

party to the commission proceeding within 30 days after the

financing order is issued. All appeals of a financing order shall

be heard and determined as expeditiously as possible with lawful

precedence over other matters. Review on appeal shall be based

solely on the record before the commission and briefs to the court

and shall be limited to whether the financing order conforms to the

constitution and laws of this state and the United States and is

within the authority of the commission under this act.

(10) At the request of an electric utility, the commission may

adopt a financing order providing for retiring and refunding

securitization bonds if the commission finds that the future

securitization charges required to service the new securitization

bonds, including transaction costs, will be less than the future

securitization charges required to service the securitization bonds

being refunded. On the retirement of the refunded securitization

bonds, the commission shall adjust the related securitization

charges accordingly.

(11) The commission shall have the authority to retain

financial or legal services to assist in issuance of a financing

order and to require the electric utility to pay the cost of the

services. The payments shall be included as qualified costs.

(12) Securitization property shall consist of the rights and

interests of an electric utility, or its successor, under a

financing order, including without limitation all of the following:

(a) The right to impose, collect, and receive securitization

charges authorized in the financing order in an amount necessary to

provide the full recovery of all qualified costs.

(b) The right under the financing order to obtain periodic

adjustments of securitization charges under subsection (16).

arising out of the rights and interests described under this

subsection.

(13) Securitization property shall constitute a present

property right even though the imposition and collection of

securitization charges depends on the further acts of the electric

utility or others that have not yet occurred. The rights of an

electric utility to securitization property before its sale to any

assignee shall be considered a property interest in a contract. The

financing order shall remain in effect and the securitization

property shall continue to exist until the commission approved

securitization bonds and expenses related to the bonds have been

paid in full.

(14) The interest of an assignee or pledgee in securitization

property and in the revenues and collections arising from that

property are not subject to setoff, counterclaim, surcharge, or

defense by the electric utility or any other person or in

connection with the bankruptcy of the electric utility or any other

entity. A financing order shall remain in effect and unabated

notwithstanding the bankruptcy of the electric utility, its

successors, or assignees.

(15) A financing order shall include terms ensuring that the

imposition and collection of securitization charges authorized in

the order are a nonbypassable charge.

(16) A financing order shall include a mechanism requiring

that securitization charges be reviewed and adjusted by the

commission at least annually, within 45 days of the anniversary

date of the issuance of the securitization bonds, to correct any

overcollections or undercollections of the preceding 12 months and

to ensure the expected recovery of amounts sufficient to timely

provide all payments of debt service and other required amounts and

charges in connection with the securitization bonds.

(17) An agreement by an electric utility or assignee to

transfer securitization property that expressly states that the

transfer is a sale or other absolute transfer signifies that the

transaction is a true sale and is not a secured transaction and

that title, legal and equitable, has passed to the entity to which

the securitization property is transferred.

(18) A true sale under this section applies regardless of

whether the purchaser has any recourse against the seller, or any

other term of the parties' agreement, including the seller's

retention of an equity interest in the securitization property, the

fact that the electric utility acts as a collector of

securitization charges relating to the securitization property, or

the treatment of the transfer as a financing for tax, financial

reporting, or other purposes.

(19) A valid and enforceable lien and security interest in

securitization property may be created only by a financing order

and the execution and delivery of a security agreement with a

financing party in connection with the issuance of securitization

bonds.

(20) The lien and security interest shall attach automatically

from the time that value is received for the bonds and shall be a

continuously perfected lien and security interest in the

securitization property and all proceeds of the property, whether

accrued or not, shall have priority in the order of filing when a

financing statement has been filed with respect to the security

interest in accordance with the uniform commercial code, 1962 PA

174, MCL 440.1101 to 440.11102, and take precedence over any

subsequent judicial and other lien creditor. In addition to the

rights and remedies provided by this act, all rights and remedies

with respect to a security interest provided by the uniform

commercial code, 1962 PA 174, MCL 440.1101 to 440.11102, shall

apply to the securitization property.

(21) Transfer of an interest in securitization property to an

assignee shall be perfected against all third parties, including

subsequent judicial and other lien creditors, when a financing

statement has been filed with respect to the transfer in accordance

with the uniform commercial code, 1962 PA 174, MCL 440.1101 to

440.11102.

(22) The priority of a lien and security interest under this

section is not impaired by any later modification of the financing

order or by the commingling of funds arising from securitization

charges with other funds, and any other security interest that may

apply to those funds shall be terminated when they are transferred

to a segregated account for the assignee or a financing party. If

securitization property has been transferred to an assignee, any

proceeds of that property shall be held in trust for the assignee.

(23) In the event of default by the electric utility or its

successors, in payment of revenues arising with respect to

securitization property, the commission or a court of appropriate

jurisdiction, upon the application of the financing party, and

without limiting any other remedies available to the financing

party, shall order the sequestration and payment to the financing

party of revenues arising with respect to the securitization

property. An order shall remain in full force and effect

notwithstanding any bankruptcy, reorganization, or other insolvency

proceedings with respect to the debtor, pledgor, or transferor of

the property.

(24) Securitization property shall constitute an account as

that term is defined under the uniform commercial code, 1962 PA

174, MCL 440.1101 to 440.11102.

(25) For purposes of this act and the uniform commercial code,

1962 PA 174, MCL 440.1101 to 440.11102, securitization property

shall be in existence whether or not the revenue or proceeds in

respect to the property have accrued and whether or not the value

of the property right is dependent on the customers of an electric

utility receiving service.

(26) Changes in the financing order or in the customer's

securitization charges do not affect the validity, perfection, or

priority of the security interest in the securitization property.

(27) The description of securitization property in a security

agreement or other agreement or a financing statement is sufficient

if it refers to this act and the financing order establishing the

securitization property.

(28) This act shall control in any conflict between this act

and any other law of this state regarding the attachment and

perfection and the effect of perfection and priority of any

security interest in securitization property.

(29) Notwithstanding the provisions of the uniform commercial

code, 1962 PA 174, MCL 440.1101 to 440.11102, the law of the state

of Michigan shall govern the perfection and the effect of

perfection and priority of any security interest in the

securitization property.

(30) Securitization bonds are not a debt or obligation of the

state and are not a charge on its full faith and credit or taxing

power.

(31) The state pledges, for the benefit and protection of the

financing parties and the electric utility, that it will not take

or permit any action that would impair the value of securitization

property, reduce or alter, except as allowed under subsection (16),

or impair the securitization charges to be imposed, collected, and

remitted to financing parties, until the principal, interest and

premium, and any other charges incurred and contracts to be

performed in connection with the related securitization bonds have

been paid and performed in full. Any party issuing securitization

bonds is authorized to include this pledge in any documentation

relating to those bonds.

(32) The acquisition, ownership, and disposition of any direct

interest in any securitization bond shall not be taken into account

in determining whether a person is subject to any income tax,

franchise tax, business activities tax, intangible property tax,

excise tax, stamp tax, or any other tax imposed by this state or

any agency or political subdivision of this state.

(33) Any successor to an electric utility, whether pursuant to

any bankruptcy, reorganization, or other insolvency proceeding or

pursuant to any merger or acquisition, sale or transfer, by

operation of law, as a result of electric utility restructuring or

otherwise, shall perform and satisfy all obligations of the

electric utility under the amendatory act that added this section

in the same manner and to the same extent as the electric utility,

including, but not limited to, collecting and paying to the person

entitled to revenues with respect to the securitization property.

(34) An assignee or financing party shall not be considered to

be a public utility or person providing electric service solely by

virtue of the transactions described in this section.

(35) Effective on the date the first securitization bonds are

issued under this section, if any provision of this section or

portion of this section is held to be invalid or is invalidated,

superseded, replaced, repealed, or expires for any reason, that

occurrence does not affect the validity or continuation of the

amendatory act that added this section, or any part of those

provisions, or any other provision of this section that is relevant

to the issuance, administration, payment, retirement, or refunding

of securitization bonds or to any actions of the electric utility,

its successors, an assignee, a collection agent, or a financing

party, which shall remain in full force and effect.

(36) Notwithstanding any other provision of this act, the

commission shall establish an eligible low-income customer and

eligible senior citizen customer rate. Upon filing of a rate

increase request, a utility shall include a proposed eligible low-

income customer and eligible senior citizen customer rate and a

method to allocate the revenue shortfall attributed to the

implementation of that rate upon all customer classes. As used in

this subsection, "eligible low-income customer" and "eligible

senior citizen customer" mean those terms as defined in section

10t.

(37) Notwithstanding any other provision of this section, the

commission shall establish rate schedules which ensure that public

and private schools, universities, and community colleges are

charged retail electric rates that reflect the actual cost of

providing service to those customers. Not later than 90 days after

the effective date of the amendatory act that added this section,

electric utilities regulated under this section shall file with the

commission tariffs to ensure that public and private schools,

universities, and community colleges are charged electric rates

that fully reflect their unique load characteristics.

House Bill No. 5524 as amended June 27, 2008

(38) Subsections (1) to (37) apply only to electric utilities

with 1,000,000 or more retail customers in this state.

(39) <<This subsection applies beginning January 1, 2009.>> The

commission shall approve rates equal to the cost of

providing service to customers of electric utilities serving less

than 1,000,000 retail customers in this state. The rates shall be

approved by the commission in each utility's first general rate

case filed after passage of the amendatory act that added this

section. If, in the judgment of the commission, the impact of

imposing cost of service rates on customers of a utility would have

a material impact, the commission may approve an order that

implements those rates over a suitable number of years. <<The commission

shall ensure that any impact on rates is not more than 2.5% per year.>>

(40) As used in this section:

(a) "Assignee" means an individual, corporation, or other

legally recognized entity to which an interest in securitization

property is transferred.

(b) "Financing order" means an order of the commission

approving the issuance of securitization bonds and the creation of

securitization charges.

including trustees, collateral agents, and other persons acting for

the benefit of the holder.

(d) "Nonbypassable charge" means a charge in a financing order

payable by a <<residential>> customer to an electric utility or its

assignees or

successors<<.

(e) "Qualified costs" means the costs due to the phase-in

period described in subsection (1) together with the costs of

House Bill No. 5524 as amended June 27, 2008

issuing, supporting, and servicing securitization bonds.

(f) "Securitization bonds" means bonds, debentures, notes,

certificates of participation, certificates of a beneficial

interest, certificates of ownership, or other evidences of

indebtedness that are issued by an electric utility, its

successors, or an assignee under a financing order, <<with a maturity

that does not exceed 10 years from the date of issuance>>, and that are

secured by or payable from

securitization property. If certificates of participation,

certificates of beneficial interest, or certificates of ownership

are issued, references in this act to principal, interest, or

premium shall refer to comparable amounts under those certificates.

(g) "Securitization charges" means nonbypassable amounts to be

charged for the use or availability of electric services, approved

by the commission under a financing order to fully recover

qualified costs, that shall be collected by an electric utility,

its successors, an assignee, or other collection agents as provided

for in the financing order.

(h) "Securitization property" means the property described in

subsection (12).