STATE OF MICHIGAN MICHIGAN PUBLIC SERVICE COMMISSION INITIAL BRIEF ON BEHALF OF MIDWEST COGENERATION ASSOCIATION

Transcription

1 STATE OF MICHIGAN MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the application of DTE ELECTRIC COMPANY for authority to increase its rates, amend its rate schedules and rules governing the distribution and supply of electric energy, and for miscellaneous accounting authority. Case No. U INITIAL BRIEF ON BEHALF OF MIDWEST COGENERATION ASSOCIATION Patricia F. Sharkey Environmental Law Counsel, P.C. 180 N. LaSalle Street Suite 3700 Chicago, Illinois T: F: November 8,

2 I. INTRODUCTION The Midwest Cogeneration Association s ( MCA ) interest in this case is limited to DTE Electric Company s ( DTE ) Standard Contract Rider No. 3 Parallel Operation and Standby Service and Station Power Standby Service ( Rider 3 ) and its impact on existing and future cogeneration resources in Consumers territory. MCA is a 501(c)(6) trade association whose members include cogeneration system and ancillary equipment manufacturers; cogeneration system engineers, financial analysts, project developers, and energy services companies; owners and operators of cogeneration systems; and cogeneration and energy efficiency advocates. Despite PURPA s mandate that utilities must offer non-discriminatory back-up and maintenance power to cogeneration customers, MCA members cite unreasonable prices and terms in standby tariffs as one of the most significant barriers to deployment of more cogeneration in the Midwest. To address this issue, MCA has become involved in public utility regulatory forums on the issue of standby rate reform in Indiana, Iowa, Minnesota, Missouri, and Ohio, as well as here in Michigan. As a part of that work, MCA has partnered with the Great Plains Institute and 5 Lakes Energy to develop a comparison and analysis of utility standby tariffs in the Midwest Region and to define the elements of a best practice model tariff. We applaud the Michigan Public Service Commission s ( Commission ) focus on the standby service issue in recent rate cases. In MPSC Case No , the Commission ordered that a Standby Rate Working Group ( SRWG ) be formed to investigate how DTE s and Consumers Energy Company s ( Consumers ) standby tariffs function. After a series of initial meetings in 2016, the SRWG concluded that intermittent resources, such as solar energy, pose 2

3 different considerations than do non-intermittent resources, such as combined heat and power cogeneration technologies. Therefore, the Commission Staff issued an initial SRWG Report primarily addressing solar energy resources in August 2016 and recommended that a second round of meetings be held to focus on non-intermittent resources, with cogeneration as the primary example. MCA was an active participant in the SRWG, particularly in the second round of meetings: participating in SRWG meetings; presenting 5 Lakes Energy s Apples-to-Apples comparison of DTE s and Consumer s tariffs to those of other Midwest utilities; offering our analysis of the impact of Rider 3 on cogeneration deployment; making recommendations for improvement consistent with our best practice model tariff; and filing several sets of comments, including comments on the draft SRWG Report, which was finalized in June 2017 ( SRWG Report ) and is incorporated in the record in this case as Staff Exhibit S MCA has also been an active intervenor in this rate case sponsoring the testimony of three witnesses, Rand Dueweke, Douglas Jester, and Jamie Scripps. The SRWG allowed stakeholders to take a deep dive into concerns with the cost allocation and rate design of the standby tariffs currently provided by the two major utilities serving Michigan self-generation customers. The SRWG Report recommended updating the utilities monthly charges based on the most up-to-date cost of service principles and various rate design reforms to reflect identified best practices for standby tariffs, including consideration of proration of daily demand charges, the interaction of standby service and supplemental service, and steps to ensure the tariff is transparent and understandable to developers and customers. Unfortunately, DTE s proposed Rider 3 in this proceeding does not respond to most of the recommendations in the SRWG Report and remains one of the most complex and expensive utility standby tariffs in the Midwest Region. MCA supports the Commission Staff s 3

4 recommendations in the SRWG Report and urges the implementation of those recommendations in this proceeding. II. ARGUMENT A. Allocation: DTE s Rider 3 Class Cost of Service Study Was Improperly Performed and Significantly Misstates the Costs Attributable to Standby Customers In the Commission s Final Order in U-18014, the Commission required DTE to provide a separate cost of service study for the class of standby customers served under Rider 3. Unfortunately, as both MCA Witness Douglas Jester and ABATE Witness James Dauphinais testified, DTE did not comply with the Commission s order. Rather, DTE applied a different definition of standby contract capacity which reclassified service that has traditionally been classified as supplemental service as standby service. DTE then performed its class cost of service study ( CCOS ) based on that different definition. (Jester Testimony at 8 TR ) and (Dauphinais Testimony at 9 TR ) The results of that flawed CCOS are a significantly inflated allocation of costs to Rider 3 customers. In response to a Staff Discovery Request, DTE provided Rider 3 customer data going back 10 years from which Witness Dauphinais assembled Table JRD-1 which depicts 4 CP and 12-CP load and Annual Energy consumption for the class. (9 TR 2164) This table shows that DTE s CCOS 4-CP value is 144% to 157% higher than the actual historical 4-CP class contribution to peak load. Similarly, DTE s CCOS 12-CP value is 92% to 118% higher than the historic class contribution to 12-CP. Finally, the data shows that DTE has overstated class annual energy consumption by 63% to 78%. According to Witness Dauphinais, the inflated costs in DTE s erroneous CCOS result in an error in the overall costs allocated to the Rider 3 class of $7.2 million dollars more than doubling the actual costs shown by DTE s own data. (9 TR ) 4

5 DTE s new improper definition of the line between standby service and supplemental service (which is discussed below) should not be allowed to justify DTE s inflated allocation of costs to this class. DTE s explanation for why it used this new definition in calculating the cost of service for a class for which it has years of data based on the prior definition is unpersuasive. DTE s claim that it is providing standby service up to the maximum capacity of the selfgeneration unit any time that unit is not running at 100% of potential output is both false and inconsistent with its past definition of standby service and even its current definition of standby demand which acknowledges the ability of the customer to reduce its supplemental demand. (Proposed Rider 3, Sheet D.69.00) It is an artificial construct to maintain that whenever a selfgeneration system is operating at <100%, customer load that is normally served and already paid for under the base tariff should be considered standby load. Indeed, this issue was discussed in the SRWG and highlighted in the SRWG Report where the Staff recommended: For customers taking both supplemental and standby service, the standby service tariff should be structured to allow the standby capacity and delivery demand charges to be structured to recognize the demand interactions between supplemental and standby service (net load). (Staff Ex. S-15.1) DTE admitted in the SRWG proceedings that the basis of its historic revenue target for the class of Rider 3 customers was not cost-based, but rather an arbitrary allocation of 1% of the overall D-11/Other revenue target. (9 TR 2181) That is why an actual class cost of service study, based on DTE s historic data, is necessary. But Rider 3 customers should not have to wait for another rate case to obtain relief from DTE s clearly arbitrary allocation. Nor should these customers be subjected to DTE s new proposed Rider 3 tariff definition of standby service and its improper allocation based on that definition. 5

6 From the standby customer s perspective, the effect of DTE s excess allocation of costs to standby service is to render otherwise economical, energy efficient cogeneration projects financially infeasible. Speaking specifically about DTE s existing Rider 3, MCA Witness Dueweke, a cogeneration project developer and financial analyst, testified: The impact of uncertain or disproportionate standby charges is often times sufficient to make or break the economic viability of a cogeneration project. I would estimate that about half of the cogeneration projects I have evaluated that are not moving forward, would move forward if the economic impact of standby rates were substantially mitigated. (9 TR 2028) MCA concurs with ABATE that the record in this proceeding contains sufficient data to allow for a reasoned allocation of costs to Rider 3 customers based on DTE s 10 years of historic data for this class. Given the negative impact of DTE s high standby rates on Michigan businesses, the Commission should not delay ordering DTE to reduce its proposed standby charges to reflect its own standby customer cost allocation data. B. Rate Design: Power Supply Capacity MCA agrees with ABATE that DTE s proposed power supply reservation fee and demand charges should be discarded and replaced with a more straight-forward and accurate rate design. The record in this proceeding contains sufficient data to design a standby tariff based on a more accurate percentage of the costs allocated to the larger class of D-11/Other customers. Specifically, the properly allocated costs which Witness Dauphinais calculates to be $6.311 Million -- can be more accurately recovered using a rate design based on the well-established Forced Outage Rate ( FOR ) of non-intermittent self-generation technologies. As Witness Dauphinais explains, Because of the high reliability of CHP, DTE only has to plan its resources to meet the expected value of this load at the time of DTE s system peak. The expected value of 6

7 this type of load is calculated by multiplying the capacity of the CHP facility by its equivalent forced outage rate ( EFOR ). (9 TR 2171) This straight-forward and more accurate power supply rate design consists of the following three elements: (i) a monthly power supply reservation charge that reasonably accommodates the forced outage rates of the best performing generators of R3 customers, (ii) an on-peak daily power supply demand charge based on an on-peak day pro ration of the full service D11 monthly power supply demand charge and (iii) a maintenance on-peak demand charge set at 50% on the on-peak daily power supply demand charge. (9 TR 2185) 1. Reservation Fee DTE s proposed fixed Reservation Fee for Rider 3 standby customers represents 16.1% of DTE s D-11 demand rate (9 TR 2181) which is far higher than the Forced Outage Rate (FOR) of cogeneration and similar non-intermittent distributed generation technologies. The Energy Resources Center, in a study of Minnesota standby tariffs, noted the policy rationale for using the FOR of the self-generation system in a reservation fee: The Forced Outage Rate should be used in the calculation of a customer s reservation charge. The inclusion of a customer s forced outage rate directly incentivizes standby customers to limit their use of backup service. This further links the use of standby to the price paid to reserve such service creating a strong price signal for customers to run most efficiently. 1 The impact of properly setting the Reservation Fee based on the FOR of the customer can be seen in the 5 Lakes Energy Apples-to-Apples comparison of standby tariffs in the Midwest Region. (Exhibit MCA-2) For example, Minnesota Power uses the customer s historic 1 Energy Resources Center, Analysis of Standby Rates and Net Metering Policy Effects on Combined Heat and Power (CHP) Opportunities in Minnesota, prepared for the Minnesota Department of Commerce Division of Energy Resources, April 2014, p. 11, attached as Exhibit MCA-6. 7

8 FOR to establish the Reservation Fee and it charges just $1,007 to reserve 2 MW of standby power compared to DTE s Reservation Fee of $3,820 for that same amount of standby reserve. (Exhibit MCA-2 at pp. 6 and 41) This high reservation fee contributes to making DTE s total standby charge of $11,985 for a no outage scenario for a 2 MW unit the highest no outage charge in the Region. Contrary to the undocumented statement of DTE Witness Bloch (9 TR 1993) in his Rebuttal of MCA Witness Scripps and the 5 Lakes Apples-to-Apples comparison of DTE s standby charges to those to Minnesota Power, Minnesota, like Michigan, does require that utility rates be cost based. Indeed, FERC rules require that all utilities rates for standby power reflect the cost to provide service. 9 TR 2175 Ideally, a Reservation Fee should be based on the self-generator s actual FOR, as is done in Minnesota Power s standby tariff. But, a good proxy for an individualized approach is to apply the average FOR of the class of Rider 3 customers. A 2004 study undertaken for the Department of Energy s Oak Ridge National Laboratory, Distributed Generation Operational Reliability and Availability Database, analyzed the FOR of over 120 distributed generation units, including cogeneration reciprocating engines, gas turbines, and steam turbines, and found average outage rates of < 3% for all three categories of cogeneration equipment, including both peak and off-peak periods. This FOR percentage is consistent with both DOE and MISO data on the FOR of combined cycle generation of 3.24% and 3.61% respectively. (9 TR 2182) MCA Witness Rand Dueweke testified that while cogeneration system manufacturers today generally warrant their units to provide 95% reliable operation (a conservative figure that MCA uses), in his experience, as a cogeneration system project developer and financial analyst, he finds cogeneration systems actually perform better than the manufacturers conservative warranties and operate reliably 96-98% of the time. (9 TR 2030) 8

9 2. Daily On-Peak Demand Charges DTE s Rider 3 Power Supply Daily On-Peak Demand Charge rate also significantly over-charges standby customers. As noted by Witness Dauphinais, the Rider 3 daily rate is 42.2% of DTE s monthly demand charge rate for D-11 full-time use customers. (9 TR 2182) This means that in less than three days of outage during peak hours in a month, a Rider 3 customer will pay as much in power supply demand charges for back-up power as a full-time use customer who places load on the grid during peak periods every day of the month. Because DTE s rate design is not tethered to the standby customer s limited use of utility resources it distorts market signals and the financial picture for cogeneration projects. As MCA Witness Rand Dueweke, put it: Why should a company invest in or optimize self-generation if the utility is going to charge for backup power almost as though the company used it all the time? (9 TR 2031) By charging a standby customer at a daily rate of 42% of the monthly rate, Rider 3 also sends the wrong signal to the self-generator for efficient use of the utility s back-up resources. Once the standby customer has reached three days of outage, it may be more economical to simply shut-down its self-generation unit. A best practice standby rate design would do the opposite. It would encourage a self-generator to optimize the reliability of its self-generation by pro-rating charges to reflect actual use of utility resources. According to the Regulatory Assistance Project, Pro-rated, daily, as-used demand charges for backup power and shared transmission and distribution facilities should be used to provide an incentive for generator reliability. 2 Recognizing the need to consider pro-rated daily demand charges, Commission Staff recommended in the SRWG Report: Daily capacity demand charges and the use of generator reservation fees and how the fee relates to the daily demand charge/pro-rated daily 2 Regulatory Assistance Project (RAP), Standby Rates for Combined Heat and Power Systems: Economic Analysis and Recommendations for Five States, February 2014, p. 5, attached as Exhibit MCA- 5, p, 5. 9

10 demand charges should be considered and discussed by the parties [in each utility s rate case]. Staff Ex. S-15.1 MCA concurs with ABATE Witness Dauphinais (9 TR ) and MCA Witnesses Douglas Jester (8 TR ) and Rand Dueweke ( 9 TR ) that to more accurately recover the costs imposed by Rider 3 customers DTE s power supply daily demand charge rate design should be revised to reflect the Rider 3 customer class FOR, which is conservatively approximately 5% or 1/20 th of the full-time use charge under the D-11 base tariff. 3. Scheduled Outage Demand Charges DTE s proposed Rider 3 provides a separate, lower daily demand charge rate for prescheduled standby service events which allows self-generators to plan for maintenance outages at a time when costs of service are low for the utility. Providing a price differential for scheduled standby service is considered a best practice which encourages maintenance and thereby increases the operational reliability of self-generation units. Proposed Rider 3 proposes a scheduled daily on-peak power supply demand charge rate that is approximately 57% of the rate for unscheduled on peak power supply demand. Witness Dauphinais proposes that these charges be set at ½ of the charge for unscheduled on-peak power supply demand. (9 TR ) MCA believes either of these ratios is fair, but for simplicity s sake would prefer the scheduled service charge be set at ½ of the rate of the unscheduled service charge. C. Rate Design: Delivery Capacity Charges DTE s Delivery Capacity Charge is a large portion of the high total charges experienced by DTE s standby customers. Although Rider 3 s high Delivery Capacity Charges are 10

11 particularly noticeable in the no outage scenario in 5 Lakes Energy s Apples-to-Apples comparison of utility standby rates, they also contribute to the high level of total standby charges experienced by DTE s standby customers under every outage scenario analyzed. (9 TR ) See Table 1 of Exhibit MCA-3. MCA Witness Dueweke described DTE s high delivery charge as a factor in DTE s overall high standby charges which discourage private investment in energy efficient and cost effective cogeneration technology. He recommended that the Commission order DTE to amend Rider 3 to pro-rate its delivery charges based on a customer s use of the utility s delivery system. (9 TR ) DTE s Delivery Capacity Charge is assessed based on standby contract capacity (kw) and is not pro-rated to reflect a standby customer s partial use of the distribution system, as are Rider 3 s Power Supply Charges. These charges reflect neither the customer s actual use of standby services nor the FOR of the class as a whole, which, as discussed above, is the metric for most accurately allocating and recovering standby service costs. MCA Witness Scripps testified that other states utility standby tariffs that she has studied generally include utilities embedded costs for both power supply and distribution capacity in a single variable demand charge (kwh). (9 TR 2048) Although Michigan law requires that distribution charges be separately stated, MCA is aware of no requirement that distribution capacity charges must be charged on a maximum contract capacity (kw) basis, rather than a variable demand basis as is power supply capacity. A daily variable demand charge set at a daily rate that is proportional to the D-11 monthly rate would fairly recover the utility s costs and reflect best practices for distribution capacity just as it does for power supply capacity. MCA also recommends assessing these proportionate distribution charges based on standby demand rather than standby contract capacity. 11

12 If the Commission believes further review of distribution charges is necessary, MCA recommends that it consider the recommendation made by ABATE Witness Jeff Pollack in the pending Consumers Energy rate case MPSC No. U (See the transcript in that case at MPSC No. U-18322, 12 TR ) Witness Pollack noted that in New York, delivery service rates are comprised of two separately stated charges, a Contract charge and an As- Used-Daily charge. He explained that the Contract Charge is designed to recover costs for distribution facilities located in close proximity to the customer s site where there is less diversity in the customer load. The As-Used Daily charge, in contrast, is designed to recover the portion of shared distribution costs of distribution lines and facilities, such as substations, that are located farther from the customer s site where the diversity of customers and load reduce the impact of any one facility s load on the resource. Witness Pollack explained the role of diversity in properly allocating distribution-related costs and points out that the diversity of standby customers (i.e., billing demand to demand coincident to the class peak) is much greater than that of full-time users, because standby customers outages requiring grid service are random, short-duration occurrences. (MPSC Case No. U-18322, 12 TR 2732) He also provided a useful example demonstrating that cost-based delivery charges should vary inversely with diversity. Id. It follows that due to the greater diversity of standby customers as a class, DTE should require a lower per unit charge to recover its delivery costs for standby customers. Recognizing the unique characteristics of standby load and that some delivery resources are shared by all distribution customers while others are dedicated to fewer customers, Witness Pollack recommended in the Consumers case that the Commission require Consumers to review the New York standby rate designs and conduct a further analysis of the distribution 12

13 system to identify an objective basis for determining the amount of shared versus local distribution costs. (MPSC Case No. U-18322, 12 TR 2733) If the Commission believes more information is needed to address DTE s high distribution charges in this case, we would recommend that it order that DTE provide a CCOS specifically addressing those charges, and identifying and distinguishing the costs associated with shared and dedicated distribution resources. D. Rate Design: Definition of Standby Service In the SRWG Report, Commission Staff recommended: For customers taking both supplemental and standby service, the standby service tariff should be structured to allow the standby capacity and delivery demand charges to be based on net load. MCA concurs in this recommendation. But DTE has proposed a new definition of the boundary between supplemental service and standby service which would charge a customer for standby service based on the standby contract capacity regardless of whether or how much standby service is actually taken. Standby service is generally defined as capacity and energy service provided by the Company to serve customer load that is normally served by the customer s generator. Supplemental service is generally defined as capacity and energy service provided by the Company to serve customer load above their standby service requirements. The point of separation between standby load and supplemental service is based on the customer s standby contract capacity for the facility, measured in KW. Any service provided by the Company up to and including the standby contract capacity level is standby service, and any service provided above the standby contract capacity level is supplemental service. Proposed Rider 3, Sheet D [emphasis added] The problem with this language can be seen in the following example: A customer with 5 MW of total load may have 2 MW of load which is being met by non-intermittent self-generation and 3 MW of supplemental load which is being supplied by the utility. For the 2 MW of self- 13

14 generation, the customer may contract for up to 2 MW of standby service for back-up and maintenance. However, the customer should not be obliged to pay for 2 MW of standby service if it can shed 1 MW of load during a self-generation system outage and place only 1 MW of load in excess of its normal supplemental load on the grid. As noted by MCA Witness Jester: When a self-generation system requires maintenance, or experiences a forced outage, these customers may shed load, provide their own back-up power through redundant self-generation, or contract for utility standby service to meet the load otherwise served through self-generation. (8 TR 1551) It is only [w]hen the customer relies upon Company standby service [that] the Company may incur costs in providing that service. Id. As cogeneration, in particular, is generally sized to and follows a customer s facility load, DTE s definition would have the perverse effect of requiring the customer to continually pay for small increments of standby service simply for adjusting a cogeneration system s output to follow the facility load. Essentially, under DTE s definition, anytime the cogeneration system output is not exactly matched to standby contract capacity, the customer would be deemed to be taking standby service. This artificial definition could result in standby charges being deemed to apply every day. Existing language in Rider 3 addresses this problem, in part, in the definition of standby demand that appears within the definition of Standby Power on Sheet D-69.00, providing: Standby demand is electric capacity provided by the Company to serve the customer s total internal load which would have been provided by the Customer s generation had it operated at its contract capacity less any reduction the customer can accomplish by reducing the supplemental demand at the time of the daily on-peak standby demand below the maximum monthly on peak supplemental demand but not less than zero. [emphasis added] 14

15 This concept of netting-out reductions in demand from standby contract capacity also appears in the existing definition of Daily Demand Charge on Sheet D-69.00: Standby demand equals standby contract capacity minus the 30-minute output toward internal load of the customer s generator less any reduction the customer can accomplish by reducing the supplemental demand below the maximum monthly on peak supplemental demand but not less than zero, and not greater than the total load served by the Company. [emphasis added] The Rider 3 definition of standby contract capacity is quite complicated. Generally, it is defined as the 1001 st highest half-hourly kw output toward internal load ratcheted over 5 summer months or 7 non-summer months within a rolling 12-months. However, there is no reference to netting out reductions in load in this definition. To address this problem, MCA recommends that DTE s new definition of standby service in paragraph in Sheet D of Rider 3 be amended to align with the definition of standby demand, as follows: The point of separation between standby load and supplemental service is based on the customer s standby contract capacity for the facility, measured in KW, minus the 30-minute output toward internal load of the customer s generator and any reduction the customer can accomplish by reducing the supplemental demand below the maximum monthly on peak supplemental demand. Any service provided by the Company up to and including the standby contract capacity that level is standby service, and any service provided above the standby contract capacity that level is supplemental service. Proposed Rider 3, Sheet D [underscoring and deletions added] E. Rate Design: Energy Charges The two separate Energy Charges in Rider 3 (Sheet D-71.00) are both based on the standby contract capacity less the output toward internal load, rather than actual metered energy usage as is done in most utility standby tariffs. This is unnecessarily complex and also results in either over or undercharging for standby customers actual energy usage. MCA 15

16 recommends that the Commission order that energy usage be charged on the straight forward basis of metered use at the same price as is charged D-11 customers. F. Rate Design: Overall Complexity Transparency is a recognized best practice for what are often complex, outdated and idiosyncratic standby tariffs. As found by the Energy Resources Center in its analysis of standby rates for the Minnesota Department of Commerce, Standby rates should be transparent, concise and easily understandable. Potential CHP customers should be able to accurately predict future standby charges in order to assess their financial impacts on CHP feasibility. 3 DTE s Rider 3 is riddled with complicated, unnecessary formulas required to calculate the fundamental elements of standby charges. As noted above, the definition of standby contract capacity, which rests on a 1001 st half hour measurement over a rolling period of months, differing seasonally, is threaded through Rider 3, making the determination of energy charges, reservation fees, and distribution charges a complex task as well as muddying the distinction between standby service and supplemental service. The SRWG Report recommended: To assist with standby service tariff transparency, a clear and concise description of the tariff structure and each term used should be included. Utilities should work with staff to ensure a good understanding of 1) the standby service tariff; 2) information available on the company s website; and 3) the company s preferred process for developers and customers to get standby service questions answered. DTE s new introductory language in Rider 3, Sheet D-67.00, indicates that DTE provides rate impact studies for customers considering on-site generation in addition to on-line 3 Energy Resources Center, Analysis of Standby Rates and Net Metering Policy Effects on Combined Heat and Power (CHP) Opportunities in Minnesota, prepared for the Minnesota Department of Commerce Division of Energy Resources, April 2014, p. 11, attached as Exhibit MCA-6. 16

17 resources and answers to frequently asked questions. However, MCA has been unable to find any on-line information regarding DTE s Rider 3 beyond the tariff itself or any Frequently Asked Questions or responses addressing standby service or providing guidance on how to determine costs under Rider 3. In response to a discovery request from MCA (MCADE1.2b) requesting any Company materials pertaining to the Company s standby tariff including any examples or spreadsheets intended to assist the customer in estimating future standby service bills, MCA was directed to DTE s discovery response to another party, the Environmental Law and Policy Center ( ELPC ). In response to ELPC request ELPCDE-1.2a. for materials the Company has sent to customers, by mail or otherwise, referencing standby service or the Company s standby tariff, DTE representative Bloch responded: The most current educational materials DTE Electric provides to customers related to standby service is the standby presentation to the Standby Working Group dated March 14, 2016, and the standby presentations to DTE Marketing employees dated March 18, Along with these presentations, the Company also provides a copy of its standby service tariff. Rider No. 3. Given the complexity of DTE s Rider 3, this level of information is insufficient to allow a prospective cogeneration customer or its consultant or vendor to determine the prospective standby charges their project may be subject to. MCA recommends that the Commission Order DTE to work with Commission Staff to make available enough information on their website to allow a prospective customer to calculate an estimated standby bill. Along with narrative information, we recommend that DTE be required to make available an on-line bill calculator, which incorporates all necessary inputs, as Witness Scripps testified that AEP Ohio does. (9 TR 2059) See Further, the Commission should require DTE to provide as a part of its Rider 3 a clear and concise Summary of Charges, as recommended by Commission Staff in the SRWG Report. 17

18 In Exhibit MCA-7, MCA has offered an example of a clear and concise summary of charges table that would greatly aid self-generation project developers and owner/operators in determining the financial impact of the Rider 3 on their self-generation projects. This example is taken from the standby tariff of Otter Tail Power, a regulated Minnesota utility. Notably, the Minnesota Public Utility Commission recently approved Otter Tail s standby tariff and, recognizing the value of this concise summary of charges to customers and regulators alike, required that the other three regulated Minnesota utilities provide a similar table for their standby tariffs. MCA recommends that the Commission do the same here. 5. The Commission Should Develop a Standardized Framework for Review of Standby Tariffs The Commission Staff also recommended in the SRWG Report that the Commission develop a standardized overall framework for standby tariffs. Staff recommends that the Commission develop a standardized framework for standby service tariffs where possible. Staff recognizes there may be reason to deviate from the standard. Any differences should be justified and supported by the company. MCA also concurs in this recommendation. Such a standardized framework for tariffs would be helpful in encouraging efficiency, ensuring fairness in standby rates, and making these tariffs more understandable from the perspective of the customer. MCA believes the elements of a standardized framework based on best practices for standby rates should be guided by the SRWG Report and Commission Staff s recommendations therein and should minimally require the following: 1. Clearly and simply stated charges, terms and conditions; 18

19 2. Clear price signals to assist customers in operating in a costeffective manner and reducing use of utility resources during peak periods, e.g. price differentiation for on-peak and off-peak hours and scheduled and unscheduled outage charges; 3. Clear differentiation of standby service and supplemental service to allow the customer to avoid standby charges when it can shed load or otherwise off-set an outage without taking excess power from the grid; 4. Pro-rated charges that promote economically efficient consumption and discourage wasteful use of utility services 4, e.g. hourly or daily charges; and 5. Rates that fairly reflect these customers contribution to utility costs. MCA recommends that the Commission adopt these principles as a framework for review of standby tariffs, in general, and, in this case, order amendments to DTE s Rider 3 in conformity with these principles. III. CONCLUSION AND RECOMMENDATIONS MCA makes the following recommendations for Commission action: 4 See Energy Resources Center, Analysis of Standby Rates and Net Metering Policy Effects on Combined Heat and Power (CHP) Opportunities in Minnesota, prepared for the Minnesota Department of Commerce Division of Energy Resources, April 2014, p , attached as Exhibit MCA-8 (JWS-8). 19

20 1. The Commission should reject DTE s CCOS for Rider 3 and require DTE to revise its Rider 3 charges to reflect the lower overall costs attributable to the class of Rider 3 customers shown by ABATE Witness Dauphinais analysis; 2. The Commission should discard DTE s proposed reservation fee and demand charges (Sheet D and D-71.00) and replace it with the more straight forward and accurate power supply rate design proposed by Witness Dauphinais, specifically: 5% of the D-11 Tariff reservation fee charge and 1/20 th of the D-11 Tariff daily on-peak demand charge, with ½ of that daily on-peak demand charge rate to be applied for scheduled outages; 3. The Commission should require that DTE amend its Distribution Charge (Sheet D-72.00) to a daily prorated charge reflecting 1/20 th of the D-11 Distribution Charge (based on the same rationale as MCA and ABATE have provided for pro-rating power supply demand charges) and based upon standby demand, as defined in Rider 3, rather than standby contract capacity. Alternatively, if the Commission believes further review of distribution charges is required, the Commission should order DTE to provide a CCOS specifically addressing distribution charges and identifying and distinguishing shared versus local distribution costs. 4. The Commission should reject DTE s new definition of standby service (Sheet D ) which is based on standby contract capacity and order that DTE revise Rider 3 to clarify that a standby customer shall not be charged for standby service under Rider 3 except for standby service actually taken in excess of a facility s normal supplemental demand; 5. The Commission should require that DTE to base its Energy Charges (Sheet D-71.00) on metered energy usage, rather than Standby Contract Capacity, and to align its energy rates with those charged under the D-11 Tariff. 20

21 6. The Commission should require DTE to: a. Work with Commission Staff to make available enough information on its website to allow a prospective standby customer to calculate an estimated bill under Rider 3; b. Provide an on-line bill calculator on its website, similar to that provided by AEP Ohio on its website; and c. Provide, as a part of the Rider 3 tariff, a clear and concise summary table of Rider 3 charges, similar to that provided by Otter Tail Power (Exhibit MCA-7) 7. The Commission should consider opening a docket to adopt a best practices framework for review of standby tariffs in general, and, in this case, order amendments to DTE s Rider 3 in conformity with the recommendations of the Commission Staff in the SRWG Report and minimally require the following: a. Clearly and simply stated charges, terms and conditions; b. Clear price signals to assist customers in operating in a cost-effective manner and reducing use of utility resources during peak periods, e.g. price differentiation for on-peak and off-peak hours and scheduled and unscheduled outage charges; c. Clear differentiation of standby service and supplemental service to allow the customer to avoid standby charges when it can shed load or otherwise off-set an outage without taking excess power from the grid; 21

22 d. Pro-rated charges that promote economically efficient consumption and discourage wasteful use of utility services, e.g. hourly or daily charges; and e. Rates that fairly reflect these customers contribution to utility costs. November 8, 2017 Respectfully submitted, Patricia F. Sharkey Environmental Law Counsel, P.C. 180 N. LaSalle Street Suite 3700 Chicago, Illinois T: F: