Opinion ID: 1984859
Heading Depth: 3
Heading Rank: 1

Heading: Ratemaking Power

Text: The PSC initially characterizes its retail wheeling program as ratemaking, thus falling within its authority under § 7 of the electric transmission act, M.C.L. § 460.557; MSA 22.157, and § 22 of the railroad commission act, M.C.L. § 462.22; MSA 22.41. See also M.C.L. § 460.6a; MSA 22.13(6a). The challenged portion of the order does not, however, involve ratemaking. Although retail wheeling has a ratemaking component, i.e., the establishment of the rate a third-party provider must pay to transmit power through a local utility's system, appellants do not challenge that aspect of the experimental program. Instead, appellants contend that the PSC cannot order local utilities to transmit electricity from a third-party provider's system through its own system to an end-user. This aspect of retail wheeling is simply not ratemaking. This Court explained in Union Carbide, supra at 148, 428 N.W.2d 322, that the PSC's authority to regulate a utility's rates and charges does not include the power to make management decisions. We quoted Missouri ex rel. Southwestern Bell Telephone Co. v. Public Service Comm., 262 U.S. 276, 289, 43 S.Ct. 544, 67 L.Ed. 981 (1923), to emphasize our point: It must never be forgotten that while the State may regulate with a view to enforcing reasonable rates and charges, it is not the owner of the property of public utility companies and is not clothed with the general power of management incident to ownership. [ Union Carbide, supra at 148-149, 428 N.W.2d 322.] In Union Carbide, we concluded that, although the PSC could preclude a utility from passing along increased charges incurred from its noneconomic operation of facilities, it could not order the utility to cease those operations. In other words, the PSC can encourage a specific management decision through the exercise of its ratemaking power, but it may not directly order the utility to make the decision. Similarly, in Huron Portland Cement, supra, this Court considered whether the PSC had the authority to order a utility to render service to an end-user in an area it did not serve and in which it had no power lines. This Court concluded that, absent specific statutory authority, the decision whether to provide the service rests with the utility's management. Id. at 268, 88 N.W.2d 492. In this case, the PSC attempts to compel utilities to provide a new service  the transmission of electricity from a third-party provider's system to an end-user who is not directly connected to that system. Retail wheeling would require that utilities accept power from suppliers chosen not by management, but by an end-user, and necessitate the negotiation of new interconnection agreements or modification of existing ones. Further, the utility would have to adjust its own production and purchases of power to ensure sufficient capacity to transmit the third-party provider's electricity. Absent a statute clearly conferring on the PSC the power to order such service, the decision to provide the service lies within the province of the utility's management, not the PSC. Union Carbide, supra at 151, 428 N.W.2d 322; Huron Portland Cement, supra at 261, 88 N.W.2d 492.