Court Opinion

ID: 4639482
Source: CourtListenerOpinion
Date Created: 2020-12-04 10:07:11.411929+00
Date Added: 2024-06-11T07:58:57.015369
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
              revision until final publication in the Michigan Appeals Reports.

                      STATE OF MICHIGAN

                         COURT OF APPEALS

In re RELIABILITY PLANS OF ELECTRIC
UTILITIES FOR 2017-2021.

ASSOCIATION OF BUSINESSES                                       UNPUBLISHED
ADVOCATING TARIFF EQUITY,                                       December 3, 2020

            Appellant,
V                                                               No. 340600
                                                                Public Service Commission
MICHIGAN PUBLIC SERVICE COMMISSION,                             LC No. 00-018197
CONSUMERS ENERGY COMPANY, ENERGY
MICHIGAN, INC., and MICHIGAN ELECTRIC
AND GAS ASSOCIATION,

            Appellees.

In re RELIABILITY PLANS OF ELECTRIC
UTILITIES FOR 2017-2021.

ENERGY MICHIGAN, INC.,

            Appellant,

V                                                               No. 340607
                                                                Public Service Commission
MICHIGAN PUBLIC SERVICE COMMISSION,                             LC No. 00-018197
CONSUMERS ENERGY COMPANY, and
MICHIGAN ELECTRIC AND GAS
ASSOCIATION,

            Appellees.
                                      ON REMAND

Before: METER, P.J., and GADOLA and TUKEL, JJ.

PER CURIAM.

        At the end of 2016, our Legislature enacted new electric utility legislation that included
Act 341. That act added, among other statutory sections, MCL 460.6w. As part of its
implementation of MCL 460.6w, the Michigan Public Service Commission (MPSC) issued an
order in its Case No. U-18197. That order of the MPSC was appealed to this Court in Docket No.
340600, by appellant Association of Businesses Advocating Tariff Equity (ABATE), and in
Docket No. 340607, by appellant Energy Michigan, Inc. (Energy Michigan). In these consolidated
cases,1 appellants contended that the MPSC erred by determining that it is empowered by the
Legislature under 2016 PA 341 (Act 341) to impose a local clearing requirement upon individual
alternative electric suppliers.

        In Docket No. 340607, Energy Michigan additionally contended that the order of the
MPSC purports to impose new rules upon electric providers in this state without the required
compliance with Michigan’s Administrative Procedures Act of 1969 (APA), MCL 24.201, et seq.
In Docket No. 340600, ABATE contended that the MPSC’s claim of a statutory delegation of
authority allowing the imposition of an individual local clearing requirement does not include
sufficient standards to guide the PSC’s exercise of what amounts to legislative policy-making, and
thus violates the nondelegation doctrine.

        This Court determined that the MPSC erred by determining that it is empowered by the
Legislature under Act 341 to impose a local clearing requirement upon individual alternative
electric suppliers; we therefore reversed the MPSC’s order. In re Reliability Plans of Electric
Utilities for 2017-2021, 325 Mich. App. 207, 228, 235; 926 NW2d 584 (2018). In light of that
decision, we concluded that it was unnecessary to reach the additional issues raised by Energy
Michigan and ABATE, being whether the MPSC’s determination resulted in the promulgation of
rules without compliance with the APA and in violation of the nondelegation doctrine. Id. at 234-
235.

        Thereafter, our Supreme Court considered plaintiffs’ application for leave to appeal to that
Court and, in lieu of granting leave to appeal, reversed the judgment of this Court and remanded
the case to us for further proceedings consistent with that Court’s opinion, “including addressing
whether the MPSC’s order complied with the Administrative Procedures Act.” In re Reliability
Plans of Electric Utilities for 2017-2021, 505 Mich. 97, 129; 949 NW2d 73 (2020). We do so now,
and hold that the MPSC neither issued the equivalent of administrative rules in violation of APA
procedures, nor otherwise exercised legislative authority in violation of the nondelegation doctrine.
We therefore affirm the order of the MPSC.

1
 These appeals were consolidated on this Court’s own motion. In re Reliability Plans of Electric
Utilities for 2017-2021, unpublished order of the Court of Appeals, entered November 15, 2017
(Docket Nos. 340600; 340607).

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                                 I. BACKGROUND FACTS

       When this case was previously before this Court, we summarized the background facts
underlying the appeal as follows:

      Michigan’s Legislature previously enacted what was known as the Customer
      Choice and Electricity Reliability Act, MCL 460.10 et seq., as enacted by 2000 PA
141 and 2000 PA 142, to “further the deregulation of the electric utility industry.”
      In re Application of Detroit Edison Co for 2012 Cost Recovery Plan, 311 Mich. App.
204, 207 n 2; 874 NW2d 398 (2015). That act permitted customers to buy
      electricity from alternative electric suppliers instead of limiting customers to
      purchasing electricity from incumbent utilities, such as appellee Consumers Energy
      Company (Consumers). Consumers Energy Co v Pub Serv Comm, 268 Mich. App.
171, 173; 707 NW2d 633 (2005). Among the purposes of the act, as amended by
      Act 341, is the promotion of “financially healthy and competitive utilities in this
      state.” MCL 460.10(b).

      [T]he Midcontinent Independent System Operator (MISO) is the regional
      transmission organization responsible for managing the transmission of electric
      power in a large geographic area that spans portions of Michigan and 14 other
      states. To accomplish this, MISO combines the transmission facilities of several
      transmission owners into a single transmission system. In addition to the
      transmission of electricity, MISO’s functions include capacity resource planning.
      MISO has established ten local resource zones; most of Michigan’s lower peninsula
      is located in MISO’s Local Resource Zone 7, while the upper peninsula is located
      in MISO’s Local Resource Zone 2.

              Each year MISO establishes for each alternative electric supplier in Michi-
      gan the “planning reserve margin requirement.” MISO also establishes the “local
      clearing requirement.” Under MISO’s system, there generally are no geographic
      limitations on the capacity resources that may be used by a particular supplier to
      meet its planning reserve margin requirement. That is, MISO does not impose the
      local clearing requirement on alternative electric suppliers individually but instead
      applies the local clearing requirement to the zone as a whole. Each individual
      electricity supplier is not required by MISO to demonstrate that its energy capacity
      is located within Michigan, as long as the zone as a whole demonstrates that it has
      sufficient energy generation located within Michigan to meet federal requirements.

              MISO also serves as a mechanism for suppliers to buy and sell electricity
      capacity through an auction. This allows for the exchange of capacity resources
      across energy providers and resource zones. The MISO auction is conducted each
      year for the purchase and sale of capacity for the upcoming year. The auction
      allows suppliers to buy and sell electricity capacity and acquire enough capacity to
      meet their planning reserve margin requirement. The auction also allows each zone
      as a whole to meet the zone’s local clearing requirement.

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        At the end of 2016, our Legislature enacted Act 341, in part adding MCL
460.6w, which imposes resource adequacy requirements on electric service
providers in Michigan and imposes certain responsibilities on the MPSC. Under
MCL 460.6w(2), the MPSC is required under certain circumstances to establish a
“state reliability mechanism.”

         The parties agree that because the Federal Energy Regulatory Commission
did not put into effect the MISO-proposed tariff, the MPSC is required by § 6w(2)
to establish a state reliability mechanism. A “state reliability mechanism” is
defined by the statute as “a plan adopted by the commission in the absence of a
prevailing state compensation mechanism to ensure reliability of the electric grid
in this state consistent with subsection (8).” MCL 460.6w(12)(h). The state
reliability mechanism is to be established consistently with § 6w(8), which . . .
requires each alternative electric supplier, cooperative electric utility, and
municipally owned electric utility to demonstrate to the MPSC that it has sufficient
capacity to meet its “capacity obligations.” The statute does not define “capacity
obligations,” but in § 6w(8)(c), the statute provides that:

                (c) In order to determine the capacity obligations, [the MPSC
       shall] request that [MISO] provide technical assistance in determining
       the local clearing requirement and planning reserve margin require-
       ment. If [MISO] declines, or has not made a determination by October
       1 of that year, the commission shall set any required local clearing
       requirement and planning reserve margin requirement, consistent with
       federal reliability requirements.

        Section 6w(8)(b) also provides that municipally owned electric utilities are
permitted to “aggregate their capacity resources that are located in the same local
resource zone to meet the requirements of this subdivision” and that cooperative
electric utilities are permitted to “aggregate their capacity resources that are located
in the same local resource zone to meet the requirements of this subdivision.”
Section 6w(8)(b) also permits a cooperative or municipally owned electric utility
to “meet the requirements of this subdivision through any resource, including a
resource acquired through a capacity forward auction, that [MISO] allows to
qualify for meeting the local clearing requirement.” Section 6w(8)(b), however,
does not include a similar provision for alternative electric suppliers and is, in fact,
silent as to whether alternative electric suppliers may aggregate their capacity
resources that are located in the same local resource zone to meet the requirements
of the subdivision.

       MCL 460.6w(3) directs the MPSC to establish a capacity charge that a
provider must pay if it fails to satisfy the capacity obligations established under §
6w(8). Section 6w(6), however, directs that a capacity charge shall not be assessed
against an alternative electric supplier who demonstrates “that it can meet its
capacity obligations through owned or contractual rights to any resource that
[MISO] allows to meet the capacity obligation of the electric provider. . . .”

                                          -4-
               After the enactment of Act 341, the MPSC worked collaboratively in a
       workgroup process to implement MCL 460.6w. On September 15, 2017, the MPSC
       issued an order in its Case No. U-18197, imposing new requirements on alternative
       electric suppliers as part of its implementation of MCL 460.6w. In that order, the
       MPSC determined that MCL 460.6w authorizes it to impose a local clearing
       requirement on individual alternative electric suppliers. . . . [In re Reliability Plans,
325 Mich. App. at 211-216 (footnotes omitted).]

       As noted, ABATE and Energy Michigan appealed the order of the MPSC to this Court,
challenging the order as an erroneous interpretation of MCL 460.6w. This Court agreed, and
reversed the order of the MPSC. In re Reliability Plans, 325 Mich. App. at 235. The Michigan
Supreme Court reversed the judgment of this Court, and remanded the consolidated cases to this
Court for further proceedings consistent with the Supreme Court’s opinion. In re Reliability Plans,
505 Mich. at 102, 129,

                                          II. ANALYSIS

                                  A. STANDARD OF REVIEW

        Whether an agency policy is invalid because it was not promulgated as a rule under the
APA is a question of law that we review de novo. In re PSC Guidelines for Transactions Between
Affiliates, 252 Mich. App. 254, 263; 652 NW2d 1 (2002). Whether the Nondelegation Clause of
the Michigan Constitution has been violated is a question of constitutional interpretation that we
also review de novo. See In re Certified Questions from US Dist Court, ___ Mich ___, ___; ___
NW2d ___ (2020) (Docket No. 161492); slip op at 4.

                                           B. THE APA

        Energy Michigan contends that the MPSC erred when issuing its order in its Case No. U-
18197 because the order essentially promulgates rules without complying with the formal rule-
making requirements of the APA. Energy Michigan argues that the MPSC’s order essentially
enacts rules because it establishes a formula for determining the total capacity obligation for each
electric provider, restricts resort to MISO’s planning resource auctions for that purpose, and sets
the capacity obligations on the basis of a provider’s peak load contributions. We conclude that the
MPSC did not err by interpreting § 6w of Act 341 as calling for it to implement the provisions of
§ 6w without resorting to formal rulemaking under the APA.

      The promulgation of administrative rules is governed by the APA, Slis v Michigan, ___
Mich App ___, ___; ___ NW2d ___ (2020) (Docket Nos. 351211, 351212); slip op at 1, and the
MPSC is authorized to promulgate rules under the APA. MCL 460.9(8). Under § 7 of the APA,
MCL 24.207, “rule” is defined as:

       an agency regulation, statement, standard, policy, ruling, or instruction of general
       applicability that implements or applies law enforced or administered by the
       agency, or that prescribes the organization, procedure, or practice of the agency,
       including the amendment, suspension, or rescission of the law enforced or
       administered by the agency. . . .

                                                 -5-
An agency is obligated to employ formal APA rulemaking when establishing policies that “do not
merely interpret or explain the statute or rules from which the agency derives its authority,” but
rather “establish the substantive standards implementing the program.” Faircloth v Family
Independence Agency, 232 Mich. App. 391, 404; 591 NW2d 314 (1998). A rule that is not
promulgated under the APA is invalid and does not have the force of law. MCL 24.243; Goins v
Greenfield Jeep Eagle, Inc, 449 Mich. 1, 10; 534 NW2d 467 (1995).

          Excepted from the definition of a “rule” under the APA is a “rule or order establishing or
fixing rates or tariffs,” MCL 24.207(c), a “determination, decision, or order in a contested case,”
MCL 24.207(f), an “interpretive statement” or “guideline,” MCL 24.107(h), or a “decision by an
agency to exercise or not to exercise a permissive statutory power, although private rights or
interests are affected,” MCL 24.207(j); In re Reliability Plans, 325 Mich. App. at 233. The
definition of “rule” under MCL 24.207 is broadly construed to reflect the APA’s preference for
policy determinations pursuant to rules, while the exceptions are narrowly construed. AFSCME v
Dep’t of Mental Health, 452 Mich. 1, 10; 550 NW2d 190 (1996). In addition, an agency may not
avoid the requirements for promulgating rules by issuing its directives under different labels. See
id. at 9.

        In this case, we conclude that the MPSC’s exercise of authority under § 6w was an exercise
of permissive statutory power, and thus not subject to the rulemaking requirements of the APA.
See MCL 24.207(j). Section 6w requires the MPSC to establish the format for electric provider
resource adequacy filings, and authorizes it to determine local clearing requirements and planning
reserve margin requirements for electric providers. Section 6w also calls for contested cases under
the circumstances set forth in subsections (1) and (2), and calls for the agency to determine a
capacity charge under subsection (3). Subsection (8)(c) requires the MPSC to seek “technical
assistance” from MISO “in determining the local clearing requirement and planning reserve
margin requirement” for purposes of determining capacity obligations, and subsection (8)(d)
requires the PSC to seek such assistance in “assessing resources to ensure that any resources will
meet federal reliability requirements.”

       The Legislature’s specification of procedural methodology—contested case proceedings
in Subsections (1), (2), and (3), and seeking technical assistance from MISO under Subsection
(8)—indicates that, where the Legislature did not specify how to proceed, it expected the MPSC
to do so within its own discretion. In addition, what the MPSC refers to as the “compressed
timeline that Section 6w presents” suggests that the Legislature did not expect the MPSC to
promulgate APA rules in implementing the new legislation.2 See Mich Trucking Ass’n v Pub Serv
Comm, 225 Mich. App. 424, 430; 571 NW2d 734 (1997) (treating the impossibility of promulgating
rules within the envisioned timeframe as indicating that the Legislature did not intend to require
APA rulemaking). We therefore conclude that § 7(j) of the APA exempts the MPSC from

2
  The Office of Regulatory Reinvention’s Rules Tracking Time Frame Report, p 9, provides that
the process for promulgating rules by entities within the Department of Licensing & Regulatory
Affairs averages 572 days. Because it would be impossible for the MPSC to promulgate rules to
determine annual capacity obligations with a rulemaking process that takes more than one year to
accomplish, logic dictates that the Legislature did not intend the agency to use that procedure.

                                                -6-
implementing § 6w of Act 341 by resort to the rule-making procedures of the APA. This
conclusion is further supported by the fact that § 6w does not specifically require the MPSC to
promulgate rules before undertaking the tasks assigned to it under that section. See Mich Trucking
Ass’n, 225 Mich. App. at 430.

                               C. NONDELEGATION DOCTRINE

       ABATE contends that the MPSC’s exercise of authority under § 6w of Act 341 runs afoul
of Michigan’s nondelegation doctrine, which prohibits the Legislature from delegating policy-
making authority to the Executive without meaningful standards or guiding principles. We
disagree.

         Michigan’s Constitution provides that “[t]he legislative power of the State of Michigan is
vested in a senate and a house of representatives.” Const 1963, art 4, § 1. Our state Constitution
further declares that no person “exercising the powers of one branch” of state government “shall
exercise powers properly belonging to another except as expressly provided in this constitution.”
Const 1963, art 3, § 2. “These constitutional provisions have led to the constitutional discipline
that is described as the nondelegation doctrine.” Taylor v Gate Pharmaceuticals, 468 Mich. 1, 8;
658 NW2d 127 (2003). “One of the settled maxims in constitutional law is, that the power
conferred upon the legislature to make laws cannot be delegated by that department to any other
body or authority.” In re Certified Questions, ___ Mich at ___; slip op at 12, quoting Cooley,
Constitutional Limitations (1886), pp 116-117. As noted, we review de novo whether the
Nondelegation Clause of the Michigan Constitution has been violated. See In re Certified
Questions, ___ Mich at ___; slip op at 4. “Statutes are presumed to be constitutional, and we have
a duty to construe a statute as constitutional unless its unconstitutionality is clearly apparent.” Id.
(quotation marks and citations omitted).

        Although the Legislature may not delegate its legislative power to the executive branch,
the Legislature may delegate a task to an executive branch agency if the Legislature provides
“sufficient standards.” Taylor, 468 Mich. at 10 n 9. If sufficient standards accompany the
delegation it is transformed into a proper exercise of executive power. See Blue Cross & Blue
Shield v Governor, 422 Mich. 1, 51-55; 367 NW2d 1 (1985). In other words, the Legislature’s
delegation of authority to an administrative agency is proper only when the controlling statute
provides the agency with standards sufficient to turn the agency’s decision from a legislative
decision into an executive decision. Taylor, 468 Mich. at 10 n 9.

        In determining whether a statute contains sufficient standards, “we must be mindful of the
fact that such standards must be sufficiently broad to permit efficient administration in order to
properly carry out the policy of the Legislature but not so broad as to leave the people unprotected
from uncontrolled, arbitrary power in the hands of administrative officials.” In re Certified
Questions, ___ Mich at ___; slip op at 13, quoting Dep’t of Natural Resources v Seaman, 396
Mich. 299, 308-309; 240 NW2d 206 (1976).

        In evaluating legislative standards in the context of the nondelegation doctrine, our
Supreme Court has explained that “(1) the act must be read as a whole; 2) the act carries a
presumption of constitutionality; and 3) the standards must be as reasonably precise as the subject
matter requires or permits.” Blue Cross & Blue Shield, 422 Mich. at 51. “The preciseness of the

                                                 -7-
standards will vary in proportion to the degree to which the subject regulated requires constantly
changing regulation.” Associated Builders & Contractors v Dep’t of Consumer & Industry Servs
Dir (On Remand), 267 Mich. App. 386, 391; 705 NW2d 509 (2005). The focus is “whether the
degree of generality contained in the authorization for exercise of executive or judicial powers in
a particular field is so unacceptably high as to amount to a delegation of legislative powers.” In
re Certified Question, ___ Mich at ___; slip op at 13, quoting Mistretta v United States, 488 Mich.
361, 419; 109 S. Ct. 647; 102 L. Ed. 2d 714 (1989) (SCALIA, dissenting). Thus, the question is
whether the Legislature “supplied an intelligible principle to guide the delegee’s use of discretion.
. . . [T]he answer requires construing the challenged statute to figure out what task it delegates and
what instructions it provides.” In re Certified Question, ___ Mich at ___; slip op at 13, quoting
Gundy v United States, 588 US ___, ___; 139 S. Ct. 2116, 2123; 204 L. Ed. 2d 522 (2019) (opinion
by KAGAN, J.).

        In this case, ABATE contends that the Legislature’s directive to the MPSC in § 6w of Act
341 is not accompanied by sufficiently precise standards, and thus runs afoul of the nondelegation
doctrine. Specifically, ABATE argues that the Legislature in § 6w directs the MPSC to adopt a
“state reliability mechanism” defined by the act as a “plan . . . to ensure reliability of the electric
grid in this state. . . .” MCL 460.6w(12)(h). ABATE further argues that the Legislature requires
all electric providers in Michigan to “demonstrate to the commission, in a format determined by
the commission, that . . . [each electric provider has] sufficient capacity to meet its capacity
obligations as set by the [MISO], or commission, as applicable.” MCL 460.6w(8)(a). ABATE
argues that because the statute does not define “capacity” or “capacity obligation,” and also does
not direct how to establish the capacity demonstration process, the Legislature provided
insufficient standards.

        We disagree that the statute provides insufficient standards. On the contrary, § 6w defines
the scope and nature of the MPSC’s review and sets standards directing the authority of the MPSC
in some detail. For example, § 6w(12)(h) defines “state reliability mechanism” and § 6w(8)
outlines numerous responsibilities of the MPSC if a state reliability mechanism is required under
§ 6w(2). Section 6w(8)(c) provides direction to the MPSC to determine capacity obligations by
requesting technical assistance from the appropriate independent system operator in determining
the local clearing requirement and the planning reserve margin requirement, terms defined by the
statute, and otherwise to set those requirements consistent with federal reliability requirements.
MCL 460.6w(8)(c).

                                                 -8-
        As noted, in determining whether a statute contains sufficient standards we are mindful
that although the standards cannot be so broad as to permit uncontrolled, arbitrary power in the
hands of administrative officials, they must be sufficiently broad to permit efficient administration
to properly carry out the policy of the Legislature. In re Certified Questions, ___ Mich at ___; slip
op at 13. Given that the preciseness of the standards by necessity varies with whether the subject
being regulated requires constantly changing regulation, Associated Builders (On Remand), 267
Mich. App. at 391, and given that the Legislature is presumed not to delegate the authority to act
unreasonably, In re Certified Questions, ___ Mich at ___; slip op at 16, we conclude that the
standards provided were not so general as to amount to a delegation of legislative powers. See id.
at ___; slip op at 13.

       Affirmed.

                                                              /s/ Patrick M. Meter
                                                              /s/ Michael F. Gadola
                                                              /s/ Jonathan Tukel

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