Court Opinion

ID: 4365880
Source: CourtListenerOpinion
Date Created: 2019-02-08 10:07:59.632642+00
Date Added: 2024-06-11T14:48:30.682815
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 Application of DTE ELECTRIC COMPANY
for Approval of Facility.

MICHIGAN ENVIRONMENTAL COUNCIL,                                UNPUBLISHED
NATURAL RESOURCES DEFENSE COUNSEL,                             February 7, 2019
and SIERRA CLUB,

           Appellants,

v                                                              No. 344031
                                                               MPSC
DTE ELECTRIC COMPANY,                                          LC No. 00-018419

           Petitioner-Appellee,

and

MICHIGAN PUBLIC SERVICE COMMISSION
and ASSOCIATION OF BUSINESSES
ADVOCATING TARIFF EQUITY,

           Appellees.

In re Application of DTE ELECTRIC COMPANY
for Approval of Facility.

ENVIRONMENTAL LAW & POLICY CENTER,
ECOLOGY CENTER, SOLAR ENERGY
INDUSTRIES ASSOCIATION, UNION OF
CONCERNED SCIENTISTS, and VOTE SOLAR,

           Appellants,

v                                                              No. 344033
                                                                   MPSC
DTE ELECTRIC COMPANY,                                              LC No. 00-018419

              Petitioner-Appellee,

and

MICHIGAN PUBLIC SERVICE COMMISSION
and ASSOCIATION OF BUSINESSES
ADVOCATING TARIFF EQUITY,

              Appellees.

Before: CAMERON, P.J., and BECKERING and RONAYNE KRAUSE, JJ.

PER CURIAM.

       These consolidated appeals arise out of the Michigan Public Service Commission (PSC)
granting “certificates of necessity” (CONs) to DTE Electric Company (DTE) for the construction
of a new 1,100 megawatt (MW) power plant at a cost of almost $1 billion, to replace several
coal-powered plants that are scheduled to close. CONs are essentially pre-approvals of the need
or propriety of major utility projects, investments, or purchases. Appellants are a variety of
intervenors in the matter below, who contend generally that the PSC erred in granting the CONs.
We affirm.

                                 I. STANDARD OF REVIEW

        We emphasize at the outset that we are forbidden to substitute our own judgment for that
of the PSC. Attorney General v PSC No 2, 237 Mich. App. 82, 88; 602 NW2d 225 (1999).
However, we review questions of law de novo, although with “respectful consideration” given to
an agency’s interpretation of a statute. In re Complaint of Rovas Against SBC Michigan, 482
Mich. 90, 103, 108; 754 NW2d 259 (2008). An aggrieved party must “show by clear and
satisfactory evidence that the order of the commission complained of is unlawful or
unreasonable.” MCL 462.26(8). “Unlawful” means that “the commission failed to follow some
mandatory provision of the statute or was guilty of an abuse of discretion in the exercise of its
judgment.” Giaras v PSC, 301 Mich. 262, 269; 3 NW2d 268 (1942). “ ‘Unreasonable’ is a word
of art in our jurisprudence and means arbitrary, capricious, or totally unsupported by admissible
and admitted evidence.” Associated Truck Lines, Inc v PSC, 377 Mich. 259, 279; 140 NW2d 515
(1966). Courts accept an agency’s factual findings if they are supported by “substantial
evidence,” which must be “more than a scintilla” but need not be a preponderance. In re Payne,
444 Mich. 679, 692; 514 NW2d 121 (1994).

                             II. CERTIFICATES OF NECESSITY

        Certificates of necessity (CONs) are governed by MCL 460.6s. Utilities may request
several different kinds of CONs under MCL 460.6s(3); in relevant part:

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              (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.

                                              * * *

               (d) A certificate of necessity that the estimated purchase or capital costs of
       and the financing plan for 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). [MCL 460.6s(3).]

Under MCL 460.6s(4), the PSC is required to hold a contested case hearing on a utility’s CON
application, inquiring into the reasonableness and prudence of the proposed project, and issue an
order granting or denying the application within 270 days. MCL 460.6s(4) further provides that
the application shall be granted if the PSC finds five enumerated criteria satisfied:

       (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 under section 6t or 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.

       (c) The estimated cost of power from the existing or proposed electric generation
       facility or the price of power specified in the proposed power purchase agreement
       is reasonable. [ . . . ]

       (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, electric transmission efficiencies, and any
       alternative proposals submitted under this section by existing suppliers of electric
       generation capacity under subsection (13) or other intervenors.

       (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 the border with another state. [MCL
       460.6s(4).]

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MCL 460.6s(11) sets forth certain requirements for the PSC to mandate in integrated resource
plans (IRPs1) from utilities.

                                      III. BACKGROUND

        On July 31, 2017, DTE filed an application seeking three CONs for a proposed 1,100
MW natural gas combined cycle (NGCC) electric power plant. Specifically, DTE sought CONs
(1) that the power to be supplied was needed, (2) that the proposed facility was the most
reasonable and prudent means of meeting that need, and (3) that the almost $1 billion cost of the
project would be recoverable in rates from DTE’s customers. DTE’s application was prompted
by the imminent retirement of eight coal-fired power plants, which DTE predicted would incur a
loss of approximately 1,822 MW of capacity. The PSC described the ensuing proceedings as
generating “a record that is more voluminous than usual.” Ultimately, it found that DTE’s
presentation suffered from various flaws and improprieties, but that DTE nevertheless satisfied
its burdens of proof. The PSC therefore granted all three requested CONs.

        Insofar as we can determine, only ABATE directly challenged the retirement of the coal
plants per se, and therefore DTE’s need for the power, before the PSC. Although ABATE has
filed an appearance in this appeal, it has done so as an appellee rather than an appellant, and in
any event it has not submitted a brief or argument. The remaining appellants’ arguments are
somewhat opaque and seemingly conflate the three CONs, but we can discern no coherently-
expressed dispute whether there was a need for the power to be supplied. Likewise, we perceive
no coherently-expressed dispute whether the cost of the project would be recoverable in rates
from DTE’s customers. Consequently, we treat the PSC’s issuance of the first and third CONs
as undisputed, and we are constrained to accept them as outside the scope of our review.

        The effective basis of the instant appeal is, therefore, limited to whether DTE’s proposed
NGCC plant is “the most reasonable and prudent means of meeting the power need relative to
other resource options for meeting power demand, including energy efficiency programs, electric
transmission efficiencies, and any alternative proposals submitted.” MCL 460.6s(4)(d).
Appellants generally present three arguments: (1) that the PSC improperly shifted the burden of
proof from DTE as the applicant to the intervening parties; (2) that the PSC inadequately
considered alternative possibilities that could defer or partially displace the necessity of the new
plant; and (3) that the PSC erroneously found DTE to have satisfied its burden of showing the

1
  Historically, the PSC has described IRPs as essentially long-range, holistic, and potentially
complex plans created by utilities; seeking to predict future energy needs, taking into account
both supply-side and demand-side resources and a multitude of other possible complicating
factors such as social or environmental scenarios, and set forth how the utility proposes to meet
those needs. See In re Consumers Power Co, Case No. U-9172 (March 29, 1990), pp 23-25.
Pursuant to 2016 PA 341, the Legislature enacted statutory IRP guidelines in MCL 460.6t.
However, the PSC determined that because DTE’s application predated the PSC’s issuance of
guidelines and procedures under both MCL 460.6s and MCL 460.6t, DTE’s application would be
evaluated pursuant to only MCL 460.6s. Appellants do not challenge that determination.

                                                -4-
proposed plant to be the most reasonable and prudent option. We will address these concerns in
turn.

                             IV. IMPROPER BURDEN SHIFTING

        Pursuant to MCL 460.6s(4), the instant matter was “conducted as a contested case” under
the Administrative Procedures Act (APA), MCL 24.201 et seq. MCL 460.6s does not expressly
prescribe a burden of proof except in subsection (4)(a), which requires “the electric utility [to]
demonstrate[] a need for the power that would be supplied.” Nevertheless, “[g]enerally, in
contested cases under the APA, the proponent of an order or petition has the burden of proof and
the burden of going forward.” Bunce v Secretary of State, 239 Mich. App. 204, 216; 607 NW2d
372 (1999). We therefore accept the parties’ imposition upon DTE of the burden of proving all
factual prerequisites for issuing a CON. Additionally, by default, “the requisite standard of proof
in administrative proceedings is generally the same as that used in civil cases—a preponderance
of the evidence.” Id. at 218. We therefore also accept the PSC’s imposition upon DTE of a
preponderance standard.

       Consequently, DTE was required to establish by a preponderance of the evidence that, in
relevant part, its proposed NGCC plant “represents the most reasonable and prudent means of
meeting the power need relative to other resource options for meeting power demand.” MCL
460.6s(4)(d).

        It is possible to understand DTE’s obligation as requiring it to affirmatively prove every
other possible option to be less reasonable or prudent, which in turn requires DTE to identify
what every other possible option might be. This strongly resembles requiring DTE to “prove a
negative,” which is an exceedingly difficult endeavor. See, e.g., People v Poindexter, 90 Mich
App 599, 609-610 n 4; 282 NW2d 411 (1979); Coates v Drake, 131 Mich. App. 687, 696; 346
NW2d 858 (1984). Where it is unavoidable that a party must undertake such an endeavor, courts
have granted that party a degree of leeway or lenience in making its proofs. See Taff v Hosmer,
14 Mich. 309, 315-316 (1866); Davis v McMillan, 142 Mich. 391, 399, 401; 105 N.W. 862 (1905).
Early in Michigan’s history, our Supreme Court held that where it was incumbent on a party to
prove a negative, “any proof which would raise a fair and reasonable presumption of” that
negative “would be sufficient till overcome by some evidence tending to show [the affirmative].”
Young v Stephens, 9 Mich. 500, 504 (1862). Thus, a party may be permitted to make a prima
facie case, whereupon it becomes incumbent upon the other party to rebut that prima facie case.
Hayes-Albion v Kuberski, 421 Mich. 170, 185-186; 364 NW2d 609 (1984).

        Here, the PSC followed essentially the same procedure. It explained, in its order denying
rehearing, that the burden of proof had been upon DTE, and that burden remained upon DTE
throughout the proceedings. However, the PSC shifted the burden of going forward between the
parties throughout the proceedings. The courts are familiar with this process: although the
burden of persuasion generally remains with the plaintiff at all times, the burden of going
forward with the evidence may shift throughout the proceedings. See Widmayer v Leonard, 422
Mich. 280, 290; 373 NW2d 538 (1985). In light of our discussion above, we find nothing
improper in the PSC adopting a procedure under which DTE may be permitted to make a prima
facie showing, even an imperfect such showing, that its NGCC plant is the most reasonable and
prudent option; whereupon opposing parties will be obligated to produce a meaningful showing

                                                -5-
to the contrary. The PSC is within its discretion to consider the evidence proffered by the
opposing parties to be unpersuasive. Furthermore, if a statute is silent on the matter, an agency
may reallocate the burden of proof “when necessary and consistent with the legislative scheme.”
Bunce, 239 Mich. App. at 217.

        To the extent appellants complain that the PSC’s dispositional order failed to clearly
articulate this procedure, we are sympathetic, but we do not find its deficiencies fatal. Courts
look to the substance of matters rather than nomenclature or talismanic phrases. Wilcox v
Moore, 354 Mich. 499, 504; 93 NW2d 288 (1958); In re Hensley, 220 Mich. App. 331, 334; 560
NW2d 642 (1996). The PSC’s opinion and order may be difficult to read for those not well-
versed in its area of expertise. However, it is clear that the PSC recognized that the burden of
ultimate persuasion was upon DTE, and that the PSC was required to make findings under a
preponderance of the evidence standard. Throughout its order, the PSC extensively set forth the
parties’ various positions and summarized the evidence they had presented. Critically, the PSC
explained why it ultimately agreed with DTE despite finding some serious deficiencies in DTE’s
proofs.

        In short, it is readily apparent that the PSC found DTE to have established a prima facie
showing of all necessary facts, and that the opposing parties had not convincingly rebutted that
showing. Shifting the burden of production, and then finding opposing’ parties production
insufficient, does not inherently shift the burden of proof or persuasion. In re Sprint
Communications Co, LP, Complaint, 234 Mich. App. 22, 40-42; 592 NW2d 825 (1999). The
PSC’s finding that DTE’s presentation was flawed does not mandate a finding that DTE’s
presentation was insufficient, nor does it mandate a finding that opposing parties’ presentation
must be accepted. “In reality, [appellants’ arguments] here [are] not so much about the
allocation of the burden of proof as it is about the weight and sufficiency of the evidence.” Id. at
42. We find that the PSC did not improperly shift the burden of proof; it simply found DTE’s
presentation to be persuasive despite its flaws, and it found appellants’ presentation to be
unpersuasive. There being some evidence in the record to support the PSC’s findings, we are
constrained to accept them. In re Payne, 444 Mich. at 692.

                       V. DEFERRAL OR PARTIAL DISPLACEMENT

        Appellants contend that the PSC failed to undertake a proper consideration of “other
electric resources that could defer, displace, or partially displace the proposed generation facility
… including additional renewable energy, energy efficiency programs[2], load management, and
demand response[3]” as required by MCL 460.6s(11)(f). Specifically, appellants argue that the

2
  “Energy efficiency” (EE), or “energy waste reduction” (EWR), refers to programs intended to
encourage consumers to reduce their energy consumption through more efficient behavior,
materials, equipment, or devices. For example, replacing incandescent bulbs with LED bulbs, or
improving building insulation.
3
  “Demand response” (DR) refers to programs encouraging or incentivizing energy customers to
reduce or shift their energy use at certain times.

                                                -6-
PSC improperly focused on alternatives that would completely displace the proposed plant, while
ignoring or minimizing evidence that the plant could be deferred, even in part. We find that
appellants largely take statements by the PSC out of context.

        The PSC observed that some modeling showed “that achieving 2% annual energy savings
could defer the proposed plant by one year, to 2023.” Appellants complain that the PSC
improperly dismissed this finding on the grounds that “the 2% savings level . . . only defers [the
plant] by one year.” However, in context, the PSC went on to discuss more extensively that it
did not believe a 2% annual energy savings was likely to be achievable, and that the evidence
supported its doubtfulness. The PSC additionally noted:

       Ultimately, the Commission finds that a narrow window exists prior to the
       planned coal plant retirements that may not allow sufficient time for ramping up
       significant quantities of renewable energy, EE, DR, storage, or other options in
       order to completely displace the need for the proposed gas plant.

Again, in context, the PSC observed that the need for DTE’s proposed plant was imminent, and
“[e]ven if such options were feasible as a comprehensive portfolio to replace the gas plant under
this timeframe, the cost is higher.” Furthermore, “without replacement generation, there are
potential operational reliability issues that could arise given the significant amount of generation
retiring in a concentrated area.” The PSC did find that alternate resources might be able to
displace rather than defer a second plant potentially scheduled for 2029. However, “there is a
need to proceed with construction [of the plant] in 2019 to ensure reliability as coal plants are
retired.” Implicit is a finding that partial deferral simply was not practical under the given time
constraints.

        Furthermore, DTE and the PSC accurately observe that MCL 460.6s(11)(f) requires only
an analysis of alternative options. It does not impose any particular basis for denying a CON or
an IRP based on the availability of those options or the outcome of that analysis. We cannot find
that the PSC committed a mistake of law; and, again, there being some evidence in the record to
support the PSC’s findings, we are constrained to accept them. In re Payne, 444 Mich. at 692.

                  VI. THE MOST REASONABLE AND PRUDENT OPTION

         Initially, “the power need” to which MCL 460.6s(4)(d) refers can only reasonably be
understood as the specific need that the utility was required to establish under MCL 460.6s(4)(a).
Similarly, a CON issued under MCL 460.6s(3)(b), that the facility “represent[s] the most
reasonable and prudent means of meeting that power need,” can only reasonably refer to a CON
issued under MCL 460.6s(3)(a). Consequently, DTE is not required to show that its NGCC plant
is in the abstract the most reasonable and prudent means of generating a given amount of power,
or even any amount of power. Rather, DTE must show that its NGCC plant is the most
reasonable and prudent means of satisfying the particular need for power established as a
consequence of the imminent retirement of DTE’s coal plants.

       As noted, the power to be supplied by the proposed NGCC plant was necessary in the
near future. Consequently, any analysis conducted by the PSC could only reasonably focus on
meeting that need within narrow time constraints. The PSC specifically found that “any

                                                -7-
recommendations for additional retirements, renewable energy, EE, DR, or additional fossil
generation after 2022 are largely irrelevant to the issue of whether a CON should be granted for a
plant that will begin construction in 2019 and is expected to begin operating in 2022.” We agree,
and we therefore reject appellants’ arguments to the extent they suggest that the PSC erred in
considering a short-term timeframe for approving the CONs. To the contrary, it would have
been unreasonable for the PSC to consider options that would not meet the particular power need
that DTE proposed to satisfy with its NGCC plant.4

       Appellants also argue that DTE and the PSC failed to give sufficient or proper
consideration to demand response, wind and solar energy production technology, transmission
options, and improved energy efficiency savings even within the requisite timeframe. As they
point out, the PSC itself found DTE’s presentation to be highly dubious in some respects.
However, our review is of the PSC, not of DTE. Furthermore, the PSC concluded that DTE’s
modeling assumptions were reasonable for the near future; its criticisms were largely of DTE’s
longer-range forecasts. We are not persuaded that appellants have shown more than a
disagreement with the PSC’s analysis.

         Regarding battery storage technology, the PSC discussed testimony tending to show that
the cost of battery storage was expected “to decline significantly over the next five years,” and
that the technology was developing rapidly. Furthermore, other utilities were including battery
storage as resource options. However, testimony also indicated that those utilities had specific
compelling reasons to do so, and despite those reasons, they were not planning to implement
their battery storage until after the timeframe relevant to the instant plant. The PSC concluded
that it was “not inclined to write off this emerging technology as lightly as DTE,” but “f[ound]
persuasive the company’s testimony that the utilities that are planning the addition of utility-
scale storage are not intending to do so until the mid-2020’s or later.” We note that a significant
cost reduction in five years is well after the instant power need will manifest. We are not
persuaded either that the PSC failed to give battery storage technology inadequate consideration,
or that the PSC made an unreasonable finding of fact.

        Regarding power transmission options, DTE opined that relying on transmission
alternatives was risky and unreliable, because it would depend on energy capacity being
available at a reasonable cost in nearby areas. Appellants essentially disagreed with the
propriety of focusing on in-state generation to the exclusion of potentially less-expensive
imported energy. The PSC specifically found DTE’s analysis of transmission options to be
“unnecessarily weak,” but “technically” satisfactory. The PSC found that although DTE could
have conducted a better investigation, it agreed that DTE would face difficulties and risks,
especially because there did not appear to be any presently existing satisfactory options.
Technical impediments, if any, to energy importation aside, it is clear that the PSC prioritized

4
  We note again that the PSC did properly find such considerations relevant to the second plant
proposed for 2029. However, the second plant is not before us, and we express no opinion
regarding the second plant.

                                                -8-
reliability and certainty over unproven possibilities. We find nothing unreasonable in adopting
such a prioritization.

        Regarding wind and solar power generation options, testimony indicated that there was
considerable “local community resistance,” including a successful voter referendum, precluding
installation of wind parks in the most appropriate areas for wind power generation. Although
appellants cited studies indicating that the cost of installing wind generation might be lower than
DTE’s projections, DTE relied on its own actual experiences. The PSC accepted DTE’s
projections regarding wind generation. The PSC likewise accepted DTE’s reliance on its own
experiences with installation of solar energy production. Again, we find nothing unreasonable in
the PSC deciding to prioritize first-hand experience and empirical data over theory and
possibilities. Appellants complain that the PSC failed to consider “the gradual development of
smaller solar and wind facilities.” However, the PSC found that a smaller plant would be less
economical than the 1,100 MW plant proposed, which, again, we do not find unreasonable.

        Regarding energy efficiency (EE) and demand response (DR) savings, the PSC found it
doubtful that DTE could actually achieve sufficient levels of either EE or DR to offset a
significant amount of the necessary energy capacity. Notwithstanding criticisms of DTE’s
modeling, the PSC relied on testimony that very few utilities had successfully achieved a 2% EE
savings level, and it had doubts that DTE could do so within the requisite timeframe. Likewise,
the PSC found that DTE’s inexperience with DR programs and “uncertainty surrounding
customer receptivity” again cast doubt on DTE’s ability to adequately ramp up its DR program
within the requisite timeframe. To the extent appellants contend that the PSC’s conclusions
regarding EE and DR are unsupported by the evidence, we find nothing unreasonable about
erring on the side of caution and certainty. Moreover, “[a]n agency may use its experience,
technical competence and specialized knowledge in the evaluation of evidence presented to it.”
MCL 24.277.

        DTE’s burden of proof is a preponderance of the evidence, and to the extent DTE must
“prove a negative,” the PSC properly allowed DTE to make a prima facie showing and then
impose upon opposing parties the burden of producing contrary evidence. A plain reading of the
PSC’s opinion shows that it made findings regarding all of the required issues. The PSC
considered all of the alternative options and found that they were not realistically viable, under
the circumstances, to meet this particular power need within the necessary timeframe. Based on
the PSC’s analysis and explanation regarding the various shortcomings or alternative
considerations presented by appellants, it is evident that the PSC examined the criticisms levied,
weighed their legitimacy and feasibility, and determined whether DTE had met its burden in
light of the criticisms. In every instance, the PSC discussed the identified flaws; but ultimately,
when it found in favor of DTE’s analysis on a particular factor, the PSC placed the burden on
DTE to meet the statutory burden of proof. Appellants essentially disagree with the PSC’s
findings, which is outside the standard of our review.

                                      VII. CONCLUSION

       As discussed, we are not permitted to substitute our judgment for that of the PSC. We
conclude that the PSC did not improperly shift the burden of proof by shifting the burden of
persuasion after DTE made a prima facie showing. We are not persuaded that the PSC’s order

                                                -9-
granting the CONs at issue was unlawful or unreasonable. We therefore affirm. DTE and the
PSC, being the prevailing parties, may tax costs. Although ABATE is listed as an appellee in the
caption, we direct that ABATE may not tax costs, having not substantively participated in this
appeal. MCR 7.219(A).

                                                           /s/ Thomas C. Cameron
                                                           /s/ Jane M. Beckering
                                                           /s/ Amy Ronayne Krause

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