Merits

The MPSC argues that MCL 460.10b(1) and MCL 460.10r(6) give it the authority to impose the 5 cent per-meter per-month tax to subsidize renewable-energy production. Further, the MPSC argues that this decision should be deferred to by the courts.

When a statute is clear, the courts will enforce it as written and will not defer to an agency’s interpretation of the statute. Consumers Power Co, 460 Mich 148, 157 n 7. When a statute is ambiguous, there are contradictory standards of review for an MPSC interpretation of that statute. Some rulings suggest that the MPSC cannot exercise a power unless that power has been granted clearly in legislation, while other rulings suggest that the courts should be deferential to MPSC interpretations, even if those interpretations grant the commission additional power.[1]

Courts have held that the MPSC cannot exercise a power that is not explicitly conferred in a statute. In Consumers Power Co, this Court stated that it "strictly construes the statutes that confer power on the PSC." Id. at 155. A rule of construction specific to statutes involving boards and commissions is that ambiguous language cannot be used to confer power. Id. ("The power and authority to be exercised by boards and commissions must be conferred by clear and unmistakable language, since a doubtful power does not exist." (quoting Union Carbide Corp v Michigan Public Service Comm, 431 Mich 135, 151; 428 NW2d 322 (1988))); Michigan Electric Cooperative Ass’n v Michigan Public Service Comm, 267 Mich App 608, 616; 705 NW2d 709 (2005) ("The PSC possesses only that authority granted it by the Legislature. Authority must be granted by clear and unmistakable language. A doubtful power does not exist.").

Other authorities indicate that deference should be given to agency interpretations of ambiguous statutes. The pertinent portion of MCL 462.25 states,"All rates, fares, charges, classification and joint rates fixed by the commission and all regulations, practices and services prescribed by the commission shall be in force and shall be prima facie, lawful and reasonable until finally found otherwise." MCL 462.26(8) states, "In all appeals under this section the burden of proof shall be upon the appellant to show by clear and satisfactory evidence that the order of the commission complained of is unlawful or unreasonable." Regarding "unlawfulness," this Court stated, "To declare an order of the commission unlawful there must be a showing 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." In re MCI Telecommunications Complaint, 460 Mich 396, 427; 596 NW2d 164 (1999). Regarding "unreasonableness," this Court stated, "The hurdle of unreasonableness is equally high. Within the confines of its jurisdiction, there is a broad range or ‘zone’ of reasonableness within which the PSC may operate." Id. In Consumers Power Co, this Court stated, "While the PSC has only those powers conferred on it by the Legislature, the interpretation given to statutes by the agency charged with applying them is entitled to great deference." 460 Mich at 154.

Nevertheless, even where the courts have granted deference to agency interpretations of ambiguous statutes, some courts have qualified the amount of deference they will give. The Court of Appeals has stated, "A reviewing court must give due deference to the administrative expertise of the PSC and may not substitute its judgment for that of the agency. However, this does not mean that courts may abandon or delegate their responsibility to interpret statutory language and legislative intent." Attorney General v Michigan Public Service Comm, 244 Mich App 401, 406; 625 NW2d 786 (2001) (citation omitted). Further, a court does not "afford the same measure of deference to an agency’s initial interpretation of new legislation as [it does] to a longstanding interpretation." Michigan Electric Cooperative Ass’n, 267 Mich App at 616.

These contradictory standards for reviewing the MPSC’s interpretation of an ambiguous statute are problematic. Such varying standards could tempt judges to apply whatever rule would justify a conclusion they personally favor. In contrast, the ideal approach was stated by this Court in Consumers Power Co: "In construing the statutes empowering the PSC, this Court does not weigh the economic and public policy factors that underlie the action taken by the PSC." 460 Mich at 156. More importantly, such conflicting standards breed litigation. They encourage the MPSC to construe its powers broadly, but also encourage challenges to any MPSC action. This leads to the courts’ becoming involved in a wide range of agency matters, and without a unitary standard, a consistent jurisprudence is unlikely to emerge.

Thus, a single unifying standard for the review of ambiguous statutes is needed. For reasons that will be touched upon in Argument II, the best standard would be one that limits the MPSC to powers clearly given by the Legislature. Regardless, this Court should settle on a single standard if presented the opportunity.

Turning to the specific issue at hand, the Legislature clearly did not intend to empower the MPSC to tax all of Consumers’ customers in order to facilitate financing of renewable-energy projects. As a primary matter, the MPSC has already admitted that the Legislature clearly did not provide a mechanism to finance the MREP: In MPSC Case No. U‑12915, the MPSC stated "the language adopted in Act 141 persuades the Commission that the Legislature did not intend to create a program that would require consumers to pay an additional surcharge to support it." The MPSC should not be allowed to change its position to its own advantage now.

Further, the MPSC’s earlier conclusion about the MREP would undermine any argument for granting the MPSC deference if this Court were to conclude that the CCERA is ambiguous. After all, a court does not "afford the same measure of deference to an agency’s initial interpretation of new legislation as [it does] to a longstanding interpretation." 267 Mich App at 616. It is therefore reasonable to conclude that if a court were to grant any deference in the case of ambiguous statutes, that court would afford no deference to an agency’s interpretation of a new statute when that interpretation directly contradicts the agency’s earlier interpretation of the statute.

This statute is not ambiguous, however. The "CC" in the CCERA stands for "Customer Choice." The section of Act 141 stating its purpose, supra at p. 7, makes clear that customer choice and market forces were the overriding rationales behind the reform. The MPSC’s vision of the "renewables energy program" directly contravenes these rationales. In Consumers’ voluntary renewable-energy program, the market signaled that new renewable-energy facilities were not viable for Mackinaw Power and North American Wind, since banks were unwilling to finance these companies’ projects. In imposing a compulsory tax, the MPSC seeks to override the very market signals that the Legislature intended to elevate. Moreover, by assuring the renewable-energy firms a 20-year stream of revenue independent of their performance, the MPSC’s arrangement would shield providers of renewable energy from the competitive forces that impose economic discipline and efficiency. In fact, the consumers have no "choice" about whether to participate in funding these renewable-energy projects; participation is mandatory for every one of Consumers’ customers.[2]

MCL 460.10b(1), a rate-setting section of the CCERA that the MPSC relies on in its arguments here, does not mention "renewable energy." Rather, the section merely discusses "new generation, transmission, and distribution technologies." This phrase need not include renewable energy, since "new generation, transmission, and distribution technologies" can simply entail traditional utilities’ becoming more competitive through new technologies that increase the companies’ efficiency and that mitigate the environmental impacts of fossil and nuclear fuels.

Furthermore, in MCL 460.10g(f), the Legislature specifically defined the term "renewable energy source" ("energy generated by solar, wind, geothermal, biomass, including waste-to-energy and landfill gas, or hydroelectric"). Yet the term "renewable energy source" was not used in MCL 460.10b(1), indicating that the Legislature did not intend to include it there.

The Legislature knew precisely how to create a funding mechanism, since it did so in MCL 460.10r(2), where it ordered the MPSC to establish a funding mechanism for an "educational program" to inform electric customers about the availability of alternative electrical suppliers. It seems odd to suggest that the Legislature would explicitly discuss the funding of such a relatively minor program, but only implicitly authorize a tax to provide subsidies for the production of renewable energy itself. The far better explanation is that the Legislature did not intend to create subsidies for renewable-energy production — and that the Legislature certainly did not empower the MPSC to levy a tax for that purpose.

The structure of MCL 460.10r indicates that the "renewable energy program" was created only to provide information to consumers, not to subsidize renewable‑energy projects. MCL 460.10r(1) requires the MPSC to establish standards for communications from electricity providers to consumers. MCL 460.10r(2) mandates that the MPSC create a funding mechanism for an educational program. MCL 460.10r(3) requires electricity providers to inform each customer about the environmental characteristics of the customer’s energy provider, including what fuels are used (for example, fossil, nuclear, or renewable), the average emissions of sulfur dioxide and carbon dioxide emitted per megawatt-hour, and the average amount of nuclear waste per megawatt-hour. Obviously, MCL 460.10r(3) was enacted so that electricity customers could be informed about the environmental consequences of their choice of electricity provider. Both MCL 460.10r(4) and MCL 460.10r(5) discuss informational reporting requirements.

As noted above, MCL 460.10r(6) states:

The commission shall establish the Michigan renewables energy program. The program shall be designed to inform customers in this state of the availability and value of using renewable energy generation and the potential of reduced pollution. The program shall also be designed to promote the use of existing renewable energy sources and encourage the development of new facilities.

The MPSC contends that this provision was meant to create a fund that would subsidize renewable-energy production. But the remainder of MCL 460.10r discusses only providing electricity customers with information, clearly indicating that in MCL 460.10r(6), the Legislature was referring to a program only to inform electricity customers about the potential benefits of renewable-source electricity. Such a program would "promote the use of existing renewable-energy sources and encourage the development of new facilities," since customers would now be aware of the environmental consequences of the use of fossil or nuclear fuels and might want to explore a renewable-energy alternative. The MPSC’s suggestion that MCL 460.10r(6) actually empowers the commission to levy a tax to subsidize renewable-energy production is an implausible construction of the legislative language, especially given that this subsection occurs at the end of MCL 460.10r. It strains credulity to contend that the Legislature would casually append such an important power to the end of a statute that repeatedly talks about something else.

The MPSC tries to distinguish the instant case from this Court’s decisions in Consumers Powers Co and Union Carbide Corp by contending that this case is a pure rate case, while those cases were not. This distinction is unavailing, since the 5 cent per-meter per-month charge is in actuality a tax, not a fee.

Union Carbide involved the MPSC’s attempt to order Consumers to fire up and shut down its plants in a particular order. In that case, the MPSC essentially wanted to make sure that Consumers’ least efficient plant was operated as little as possible, and the commission ordered Consumers to make certain that this occurred. This Court held that while the MSPC had the power to regulate rates, it did not have the power to "make management decisions." 431 Mich at 149. In dicta, this Court stated that the MPSC "acted properly in preventing Consumers from passing on to ratepayers any additional fuel expense" from the inefficient operation of its plants (although this issue was not appealed to this Court). Id. Nevertheless, this Court held that the MPSC’s effort to protect consumers through the exercise of the commission’s rate-making power did not enable the MPSC to order Consumers to operate in a particular manner.

In Consumers Power Co, the MPSC attempted to order Detroit Edison and Consumers to engage in "retail wheeling," in which a consumer buys electricity from a third-party provider and receives the electricity through Detroit Edison’s or Consumers’ power lines for a fee.[3] This Court held that the MPSC’s rate-making power did not include the authority to take such action:

The PSC initially characterizes its retail wheeling program as ratemaking. . . . 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.

460 Mich at 157-58. This Court ignored the public policy rationale for retail wheeling, and this Court held that as a matter of statutory interpretation, the MPSC clearly did not have the power to enact such a program.

As in Union Carbide and Consumers Power Co, the MPSC claims that this case is within its traditional rate-making powers. This is untrue. Although the MPSC will likely contend that the 5 cent per-meter per-month surcharge is a "rate" or "fee," it is not. It is a tax.

In Bolt v City of Lansing, 459 Mich 152, 161; 587 NW2d 264 (1999), this Court stated, "Generally, a ‘fee’ is ‘exchanged for a service rendered or a benefit conferred, and some reasonable relationship exists between the amount of the fee and the value of the service or benefit.’ A ‘tax,’ on the other hand, is designed to raise revenue." Id. (citations omitted). Here, Consumers’ customers are being charged for a service they did not choose to receive, and the MPSC admits that its goal is to raise revenue. Therefore, the 5 cent per-meter per-month charge is a tax.

This tax is clearly not within the MPSC’s traditional rate-making power. In fact, the MPSC’s argument errs at its inception, since it employs the term "rate." This term is a misnomer. MPSC rates are charged for services rendered or for the recovery of "stranded costs." MCL 460.10a(1). As just noted, what the MPSC refers to as a "rate" is not a payment for services, since many customers do not receive the services. Nor is this "rate" for the payment of "stranded costs" — i.e., costs that arose before Act 141 became law and before the utilities faced competition. The MPSC does not have the power to order all of Consumers’ customers to subsidize the development costs of renewable-energy companies that wish to enter the more competitive market that emerged after Act 141 became law.

It is therefore clear that the MPSC did not have the statutory authority to enact the 5 cent per-meter per-month tax on Consumers’ customers to help finance renewable-energy production. This Court should deny leave to appeal.

[1] This contradiction has probably arisen because of constitutional concerns that will be discussed more fully in Argument II. With agencies, the courts have recognized two somewhat inconsistent concepts: (1) courts prefer to defer to agency expertise, particularly in technical matters; and (2) courts are wary of allowing agencies to act in the Legislature’s stead, since agencies are largely insulated from democratic influences. This second issue becomes particularly acute when the delegation language contains few standards and effectively leaves the agency a wide scope of authority.

These inconsistent standards and the policy implications behind them were discussed in Justice Brickley’s dissent in Consumers Power Co, and they are also reviewed in Argument II. Justice Brickley advocated adoption of the classical federal model, in which an agency’s construction of ambiguous statutes receives deference from the courts. As stated below, amicus curiae does not agree.

[2] It is also worth recalling here that all of the customers of Detroit Edison, the other major energy supplier in Michigan, face a similar tax.

[3] This is basically the concept of "unbundled energy." When energy is "bundled," one entity both supplies and delivers the energy. When energy is "unbundled," as in retail wheeling, one entity supplies the energy and another delivers it.