Executive Summary

(1) On May 18, 2004, the Michigan Public Service Commission, an agency of state government, levied a 5 cent per-meter per-month "surcharge" on the electrical bills of all customers of Consumers Energy in order to finance subsidies for Michigan-based projects in wind power and other forms of "renewable energy." In imposing this charge — actually a tax — the MPSC exceeded its statutory authority under Michigan’s "Customer Choice and Electricity Reliability Act" (Public Act 141). This conclusion is supported by accepted rules of statutory construction and by the MPSC itself:

  • On May 16, 2002, the MPSC held that the CCERA did not permit the commission to force electricity customers to support renewable-energy production, writing that "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 changed its view and claimed power to order a "surcharge" only after two renewable-energy firms later stated that they lacked money to finance their expansion plans. Given the MPSC’s contradictory record, the courts should be skeptical of the MPSC’s views in this dispute.

  • The MPSC justifies its purported power to levy the "surcharge" in this case by citing a section of the CCERA that sometimes permits the commission to set electricity rates. The commission’s reliance on this section fails for three reasons:

  • ~       The CCERA’s rate-setting section does not mention renewable energy or any "renewable energy source," even though lawmakers specifically defined the latter term in the act.

    ~       In contrast to the absence of language in the CCERA authorizing subsidies for renewable energy production, the act does establish a funding mechanism for an "educational program" to inform consumers about the availability of alternative electrical suppliers. It is implausible to suggest, as the MPSC does, that the Legislature would explicitly provide funding for such a relatively minor program, but only implicitly authorize a broad "surcharge" to provide subsidies for the production of renewable energy itself.

    ~       MPSC rates are charged for services rendered or for the recovery of "stranded costs." But the 5 cent per-meter per-month "surcharge" in this case is levied on customers who receive no service from renewable-energy suppliers, and the "surcharge" does not pay for "stranded costs," since the costs subsidized in this case were not incurred before the CCERA became law. Indeed, according to guidelines enunciated by the Michigan Supreme Court in Bolt v. City of Lansing, this "surcharge" is a tax, not a rate or fee "exchanged for a service rendered or a benefit conferred. ..."

  • The MPSC further justifies its power to impose the "surcharge" in this case by pointing to a second section of the CCERA: the exhortation that the renewable-energy information program instituted by the legislation "also be designed to promote the use of existing renewable energy sources and encourage the development of new facilities." This claim fails for two reasons:

  • ~    The section of the CCERA cited by the MPSC repeatedly refers to communication and education, clearly indicating that the CCERA’s renewable-energy program is meant only to provide information to consumers, not to subsidize renewable-energy projects.

    ~    The specific passage that the MPSC cites appears only at the end of the relevant portion of the statute. 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.

(2) The Michigan Court of Appeals has correctly overturned the MPSC’s renewable-energy "surcharge." The Michigan Supreme Court should deny the commission leave to appeal that decision.

(3) If, however, the Supreme Court decides the MPSC might have grounds for appeal, the court must recognize that an MPSC power to levy such a "surcharge" probably represents an unconstitutional delegation of power from the Legislature to an executive agency. The jurisprudential standards for reviewing such delegations are contradictory, but a legislative grant of power to the MPSC would need to comply with key clauses of the Michigan Constitution: the seat of legislative power (Article 4, Section 1); separation of powers (Article 3, Section 2); due process (Article 1, Section 17); permissible language in the levying of taxes (Article 4, Section 32); nonsurrender of the taxation power (Article 9, Section 2); and permissible payments from the state treasury (Article 9, Section 17).

(4) If the Michigan Supreme Court were to grant the MPSC leave to appeal, this case would be ideal for determining the standards of judicial review for delegations of legislative power. Further, the dispute would allow the court to articulate a consistent standard of review for executive agency interpretations of ambiguous statutes. Ideally, this standard would grant agencies minimal leeway in the absence of explicit legislative language. Regardless, a consistent standard would reduce litigation and discourage judicial activism.