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State PBF/ USF History, Legislation, Implementation

Michigan
Last Updated: November 2011
Summary

From February 2002 through September of 2010, the Michigan Public Service Commission (MPSC) has disbursed over $550 million in low-income energy grants.

The most recent round of grant funds, totaling $62 million, was approved by the MPSC on June 25, 2011, for disbursal on October 1, but its disbursement has been held up due to legal issues. As a result, the state's LIHEAP and several nonprofits such as the Salvation Army, the Michigan Community Action Agency Association, and The Heat and Warmth Fund (THAW) started the winter without the supplemental funding they had come to depend on for nearly a decade.

The grants come from the state's Low-Income and Energy Efficiency Fund (LIEEF) initially established as part of the Customer Choice and Electric Reliability Act of 2000 (Public Act 141) and continued in subsequent orders. The purpose of the Fund is to provide shut-off and other protection for low-income customers and to promote energy efficiency by all customer classes.

In July, a Michigan appeals court struck down the fund saying the MPSC no longer has authority to maintain it and disburse money from it. Ruling in a Michigan Consolidated Gas Co. rate case, the court said that the legislature implicitly intended to halt authorization for the LIEEF because it had omitted obsolete references to the fund in legislation known as 2008 PA 286, even though subsequent legislation, 2009 PA 172, referred to the fund and despite continued recognition by the legislature through its yearly allocations to the fund.

The MPSC has appealed the decision to the state Supreme Court.

Background

Since late 2001, the MPSC has solicited energy assistance and energy efficiency grant proposals on numerous occasions and has allocated LIEE funds statewide though a series of grant awards beginning in February 2002. Overall, the Commission has allocated approximately 73 percent of the grants to low-income energy assistance programs, about 16 percent to low-income energy efficiency programs and the remainder to the development of energy efficiency programs for all customer classes.

As a result, the majority of the funding — about $448 million — has gone for low-income bill payment assistance and a majority of that amount has been made available for distribution through the Department of Human Services (DHS), the state LIHEAP grantee. Most of the remaining funds have gone for low-income energy efficiency projects.

In awarding the grants, the Commission gave significant consideration to organizations with a proven record in distributing energy assistance to low-income residents, an existing administrative structure to handle additional distribution activities, and the ability to coordinate assistance with other service providers and serve multiple counties. In addition to grants to the DHS, the Michigan Community Action Agency Association, the Salvation Army and The Heat and Warmth Fund, a Detroit-based statewide fuel fund, have been regular grant recipients, along with a handful of regional nonprofits.

In several cases, including during the winter of 2005-06, the Commission issued the energy assistance grants on an expedited basis in response to rising gas prices, the state's budget, extremely cold weather, the economy, and an increasing occurrence of utility service shutoffs. In May 2007, $22 million in LIEE funds was distributed directly to the DHS by the state legislature, rather than through the MPSC, in order to swiftly provide supplemental funds for the LIHEAP crisis assistance program, which had run out of money.

Michigan's 2000 restructuring law created the LIEEF as part of securitization — bonds that customers pay off on their bills, allowing the state's two largest electric utilities, Detroit Edison and Consumers Energy, to recover their stranded costs. Savings from securitization were first used to lower rates by five percent; any other savings went into the LIEEF. Detroit Edison was the only electric utility whose securitization savings exceeded the amount necessary to fund the rate reduction required in the law and was the only company that contributed to the Fund.

In February 2004, in an interim order granting rate relief to Detroit Edison, the MPSC determined that there were no longer any excess securitization savings to fund the LIEEF and that it should be included in Detroit Edison's cost of service. It established a surcharge on the utility's distribution rates to fund the LIEEF. The surcharge was set to generate $39.9 million annually.

A new funding source for the LIEEF came in December 2005 when the MPSC, in a rate case settlement with Consumers Energy, directed the company to contribute $26.5 million annually to the LIEEF from its electric customers. Consumers Energy had proposed spending $15 million on low-income energy programs, but the Commission increased the amount, saying that state law allowed it to take the necessary steps to assure that low-income and energy efficiency funds are available and sufficient.

Additionally, in November of 2006, the Commission in Case No. U-14547 authorized Consumers Energy to fund $17.4 million annually for the LIEEF from its natural gas customers, bringing the total annual LIEEF funding to nearly $84 million. Like Detroit Edison, Consumers Energy was to recover its costs through customer charges.

Finally, in June 2010, the Commission issued an order in Case No. U-15985 authorizing Michigan Consolidated Gas Company (MichCon) to provide $5 million annually to the LIEEF, bringing annual revenue for the fund nearly $88.9 million.

More information is available in Report on the Low-Income and Energy Efficiency Fund, October 2011, the MPSC's latest annual report on its low-income fund.

 
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Page last updated: November 21, 2011