Review of Indiana Michigan Power Company's Power Supply Cost Recovery Plan Dockets for 2021 and 2022
Synapse provided expert testimony and analysis to support the Sierra Club in reviewing Indiana Michigan Power Company (I&M)’s Power Supply Cost Recovery (PSCR) Plans for the calendar year 2021 in Michigan Public Service Commission Docket U-20804, and for the calendar year 2022 in Docket U-21052. Synapse testimony in each docket focused on evaluating the prudence of I&M’s PSCR plan for each respective year. Specifically, we evaluated I&M’s justifications for charging Michigan customers for the purchase of energy from its affiliate, Ohio Valley Electric Corporation (“OVEC”) at above-market prices and review I&M’s oversight of OVEC’s operational and planning decisions. We also evaluated the Company’s operation of the Rockport units and reviewed the fuel and power purchase costs it plans to pass on to customers during the PSCR plan and five-year forecast period.
We found that I&M has been purchasing power from OVEC, an affiliate company, at above market value and passing those costs on to ratepayers since 2017. In 2020 alone, I&M customers incurred $2.5 million in losses relative to the energy market on a variable cost basis, and in total, the ICPA cost I&M customers $26.5 million more than the cost of equivalent energy and capacity in the market. We also found that I&M incurred $25.1 million in net losses relative to the market energy prices in 2020 at the Rockport units on variable cost basis, which could have been mitigated with more prudent unit commitment practices. Finally, we found that I&M's fuel cost plans and five-year forecasts show that the company will continue to incur net losses in energy market revenue and capacity value by purchasing energy from OVEC and that I&M will continue to uneconomically operate Rockport, and the Company will pass millions in excess costs on to its ratepayers as a result of these actions.
We recommended that the Commission amend the PSCR plan and remove costs incurred above the cost of market purchases for energy and capacity. The Company should cap the recovery of costs incurred under the ICPA at the equivalent market value in the future. We also recommend that the commission not allow I&M to develop a PSCR plan that assumes uneconomic commitment of the Rockport units. Finally, we recommend that the Commission indicate that it will disallow recovery of the fuel portion of all net revenue losses incurred as a result of imprudent unit commitment decisions in future reconciliation dockets.
In its final order in both Docket U-20804 and U-21052, the Commission reaffirmed its determination that I&M, under Michigan law, is considered an affiliate of OVEC, and therefore is subject to the Commission’s Code of Conduct rules governing affiliate transactions. As such, the Commission issued a warning under Section 7 of Public Act 304, MCL 460.6j, that it is unlikely to allow I&M to recover unjustified costs from Michigan ratepayers in its PSCR reconciliation proceeding for the utility’s long-term agreement with OVEC.