NERA Senior Consultant Dr. Laura T.W. Olive gave direct testimony before the Michigan Public Service Commission in the matter on the commission’s own motion to open a docket to implement the provisions of Section 6w of 2016 PA 341 for Cloverland Electric Cooperative’s (Cloverland’s) service territory. She appeared on behalf of Constellation NewEnergy, Inc. and Constellation Energy Services, Inc. (Constellation), active alternative electric suppliers in Michigan. Constellation has a direct interest in the rates, terms, and conditions proposed in this proceeding as a participant in the electric choice market and as a potential entrant to Cloverland’s service territory in the future. Dr. Olive provided an economic analysis of the company’s proposed state reliability mechanism (SRM) charge mandated by Section 6w of 18 Public Act 341 of 2016 (Act 341).

Dr. Olive concluded in her analysis that Cloverland’s proposed method for calculating an SRM capacity charge does not address the need to create an SRM capacity charge in order to ensure reliability with sufficient capacity resources at the peak. The cost of new entry (CONE) provides an independent, forward-looking estimate of the value in the market of the cost of new capacity in Midcontinent Independent System Operator (MISO) Zone 2 that can be readily applied as an SRM capacity charge. As such, Dr. Olive recommended that the commission adopt an SRM capacity charge no higher than MISO Zone 2 CONE value of $260.90/MW-day.