Laura T. W. Olive, PhD, Testifies Before the Michigan Public Service Commission Regarding Provisions of Section 6w of 2016 PA 341 for Upper Peninsula Power Company’s Service Territory

01 September 2017
Dr. Laura T. W. Olive

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 Upper Michigan Energy Resources Corporation’s service territory. She appeared on behalf of Constellation NewEnergy, Inc. and Constellation Energy Services, Inc. (Constellation), active alternative electric suppliers (AESs) in Michigan. Constellation has a direct interest in the rates, terms, and conditions proposed in this proceeding. Dr. Olive provided an economic analysis of Upper Peninsula Power Company’s (UPPCO's) proposed state reliability mechanism (SRM) charge mandated by Section 6w of Public Act 341 of 2016 (Act 341).

Dr. Olive concluded in her analysis that UPPCO’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. UPPCO classifies the production demand costs from its most recent cost of service study to be capacity costs.  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.