Lansing — A state commission overstepped its authority when it announced rules last year that would limit the area in which alternative electric providers can buy electricity, the Michigan Court of Appeals ruled Thursday.

In September, the Michigan Public Service Commission said alternative electric suppliers would have to demonstrate sufficient capacity three years in advance by using energy from within state lines, instead of through ownership and rights in interstate energy stores.    

Critics have said the rule forces smaller, alternative electric suppliers into buying from dominant suppliers DTE Energy and Consumers Energy rather than from out-of-state companies, potentially increasing the cost for consumers. The commission has said the requirement ensures Michigan has a reliable supply of power.

While a 2016 law may empower the commission to require alternative electric suppliers to demonstrate enough sufficient capacity, “it does not specifically authorize the MPSC to impose local clearing requirements upon alternative electric suppliers individually,” the order read.

The public service commission is reviewing the court ruling before deciding its next step, commission spokesman Nick Assendelft said Friday.

The ruling is the latest blow in a fight between other electric suppliers and the two dominant companies that control 90 percent of the energy market. 

In May, House Energy Policy Chairman Rep. Gary Glenn called the firms ”monopoly utilities” and likened Consumers Energy's lobbying efforts to terrorism. That same month, the Williams Township Republican and other representatives introduced a five-bill “Energy Freedom” package that would loosen renewable energy regulations so as to increase the independence of smaller producers from energy giants such as DTE and Consumers.

In a Friday statement, Glenn said the requirement to buy energy from within the state was the equivalent of telling Michigan families they could only buy Michigan products.

The lawsuit is a back-door, bureaucratic attempt to eliminate electric choice by “reviving a protectionist scheme pushed by the state’s two monopoly utilities in the last legislative session but expressly rejected by the people’s elected representatives," he said.

The Court of Appeals ruling was a “major blow to utility monopolies' hopes of eliminating the electricity choice market," Glenn said.

Officials at Consumers Energy, which was also named in the suit, disagreed with the appeals court's ruling, spokeswoman Katelyn Carey said.

“Michigan's 2016 Energy Law laid out a framework that ensures reliable and affordable energy in Michigan,” Carey said in a statement. “We believe the commission does have the authority to ensure reliability requirements are met by all electric providers serving Michigan.”

The lawsuit challenging the commission’s September rules was filed by the Association of Businesses Advocating Tariff Equity and Energy Michigan Inc. ABATE is made up of large energy users, including the Dow Chemical Co., General Motors Co., Marathon Petroleum, Enbridge Energy and U.S. Steel. Energy Michigan describes itself as an advocate and protector of “alternative and independent power supply.”

The court of appeals ruling was a "win for Michigan ratepayers," said ABATE lawyer Michael Pattwell. He said the decision will "serve as a gentle reminder to state agencies that they possess only those powers expressly granted them by the Legislature."

Michigan companies, universities and religious organizations that rely on alternative electric providers objected to the public service commission’s rule, noting it had been stripped from the 2016 legislation, only to be revived by the commission.

The Court of Appeals order agreed, noting the requirement was specifically removed during the legislative process, indicating the intent of lawmakers when they drafted the bill.

Energy Michigan also argued that, in issuing its September 2017 regulation, the commission was engaging in administrative rule making without calling it as such.

The Court of Appeals stayed mum on Energy Michigan’s claim because it had already ruled the commission didn’t have the authority to impose a local clearing requirement.

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