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Feb. 26, 2003: Michigan Orders Utility To Halt Cross-Subsidization

February 26, 2003
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LANSING, Mich. — The Michigan Public Service Commission has cited Consumers Energy Company for violations of the Commission's code of conduct for the utility’s appliance service plan (ASP) program and has ordered Consumers to cease and desist from further violations of the code, which was established by the Commission's Dec. 4, 2000 order in Case No. U-12134. The Commission also granted, in part, Consumers' request for an extension of the temporary waiver of the code, subject to conditions.

The purpose of the code of conduct is to prevent electric utilities and alternative electric suppliers from engaging in cross-subsidization, information sharing, and preferential treatment between their regulated and unregulated services.

Consumers' ASP program provides repair service for residential heating and cooling equipment as well as major kitchen and laundry appliances. Based on the state’s Customer Choice and Electricity Reliability Act, the Commission found that Consumers' heating and air conditioning services could only be performed through a full functional separation, preferably through a separate affiliate. The Commission did grant Consumers a temporary waiver of the separation requirement of the code for these services through April 3, 2003. Consumers sought an extension of that temporary waiver until April 3, 2004.

The Commission has now extended the temporary waiver until December 31, 2003, at which time Consumers must either terminate its ASP program or complete the full functional separation of its regulated activities from the appliance service program. The extension of the temporary waiver was conditioned on the discontinuation of messages promoting the ASP program in customers' bills and a requirement that Consumers' ASP program bear the full cost of advertising and promotional activities through the use of separate mailings by December 31, 2003. Until that date, Consumers may continue to bill customers for the costs associated with the ASP program on its utility bills, but may do so only if the ASP program is charged for such billing services on a fully allocated (not incremental) cost basis.

The Commission also issued an order (Case No. U-13089) that cited Consumers for jointly advertising unregulated programs with regulated programs, a provision of the code of conduct that was not stayed. The Commission also ordered an immediate cessation of promoting the ASP program via inserts and bills provided through ratepayer funds.

In this case, Phillip D. Forner, an HVAC contractor, filed a complaint against Consumers for placing promotional information about its unregulated business activities into its billing envelopes or by printing such information on its customers' bills. Therefore, the Commission issued a cease and desist order from further violations of the code of conduct.

Publication date: 02/24/2003

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