Andrea Hayden

1108 Pages·2017·12.16 MB·English

by  Jon P Christinidis

DTE Electric Company
One Energy Plaza, 1635 WCB
Detroit, MI 48226-1279

Andrea Hayden
[phone]
andrea.hayden@ dteenergy.com

July 6, 2018

Ms. Kavita Kale
Executive Secretary
Michigan Public Service Commission
7109 West Saginaw Highway
Lansing, Michigan 48917

Re: In the matter of the Application of DTE Electric Company for authority to
increase its rates, amend its rate schedules and rules governing the
distribution and supply of electric energy, and for miscellaneous accounting
authority.
MPSC Case No. U-20162

Dear Ms. Kale:

Attached for electronic filing in the above captioned matter is DTE Electric Company’s
Application, Prehearing Notice, Protective Order, Nondisclosure Certificates, Testimony and Exhibits.
Also attached is the Proof of Service.

Very truly yours,

Andrea Hayden

AH/rsf
Enc.
cc: Service List
STATE OF MICHIGAN

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter of the Application of )
DTE ELECTRIC COMPANY )
for authority to increase its rates, amend ) Case No. U-20162
its rate schedules and rules governing the )
distribution and supply of electric energy, and )
for miscellaneous accounting authority. )

APPLICATION

DTE Electric Company (“Applicant,” the “Company” or “DTE Electric”), a corporation
organized and existing under and by virtue of the laws of the State of Michigan, with its principal
office at One Energy Plaza, Detroit, Michigan 48226, files this Application pursuant to MCL 460.6
et seq., and various Michigan Public Service Commission (“Commission”) orders, requesting
authority to increase rates, and amend its rate schedules and rules governing the distribution and
supply of electric energy. In support of the relief requested in this Application, the Company
respectfully represents to the Commission as follows:
1. Applicant is a wholly-owned subsidiary of DTE Energy, supplying retail electric
service to customers located in Michigan, and is a public utility subject to the jurisdiction of the
Commission.
2. Applicant is presently serving its electric customers under schedules of rates and
charges approved by this Commission in its Orders dated April 18, 2018 and June 28, 2018, in
Case No. U-18255 (“U-18255 Orders”), and pursuant to various special contracts approved by the
Commission.
3. This Application is being filed in accordance with filing requirements contained in
the Commission’s Order in Case No. U-18238, dated October 11, 2017.
4. The Company has determined the need for additional annual revenues in the
amount of approximately $328 million effective as early as June 6, 2019, in order to recover,
among other things, capital costs associated with the addition of plant involving generation and
the electric distribution system; capital structure cost changes; increased operation and
maintenance expense due to inflation and accounting standard changes.
5. This filing reflects DTE Electric’s continuing efforts to minimize, to the extent
possible, the amount of rate relief required. In order to moderate the required rate increases to our
customers, DTE Electric has, and continues to aggressively pursue opportunities to reduce costs.
DTE Electric has proactively engaged in a number of efforts to improve processes and to reduce
costs as much as possible while still providing safe and reliable service to its customers.
6. The proposed revenue increase described in this Application is necessary in order
to allow the Company to continue to provide safe and reliable electric service, to meet customers’
service quality expectations, and to allow the Company a reasonable opportunity to recover its
costs of operation, including a reasonable rate of return.
7. The historical test year being used by DTE Electric is the calendar year ended
December 31, 2017. This 12-month period was then normalized and adjusted for known and
measurable changes, as supported by the Company’s witnesses in this case, to arrive at the
Company’s May 1, 2019 through April 30, 2020 projected test year.
8. DTE Electric’s projected rate base of approximately $17.2 billion includes actual net
plant and working capital as of December 31, 2017 with projected changes through April 30, 2020 and
includes the impact of base capital expenditures and further adjustments for specific major
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projects. Major capital projects during the projected period ending April 30, 2020 are described in the
testimony and exhibits of the Applicant’s witnesses.
9. Thus, the Applicant's testimony and exhibits filed contemporaneously with this
Application evidence a need for additional annual revenue beginning May 2019 of approximately
$328 million.
10. Attachment 1 to this Application summarizes the Company’s request. DTE Electric
proposes to allocate the required electric revenue increase among rate classes as set forth on
Attachment 2 to this Application. A comparison of typical bills and proposed rates for Residential
Service Rate D1 is shown on Attachment 3 to this Application. In addition, the Proposed Draft
Notice is included as Attachment 4 to this Application.
11. DTE Electric is proposing, among other things, certain changes to the Company’s
tariffs, including a change in the Residential D1 rate design to a time of use based charge, in
compliance with the Commission’s direction in Case No. U-18255; a new Weekend Flex pilot
program and a Fixed Bill pilot program for the Residential D1 rate design; a new Distributed
Generation Rider (Rider 18); inclusion of billing demand voltage level adjustments for Rate
Schedule D6.2; proposed voltage level adjustments for demand charges which account for
differences in losses and cost allocation at each voltage; changes to determining power supply cost
allocation to Standby Service Rider 3 and associated rate design changes to better align cost
allocation with cost causation principles, and development of surcharges for years 2020, 2021, and
2022, associated with the Company’s proposed Infrastructure Recovery Mechanism (IRM).
12. With respect to DTE Electric’s proposed time of use rate, the Company is
requesting that the Commission reverse its decision in Case No. U-18255 and allow customers to
retain the ability to opt-in voluntarily to the various time of use rate products currently available.
In the alternative, DTE Electric is requesting that the Commission allow the Company to transition
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its Rate Schedule D1 non-capacity rate to a time of use rate over a reasonable period of time in
light of the information technology, customer service, and customer communications issues that
will need to be addressed for such a transition.
13. The Company is requesting the waiver of the Commission’s Residential Billing
Rules R 460.125 and R 460.121 in order to implement the proposed Weekend Flex and Fixed Bill
pilot programs. Rule 460.125 states that a utility shall bill each customer for the amount of
electricity consumed. Customers enrolled on the Weekend Flex pilot will pay a fixed monthly
charge for their weekend electricity usage, while customers enrolled on the Fixed Bill pilot will
pay a fixed price for their monthly electricity usage, therefore, waiver of R 460.125 is needed. R
460.121 which states that a utility shall bill a customer with satisfactory payment history on an
equal monthly billing program if requested. Customers enrolled on the Weekend Flex or Fixed
Bill pilots will not be eligible to be enrolled on an equal monthly billing program.
14. DTE Electric is proposing an Infrastructure Recovery Mechanism which is
designed to recover the incremental revenue requirement associated with certain distribution, fossil
generation and nuclear generation capital expenditures incurred beginning May 1, 2020 through
December 31, 2022. The Company is proposing an interim reconciliation process be conducted, and
that any over or under recovery of IRM surcharges be deferred as a regulatory liability or regulatory
asset until the following IRM reconciliation.
15. The Company is proposing an electric vehicle program (Charging Forward) which
is designed to address customer education and outreach; residential smart charger support and
charging infrastructure enablement. The Company is requesting that rebates provided through the
program be deferred as a regulatory asset.
16. The Company is also seeking to increase its tree trimming expenditures so as to
achieve a steady-state five-year cycle of tree trimming. The Company is requesting that this tree
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trimming “surge” expense be deferred as a regulatory asset which will be securitized when the
asset reaches an appropriate balance.
17. As required by Commission orders in Case Nos. U-16991 and U-16117, DTE
Electric filed a depreciation case on November 1, 2016 in Case No. U-18150. On November 10,
2016, the Company also filed a joint depreciation case with Consumers Energy Company in Case
No. U-18195 for the Ludington Pumped Storage Plant. The Commission issued a final order
approving a settlement in Case No. U-18195, and those new Commission approved depreciation
rates are reflected in this case. However, the Commission has not issued a final order in Case No.
U-18150, therefore, DTE Electric has reflected in this case the new depreciation rates as proposed
in the Company’s application in Case No. U-18150. Should new deprecation rates be established in
a Commission order in Case No. U-18150 before the conclusion of this rate case, the Company
proposes that those new depreciation rates be reflected in the retail rates established in this
proceeding.
18. DTE Electric is seeking cost recovery of its variable compensation programs that
are used to attract and retain employees with the requisite skills and experience to ensure
quality customer service; ensure that DTE Electric’s employees’ total compensation is externally
competitive; and that differentiate total rewards based on organizational and individual
contributions. The Company is not seeking to recover the variable compensation for the top five
DTE Energy executives.
19. DTE Electric is requesting a return on equity of 10.5% with an overall rate of return
of 5.76% after tax, 7.19% pre-tax. The Company is requesting a permanent capital structure of
approximately 51% equity and 49% long-term debt. The projected average rate base for the test
year is approximately $17.2 billion, which includes an equity base of approximately $6.7 billion.
20. Applicant is requesting that the Commission adopt the PSCR base established in
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the Commission’s Order in Case No. U-15244 on January 13, 2009.
21. In 2016, the Michigan legislature passed and the Governor signed into law 2016
PA 341 which, in the part pertinent to this proceeding, amended MCL 460.1 et seq. by adding
Section 6w (MCL 460.6w). Act 341 became effective on April 20, 2017 and directed the
creation of a state reliability mechanism (“SRM”) and capacity charge. DTE Electric is
proposing the same methodology for the SRM and capacity charge as proposed in Case No. U-
18255.
22. The Commission issued Orders on January 11, 2010 in Case No. U-15768, October
20, 2011 in Case No. U-16472, December 11, 2015 in Case No. U-17767, and on January 31, 2017
in Case No. U-18014 approving the Company’s Advanced Metering Infrastructure program
(“AMI”) and reaffirmed the earlier Orders on remand from the Michigan Court of Appeals on
October 17, 2013 and November 6, 2014. The Commission’s April 18, 2018 Order in Case No.
U-18255 instructed the Company that a full cost-benefit analysis was no longer required.
Based on the Commission’s directives, the Company is no longer providing this analysis,
however, a description of the program’s success and shortcomings as well as the direct benefits
customers receive from the program is included with this filing.
23. DTE Electric is also requesting specific Commission authority to implement certain
accounting requests. Specifically, 1) Regulatory Asset treatment of 2017 Customer 360 post-
implementation O&M expenses; 2) Regulatory Asset treatment for certain Advanced Distribution
Management System (ADMS) costs; 3) Regulatory Asset treatment for rebates in the Charging
Forward program (electric vehicle charging stations); 4) Regulatory Asset treatment for Tree Trim
Surge costs; 5) Regulatory Asset treatment for time-of-use rate implementation expenses and 6)
Regulatory Liability or Regulatory Asset treatment for over or under recovery of the IRM.
24. Applicant is filing the direct testimony and exhibits of 27 witnesses concurrently with
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this Application. The contents, recommendations, revenue and expense items and proposed
ratemaking items set forth in those documents are incorporated into this Application by reference.
25. The fact that Applicant may not address an item or position addressed by Applicant
in previous cases, or which is presently on appeal before the courts, does not constitute a waiver
of such item or position by the Company, or of any rights or positions that the Company may wish
to take on these matters in this or any other proceedings before the Commission (now or in the
future), or in any other appropriate court or venue (now or in the future).
WHEREFORE, Applicant requests that the Commission:

A. Accept this Application for filing;
B. Give such Notice to interested parties as may be required by statute or the
Commission's rules;
C. Establish a date, place and time for a prehearing conference;
D. Conduct a hearing on this Application in order to determine the just and reasonable
rates, effective as early as May 2019, which will provide Applicant a reasonable opportunity to
recover its costs of operation, including a reasonable rate of return, in the projected test year and
beyond;
E. Enter its Order approving an additional annual revenue increase effective as soon
as possible in the projected test year as described herein;
F. Enter its Order approving Applicant’s proposed capital structure and return on
Equity;
G. Grant Applicant’s request to implement an infrastructure recovery mechanism and
the associated reconciliation process proposed by the Company;
H. Grant Applicant’s request for increased tree trimming expenditures and the
associated request for regulatory asset treatment and securitization;
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I. Grant Applicant’s request to reverse the previous ruling in Case No. U-18255
related to time of use rates, or alternatively allow the Company to implement the transition over a
reasonable period of time and approve recovery of all costs associated with the transition.
J. Approve the implementation of the Company’s proposed Weekend Flex and Flex
Bill pilot programs and grant a waiver of the Commission’s Residential Billing Rules R 460.125
and R 460.121;
K. Approve the Company’s proposed electric vehicle program;
L. Enter its Order approving new rates effective as early as June 6, 2019 in the
manner described in this Application, the accompanying Attachments and the Company’s Direct
Testimony and Exhibits;
M. Grant Applicant’s request to approve the PSCR base;
N. Enter its Order approving the Company's proposals to implement certain customer
rate schedules and tariffs;
O. Enter its Order approving recovery of the Company’s generation investments;
P. Enter its Order approving recovery of the Company’s investments related to the
strengthening of the Company’s distribution system and reliability improvements;
Q. Enter its Order approving a capacity charge based on the methodology established
in Case No. U-18248 and the capacity-related costs approved in this proceeding;
R. Grant any accounting authority associated with this Application not already the
subject of any other application filed by the Company;
S. Grant any other relief described in this Application as requested by the Company;

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T. Grant Applicant such further additional relief, as the Commission may deem
suitable and appropriate.

Respectfully Submitted,

DTE ELECTRIC COMPANY
Legal Department

By: __________________________
Andrea E. Hayden (P71976)
Jon P. Christinidis (P47352)
David S. Maquera (P66228)
Megan Irving (P75232)
One Energy Plaza, 688 WCB
Detroit, Michigan 48226
[phone]

DTE ELECTRIC COMPANY

By:
Don M. Stanczak
Vice President - Regulatory Affairs

Dated: July 6, 2018
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