124 West Allegan Street, Suite 1000

Lansing, Michigan 48933

T (517) 482-5800 F (517) 482-0887

www.fraserlawfirm.com

Douglas J. Austin

Michael E. Cavanaugh

David E.S. Marvin

Stephen L. Burlingame

Darrell A. Lindman

Gary C. Rogers

Mark A. Bush

Michael H. Perry

Brandon W. Zuk

Thomas J. Waters

Michael S. Ashton

H. Kirby Albright

Graham K. Crabtree

 

Michael P. Donnelly

Edward J. Castellani

Peter D. Houk

Jonathan E. Raven

Thaddeus E. Morgan

Anita G. Fox

Elizabeth H. Latchana

Brian P. Morley

Max R. Hoffman, Jr.

Thomas L. Sparks

Paula J. Manderfield

Marlaine C. Teahan

Mark E. Kellogg

Ryan K. Kauffman

Jennifer Utter Heston

Samantha A. Kopacz

Paul V. McCord

Brian T. Gallagher

Jonathan T. Walton, Jr.

Laura S. Faussié

Melisa M. W. Mysliwiec

Aaron L. Davis

Paul C. Mallon, Jr.

Mark J. Hynes

R. Paul Vance

Shaina R. Reed

RETIRED Donald A. Hines

John J. Loose

Archie C. Fraser (1902–1998)

Everett R. Trebilcock (1918–2002)

James R. Davis (1918–2005)

Mark R. Fox (1953-2011)

Peter L. Dunlap, P.C.

F R A S E R T R E B I L C O C K D A V I S & D U N L A P | P C LANSING | DETROIT | GRAND RAPIDS

jheston@fraserlawfirm.com

(517) 377-0802

May 9, 2018 Ms. Kavita Kale Michigan Public Service Commission 7109 W. Saginaw Hwy. Lansing, MI 48917 RE: MPSC Docket No. U-18424 Dear Ms. Kale:

Attached herewith for filing in the above-referenced matter, please find the Initial Brief of Retail Energy Supply Association and Certificate of Service of same.

If you have any questions, please feel free to contact my office. Thank you.

Very truly yours,

Fraser Trebilcock Davis & Dunlap, P.C.

Jennifer Utter Heston

JUH/ab Enclosures cc: All counsel of record

STATE OF MICHIGAN

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter of the application of ) CONSUMERS ENERGY COMPANY for ) authority to increase its rates for the ) Case No. U-18424 distribution of natural gas and for other ) relief ) ____________________________________)

INITIAL BRIEF OF RETAIL ENERGY SUPPLY ASSOCIATION

Dated: May 9, 2018 FRASER TREBILCOCK DAVIS & DUNLAP, P.C. Jennifer U. Heston (P65202) Fraser Trebilcock Davis & Dunlap, P.C. 124 W. Allegan, Suite 1000 Lansing, MI 48933 Telephone: (517) 482-5800 E-mail addresses: jheston@fraserlawfirm.com

i

TABLE OF CONTENTS

I.  INTRODUCTION ...................................................................................................... 1 

II.  THE COMMISSION SHOULD DIRECT CONSUMERS TO IMPLEMENT A POOLING PROGRAM FOR CONSUMERS’ END USE TRANSPORTATION CUSTOMERS ...................................................................... 2 

A.  Pooling is common industry practice that should be available to Consumers’ EUT customers ........................................................................... 3 

B.  Pooling would benefit EUT customers through reduced costs, expanded flexibility and increased options .................................................... 4 

C.  Pooling does not increase costs to other customers or adversely affect system reliability .................................................................................... 6 

D.  Pooling provide benefits to the utility ............................................................. 6 

E.  Any incremental costs to implement pooling should be borne by pooling suppliers ............................................................................................. 6 

F.  Pooling should be a voluntary program for EUT customers ........................ 7 

G.  Consumers’ criticisms of RESA’s pooling proposal are without merit ................................................................................................................. 7 

H.  Conclusion ....................................................................................................... 8 

III.  THE COMMISSION SHOULD DIRECT CONSUMERS TO REVISE ITS BILL MESSAGE TO GCC CUSTOMERS TO REMOVE MISLEADING AND ANTI-COMPETITIVE STATEMENTS. .................................................... 11 

A.  Consumers’ bill message is anti-competitive ............................................... 12 

B.  Consumers’ bill message is false, deceptive and misleading ....................... 14 

C.  Consumers’ bill message should be competitively neutral and accurate ......................................................................................................... 16 

D.  Consumers’ tariff should be amended to prohibit false, deceptive and misleading statements by the utility ....................................................... 17 

IV.  CONCLUSION AND PRAYER FOR RELIEF .................................................... 18 

1

NOW COMES the Retail Energy Supply Association (“RESA”)1, by and through its

attorneys, Fraser Trebilcock Davis & Dunlap, P.C., and pursuant to the schedule adopted by

Administrative Law Judge Suzanne D. Sonneborn (“ALJ”), hereby respectfully submits this

Initial Brief on Consumers Energy Company’s (“Consumers’“) application for authority to

increase its rates for the distribution of natural gas and for other relief.

I. INTRODUCTION.

On October 31, 2017, Consumers filed an application, testimony and exhibits seeking

authority to increase its rates for the distribution of natural gas and for other relief. In its

application, Consumers seeks to increase rates by $178.194 million based on a test year ending

June 30, 2019, plus approval of an investment recovery mechanism. Consumers also proposes

several changes to its end use transportation (“EUT”) tariff.

RESA is a broad and diverse group of retail energy suppliers who share the common

vision that competitive retail energy markets deliver a more efficient customer-oriented

outcome than a regulated utility structure. RESA members are licensed to sell natural gas to

retail customers in Michigan as Alternative Gas Suppliers (“AGS”), including to customers in

Consumers’ EUT and gas customer choice (“GCC”) program. As a result, RESA is keenly

interested in the terms and conditions of Consumers’ EUT and GCC programs.

A part of this proceeding, RESA put forth expert witness testimony by John Mehling

and Matthew S. White. RESA’s expert John Mehling reviewed Consumers’ EUT tariffs and

1 The comments expressed in this filing represent the position of the Retail Energy Supply Association (RESA) as an organization but may not represent the views of any particular member of the Association. Founded in 1990, RESA is a broad and diverse group of twenty retail energy suppliers dedicated to promoting efficient, sustainable and customer-oriented competitive retail energy markets. RESA members operate throughout the United States delivering value-added electricity and natural gas service at retail to residential, commercial and industrial energy customers. More information on RESA can be found at www.resausa.org.

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recommended that Consumers implement a pooling program for EUT customers. Pooling

would permit EUT customers to be combined into groups or pools under each supplier.

Mr. Mehling testified that pooling for EUT customers has been common industry practice for

many years and should be made available to Consumers’ EUT customers.

RESA’s expert Matthew S. White reviewed Consumers’ new prominent bill message to

GCC customers. Mr. White determined that Consumers’ bill message is misleading and anti-

competitive and should be revised.

For the reasons discussed below, RESA requests that the Commission direct Consumers

to implement a pooling program for its end use transportation customers and direct Consumers

to revise its bill message to gas customer choice customers to remove misleading and anti-

competitive comparisons to Consumers gas cost recovery charge.

II. THE COMMISSION SHOULD DIRECT CONSUMERS TO IMPLEMENT A

POOLING PROGRAM FOR CONSUMERS’ END USE TRANSPORTATION CUSTOMERS.

RESA recommends that the Commission issue an order directing Consumers to adopt a

pooling program for Consumers’ EUT program. Pooling provides numerous benefits to EUT

customers and gas transportation programs. As explained below, there are numerous reasons

to adopt pooling, yet Consumers continues to resist. Consumers’ arguments against pooling

for transportation customers are without merit, and Consumers has proven that it will not

implement a pooling program for its EUT customers on its own initiative.2 Thus, in order for

this program enhancement to occur, the Commission must direct Consumers to adopt pooling.

2 Consumers’ witness Ms. Curtis testified that Consumers had not investigated a pooling proposal for its gas transportation customers at any time during the past nine years (between the time when a pooling proposal was put forth in Consumers’ 2009 gas general rate case, MPSC Case No. U-15986 and the time when RESA’s witness Mr. Mehling filed testimony in this proceeding). 5 Tr. 1266.

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A. Pooling is common industry practice that should be available to Consumers’ EUT customers.

As explained by RESA’s witness Mr. Mehling, “Pooling is simply the grouping of

transportation service customers that are all being supplied by the same supplier. It allows

suppliers to make a single supply nomination to a group of customers instead of numerous

individuals nominations.” The EUT customers’ usage is then offset by the pool supply.

Mr. Mehling testified that pooling “is an industry concept that has been in place for a few

decades now.” Mr. Mehling explained:

Nicor Gas Company (“Nicor”) and Peoples Gas Light and Coke Company (“Peoples”) in Illinois are two good examples of other gas transportation markets that have similarities to Consumers’ transportation program and both offer pooling. They are good examples because they are also Midwest utilities. They too have monthly balancing under Nicor’s Rider 34 Supplier Firm Transportation Service without telemetry required and under Peoples’ Rider FST for Full Standby Transportation Service without telemetry required which is similar to both Consumers and DTE Gas. Nicor and Peoples both offer storage banks similar to Consumers and DTE Gas. They are good comparisons because they have similarities in their operating systems. They are all served by multiple upstream pipelines. All have interconnects with ANR Pipeline Company. They have limited restrictions on which upstream pipelines can be utilized. All have on-system storage in addition to their upstream assets. When you analyze seventeen of the larger Midwest utilities,3 all but Consumers and DTE Gas offer pooling.4

Numerous other utilities offer pooling for their gas transportation programs, including SEMCO

Energy Gas Company and Michigan Gas Utilities Corporation in Michigan. Consumers should

make pooling available for its EUT customers, as well.

3 Nicor, Peoples, North Shore Gas, Ameren Illinois, Vectren Energy Delivery of Indiana -North, Citizens Gas Fuel Company, Vectren Energy Delivery of Indiana - South, Northern Indiana Public Service Company, Duke Energy Ohio, Vectren Energy Delivery of Ohio, Columbia Gas of Ohio, Dominion East Ohio Gas, Consumers Energy Company, DTE Gas Company, SEMCO Energy Gas Company, Michigan Gas Utilities, & Wisconsin Gas Company. 4 5 Tr. 1567-68.

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B. Pooling would benefit EUT customers through reduced costs, expanded flexibility and increased options.

Transportation customers benefit from pooling through reduced costs and imbalance

fees, expanded flexibility, and increased supplier options. Pooling reduces costs for the supplier

and ultimately the customers. Mr. Mehling testified that, “Today, because there is no pooling,

it could require one full time scheduler or up to several schedulers to manage all of the

scheduling and balancing of the supplier’s customers depending on the number of customers

being supplied.”5 With pooling, a single scheduler can often manage several utilities. Rather

than submit a separate nomination for each customer, in a pooled environment, the scheduler

can submit one nomination for the entire pool. By reducing the overhead to accomplish the

scheduling and balancing functions, then that cost savings will ultimately be passed on to the

customers in the form of more competitive pricing.

Pooling also reduces balancing costs associated with Consumers’ Authorized Tolerance

Level. On page 7 of Mr. Mehling’s direct testimony,6 Mr. Mehling provides a chart showing

how imbalance fees can be reduced when customers are able to offset imbalances as part of a

pool. Consumers’ witness Ms. Curtis testified that in 2017 Consumers’ Unauthorized Usage

Penalty was assessed 42 times. Thus, 42 times penalties were imposed without imposing any

true gas supply reliability issues for Consumers. The Commission should permit pooling

suppliers to utilize offsetting imbalances to reduce these imbalance fees.

Pooling also provides expanded flexibility for EUT customers. Today, Consumers’

EUT transportation customers are required to be standalone customers using one or more

suppliers. Pooling would give customers increased flexibility by allowing them to not only

5 5 Tr. 1568, ln. 7-10. 6 5 Tr. 1569.

5

remain as a standalone customer utilizing one or more suppliers but will also give them an

additional option to join a supplier’s pool and the benefit of sharing balancing risks with a larger

group of customers.

Pooling may also increase supplier options for EUT customers. Mr. Mehling explained

that there may be suppliers who do not participate in the Consumers gas transportation program

because pooling is not allowed.7 The lack of pooling means increased administrative burdens

and increased costs of participation, which may dissuade suppliers from participating in

Consumers EUT program today. A pooling option may entice more suppliers to participate in

Consumers’ EUT program thereby increasing competition for the benefit of EUT customers.

Pooling would also create more storage value for transportation customers. Mr.

Mehling explained that, while the total amount of storage remains the same, when storage is

aggregated and managed under the pooling supplier, storage imbalances can be offset.8

In short, the absence of pooling for Consumers’ EUT customers imposes unnecessary

burdens and inefficiencies on gas suppliers and, thus, additional costs for suppliers and their

gas transportation customers. Suppliers must input numerous gas nominations for each day,

one per customer, which could be reduced to one or a few gas nominations per day if

transportation customers elect a pooling option. Transportation customers benefit from pooling

through reduced costs and imbalance fees, expanded flexibility, and increased supplier options.

Consumers’ gas transportation program can be more efficiently and cost-effectively managed

for the betterment of all parties involved, including Consumers.

7 5 Tr. 1570. 8 5 Tr. 1570-71.

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C. Pooling does not increase costs to other customers or adversely affect system reliability.

Pooling for EUT customers does not harm other customers. Mr. Mehling explained that

pooling would not result in an increase in costs to other customers, nor would pooling adversely

impact system reliability.9 In fact, because of pooling, there should be fewer nomination errors.

More accurate nominations and balancing improves system reliability. Pooling does not relieve

the supplier of the obligation to closely match supply to demand.

D. Pooling provide benefits to the utility.

Pooling also benefits the utility. Mr. Mehling testified, as follows:

The utility should see reduced administrative costs from pooling. Rather than monitor each customer account individually, the utility would be able to monitor fewer accounts that contain one or more individual pooled customer accounts. Consumers would need to verify fewer nominations and storage banks even though the total volumes remain the same under pooling. Pooling would also simplify the tracking of imbalance nominations. After the initial start-up costs to implement pooling, the utility should experience reduced manpower costs and lower invoicing costs.10

Thus, Consumers itself should see benefits from implementing pooling on its system.

E. Any incremental costs to implement pooling should be borne by pooling suppliers.

As with any new program, there will be costs to implement it. Consumers’ witness Ms.

Curtis identified a cost of approximately $60,000 to develop and test new information

technology functionality.11 RESA is not opposed to establishing a reasonable fee to recover

incremental costs reasonably incurred by Consumers to implement a pooling program. RESA

recommends that the costs to implement and administer pooling should be borne by

9 5 Tr. 1571. 10 5 Tr. 1571. 11 5 Tr. 1252, ln. 20-22.

7

participating pooling suppliers. RESA supports a reasonable monthly administrative fee to

compensate the utility for any actual and reasonable incremental costs incurred to implement

pooling.

F. Pooling should be a voluntary program for EUT customers.

To be clear, RESA is recommending a voluntary pooling program to EUT customers.

Pooling should not be mandatory. Consumers should permit customers and suppliers to have

the option to aggregate customers into a pool. While pooling will reduce costs, and simplify

the process for customers, there may be customers who prefer to keep their supply management

separate. RESA proposes that the customer have the option of being aggregated into a pool or

maintaining individual service. The customer can elect whether to remain a standalone

customer or a pooled customer as part of its agreement with its supplier. The supplier would

then designate the customer’s decision in the customer enrollment provided to the utility. This

would provide customers with even greater flexibility than they have today.

G. Consumers’ criticisms of RESA’s pooling proposal are without merit.

Consumers’ witness Ms. Elizabeth Curtis testified that she has “reservations” about

RESA’s pooling proposal.12 Ms. Curtis criticizes RESA’s pooling proposal as being too vague

and for failing to address various aspects of Consumers’ internal processes. Ms. Curtis’

criticisms of RESA’s pooling proposal are relatively minor and can be easily remedied. In fact,

Ms. Curtis admits that Consumers could implement a pooling program for its gas transportation

customers.13 None of Consumers’ criticisms of RESA’s pooling proposal are truly

impediments to implementing pooling.

12 5 Tr. 1265, ln. 20. 13 5 Tr. 1265, ln. 18-20.

8

For instance, on page 9 of Ms. Curtis’ rebuttal testimony, she critiques the effects of

pooling on storage banks and states that there is no guarantee that any benefits from pooling

will be passed on to EUT customers. Ms. Curtis’ refusal to acknowledge the virtues of

competition contradicts fundamental economic principles. Gas marketers are operating in a

highly competitive environment for gas transportation customers. Competition among

suppliers will ensure that cost savings are passed on to EUT customers, and Consumers did not

provide any evidence or support to the contrary.14

Further, Ms. Curtis testifies that it would take approximately six months to implement

pooling.15 RESA acknowledges that Consumers may need additional time to craft new forms

and processes to implement pooling. RESA is not opposed to the Commission providing

Consumers with a delayed start date for pooling that is six months beyond the effective date of

the Commission’s order issued in this proceeding.

Consumers also resists implementing a pooling program for its gas transportation

customers because none of its transportation customers have asked for pooling.16 It should be

noted, however, that RC Campbell, Manager, Natural Gas Trading for ADM (a.k.a. A.M.

Todd), a Consumers gas transportation customer has, in fact, requested a pooling option for

Consumers gas transportation program.17

H. Conclusion.

Consumers is increasingly among a minority of gas programs that do not have pooling

for EUT customers. Pooling is the industry standard that should be available to Michigan

14 During cross-examination, Consumers’ witness Ms. Curtis was asked if she had any evidence to support her claim that cost-savings from pooling would not be passed on to gas transportation customers and she responded, “No.” 5 Tr. 1268, ln. 5-9. 15 5 Tr. 1252, ln. 22. 16 5 Tr. 1265-66. 17 See, Public Comments of RC Campbell, MPSC Case No. U-18424, Document Number 295.

9

transportation customers, yet Consumers has demonstrated an unwillingness to implement a

pooling program on its own initiative. RESA recommends that the Commission issue an order

directing Consumers to modify its tariffs to permit a pooling option for gas transportation

customers. Pooling is a common industry practice that benefits competitive markets without

causing harm to the utility. Specifically, Consumers should be required to:

1) Accept pooled nominations from suppliers;

2) Calculate and assess any load balancing charges based upon the net imbalance

of a supplier’s pool;

3) Calculate and assess any unauthorized gas usage charges based upon the net

imbalance of a supplier’s pool;18

4) Calculate and assess excess pipeline costs surcharge based upon the net

imbalance of a supplier’s pool;

5) Establish the Pool Authorized Tolerance Level (“PATL”) as the sum of all of

the individual pool member Annual Contract Quantity (“ACQ”) times 8.5% or,

when appropriate, the percentage of ACQ Tolerance Level as selected by the

pool member; and

6) Establish the pool monthly injection rights as the corresponding sum of the

rights of the individual pool members under existing tariff limits.

18 Note that RESA has removed the reference to authorized use charges in this provision to address a concern expressed by Consumers’ witness Ms. Curtis in her rebuttal testimony at page 10.

10

The Commission should order Consumers to modify its EUT tariffs as follows:

In Section E1.1 of Consumers’ tariff, the following definitions should be added:

• “Pool” or “Pooling” shall mean the grouping together of transportation

customers for the purposes of netting daily and monthly imbalances,

nominations, and storage balances.

• “Pool Administrator” shall mean the person or entity whom the transportation

customer has authorized to take actions and make decisions on their behalf with

regard to the operation of a Pool.

• “Pool Authorized Tolerance Level” (PATL) shall mean the sum of the pool

member ACQs times 8.5% (or times the percentage of ACQ Tolerance Level

when a different value is selected by the pool member).

At Section E2.2, the following statements should be added:

• If the transportation customer has authorized a Pool Administrator, the Daily

Nomination submitted by the Pool Administrator will be for the Pool as a whole.

The Pool Administrator must notify the Company in writing ten business days19

prior to the beginning of each calendar month as to which meters will be

members of the Pool. A transportation customer must remain in a Pool for a

period of one calendar month unless its transportation service is discontinued

during that calendar month and cannot be a member of more than one Pool at

any one point in time.

19 RESA has modified this proposed tariff provision to reflect ten business days’ notice, as recommended by Consumers’ witness Ms. Curtis on page 11 of her rebuttal testimony.

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Third Revised Sheet No. E-12.00 of the Transportation Service Rate should be amended

as follows:

• For any transportation customer that is part of a Pool, any Unauthorized Gas

Usage Charges will be applied to the imbalance remaining after the netting of

imbalances from all Pool members. The Pool Administrator will be responsible

for determining how any charges or credits remaining will be divided among

Pool members. By the eighth20 working day of each month, the Company will

provide the Pool Administrator with Pool member usage information from the

prior month.

The Load Balancing Charge section of Third Revised Sheet No. E-12.00 should be

amended as follows:

• For any transportation customer that is part of a Pool, the $.25 per MMBtu

charge for any month-end balance of gas will be assessed based upon the gas

that exceeds the Pool Authorized Tolerance Level (PATL) plus the sum of the

contract storage quantities that Pool members have individually contracted for.

For a Pool, for any monthly injections during the months of September and

October that are in excess of the sum of the Pool members ACQ times 1.43%,

plus the sum of the contact storage quantities that Pool members have

individually contracted for, the Load Balancing Charge will be assessed.

20 RESA has modified this proposed tariff provision to reflect the eighth working day of each month, as recommended by Consumers’ witness Ms. Curtis on page 12 of her rebuttal testimony.

12

III. THE COMMISSION SHOULD DIRECT CONSUMERS TO REVISE ITS BILL MESSAGE TO GCC CUSTOMERS TO REMOVE MISLEADING AND ANTI-COMPETITIVE STATEMENTS.

RESA’s witness, Mr. White, reviewed and analyzed a text box (“Prominent Bill

Display” box) that Consumers Energy includes on the Utility Consolidated Bills (“UCB”) of

GCC customers. Mr. White determined that Consumers’ text box contained a misleading and

anti-competitive bill message to GCC customers and recommended that the Commission adopt

a tariff amendment prohibiting such activity as part of this rate case. Mr. White also indicated

that the current bill message was not even in compliance with the previous settlement

Consumers entered into in its last rate case. Further, Mr. White recommended that, to the extent

the Commission wishes to include bill messages encouraging customers to explore their pricing

options, the message should not include any price comparisons, but rather include a

competitively neutral mention of the Commission’s choice webpage on both GCR and GCC

customers’ bills.

A. Consumers’ bill message is anti-competitive.

In 2015, Consumers revised its bills to GCC customers. As part of its bill re-design,

Consumers inserted a Prominent Bill Display box which contains a message on the first page

of the bills of just GCC Residential and Small Commercial customers who are billed on UCB.

The Prominent Bill Display box appears on the lower left side of the first page of GCC

customers’ bills (see, Exhibit RES-1 (MSW-1), page 2 of 3). The Prominent Bill Display states

that the customer has chosen to receive natural gas supply from an AGS and then goes on to

juxtapose the customer’s current gas rate which is “determined by the supplier you have

chosen” to Consumers Energy’s price “regulated by the Michigan Public Service Commission.”

Consumers does not make any similar price comparison on its bills to GCR customers.

13

Mr. White explained that Consumers’ Prominent Bill Display is anti-competitive. Mr.

White testified, as follows:

An alternative to an AGS product is the GCR offered by Consumers. To the extent Consumers is putting the GCR price comparison only on GCC customer’s bills, but fails to place any alternative pricing information on GCR customer’s bills, it creates an anti-competitive environment in Michigan. What Consumers is doing is analogous to requiring Target to place all of Walmart’s prices next to the products Target sells, but not requiring Walmart to make the same price comparison against its products. Consumers is using its role as the provider of UCB to target GCC customers and direct them to Consumers’ GCR offer.21

Mr. White further explained that Consumers’ bill message violates the terms of the settlement

agreement approved by the Commission in Consumers’ last gas general rate case, MPSC Case

No. U-17882:

The Prominent Bill Display directs customers to the Consumers gas choice webpage at ConsumersEnergy.com/gaschoice. Consumers’ webpage contains a number of warnings about shopping with an AGS which appear to attempt to dissuade customers from enrolling with an AGS. The inclusion of the webpage in the Prominent Bill Display box stands at odds with RESA’s interpretation of the Settlement Agreement in MPSC Case No. U-17882, in which Consumers agreed to include the Commission’s GCC price comparison webpage on GCC customer bills. On page 6, paragraph 16 of the Settlement Agreement in Case No. U-17882, included as Exhibit A to the Order Approving Settlement Agreement dated April 21, 2016 in that case, it reads, “Consumers Energy agrees to voluntarily include a link to the Commission’s Gas Customer Choice (“GCC”) price comparison website on the bills of GCC and GCR customers.” However, Consumers, as of February 2018 continues to include a link to the Consumers gas choice webpage in the Prominent Bill Display box, while only including the Commission’s GCC price comparison website in fine print at the end of the bill.22

21 5 Tr. 1556-57. 22 5 Tr. 1557.

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Importantly, the content of Consumers’ gas choice page is not competitively neutral and there

is a bias against the GCC program. Mr. White recommends that all customers (both GCC and

GCR) should be directed to the Commission’s choice information page and not Consumers’

choice webpage.23 The Commission and Commission Staff spent a lot of time and resources

developing a gas choice webpage that explains gas choice in a competitively neutral manner

and gives competitively neutral price comparisons. RESA recommends that the Commission’s

GCC price comparison website should be the only webpage listed in the Prominent Bill Display

or anywhere on the GCC and GCR customer bill.

B. Consumers’ bill message is false, deceptive and misleading.

In addition to Consumers’ bill message to GCC customers being anti-competitive, the

bill message is false, deceptive, and misleading to GCC consumers. Consumers’ bill message

does not provide sufficient information to customers about their gas supply options. Mr. White

explained:

Context is crucial when comparing the different products and services received by customers. The most important contextual element is product type. The most prevalent gas products offered in the Consumers gas market are either a fixed price product for a specified contract term or month-to-month variable price product. Consumers’ GCC Prominent Bill Display does not note the AGS product being provided to the customer, but implies all natural gas products are the same and readily compared based on price alone. For instance, Consumers’ GCR is a month-to-month product that could vary every month. One of the benefits of customer Choice is that customers have the ability to choose between different products in the market, including fixed price and variable price products. Customers that choose a fixed price product do so because they value the certainty of knowing their price is fixed and that they are protected from potential future wholesale market price volatility. Of course, as the market moves over time, a particular month’s GCR rate may be higher or lower than the fixed price rate; but that may be immaterial to a customer whose priorities are focused more on

23 The MPSC’s gas price comparison webpage can be found at: https://w2.lara.state.mi.us/GasChoice/

15

cost certainty than on the lowest possible price. Consumers’ GCC Prominent Bill Display does not provide any indication of the product type and thus may mislead a customer into believing that the Consumers Energy and AGS prices are based on the same, or even similar products.24

Furthermore, the bill message fails to disclose that while the GCR is just a commodity

product, the product that the customer purchased from an AGS might have other attributes

beyond just the commodity. Perhaps the product the customer receives is a renewable product

or is supported by carbon off-sets. Perhaps the customer was interested in a product that offers

airline miles or hotel rewards points after remaining on the product for a period of time. Perhaps

they have contracted for a product which offers a free or subsidized home services contract for

the duration of their tenure with their supplier. There are numerous ways in which a simplistic

comparison of Consumers’ GCR price to the AGS billed priced is misleading. Mr. White

testified, “Consumers Energy’s prominent, misleading Apples-to-Oranges comparison runs the

risk of having GCC customers lose the benefits that prompted them to choose an AGS.” To

help address this concern, RESA recommends that Consumers’ bill message provide the AGS’

contact information, rather than Consumers’ contact information. Unlike Consumers, the AGS

will be aware of the added attributes of the supplier’s offer and is knowledgeable about all of

the terms and conditions associated with the customer’s selected product.

Consumers’ bill message is also misleading in its comparison of the GCR price with the

AGS billed price because Consumers’ GCR is not a market price. Consumers’ GCR clause is

a regulatory mechanism designed to mitigate fluctuations in market prices.

Additionally, there are reconciliations built into Consumers’ GCR factor. Thus, there

are instances when Consumers may over-recover from the previous gas year, and that over-

24 5 Tr. 1558-59.

16

recovery is passed-through to the GCR the following year, lowering the GCR factor below the

current market price. There are also instances when reconciliations work to raise the GCR

factor when there were under-recoveries from the previous year. Regardless, reconciliations

cause the GCR factor to not be reflective of market-based pricing; thus, comparing a reconciled

GCR factor with a competitive AGS product also creates an Apples-to-Oranges price

comparison for customers.

Consumers’ bill message also inaccurately conveys Consumers’ price to be a fixed

amount, rather than a price per Mcf (thousand cubic feet.). Consumers’ bill message states, as

follows:

Your current gas commodity price is $9.56 per Mcf, which is determined by the supplier you have chosen. Consumers Energy’s price, regulated by the Michigan Public Service Commission is $3.17.”25

Consumers’ regulated price was not a flat $3.17. Consumers’ regulated GCR price is a

volumetric price per Mcf.

The Commission Staff also determined that Consumers’ bill message was misleading.

Staff witness Ms. Cantin found that Consumers’ claims included in the new text box were not

accurate.26 Ms. Cantin’s recommended edit, however, contains the same erroneous reference

to Consumers’ regulated price as a fixed price.

C. Consumers’ bill message should be competitively neutral and accurate.

Consumers’ bill messages should be competitively neutral and accurate. To the extent

that Consumers or the Commission wishes to encourage all customers to take advantage of the

choices in the marketplace, the messaging to customers should be competitively neutral and not

25 Exhibit RES-1 (MSW-1), page 2 of 3. 26 5 Tr. 1600-1601.

17

favor GCC or GCR prices. Thus, all bill messages should be the same for both GCC and GCR

customers unless there is a valid cause for a difference – not simply because Consumers as the

monopoly provider wants to provide a competitive solicitation to customers on the UCB, to

which all GCC and GCR customers receive.

RESA supports encouraging customers to take advantage of the different pricing

alternatives available to them in the marketplace. However, any call-out to customer choice

should be competitively neutral and not implicitly or explicitly favor the GCR price or any

product over another. The Prominent Bill Display provided by Consumers clearly encourages

customers to remain on the GCR rather than shop for their natural gas with an AGS. Thus, if

the Commission wishes to continue to include a bill message on Consumers’ bills that

references gas Choice, then the Commission should adopt the following policies:

The bill message should be the same for both GCC and GCR customers;

The bill message should not single out GCC customers for price comparisons, but

simply direct both GCC and GCR customers to the Commission gas price

comparison website;

The bill message should not include a link to the Consumers webpage for both GCC

and GCR customers; and

The bill message should include information to contact their existing supplier for

information on their current contract.

D. Consumers’ tariff should be amended to prohibit false, deceptive and misleading statements by the utility.

To protect against Consumers making false, deceptive, or misleading statements to

customers, RESA recommends that the Commission amend Consumers’ GCC tariff to prohibit

the utility from making false, deceptive or misleading statements to customers. Alternative

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energy suppliers27 and telecommunications providers28 are prohibited from making false,

misleading or deceptive statements to customers, but there is not a similar prohibition on natural

gas or electric utilities. This oversight should be remedied. RESA recommends that Section

F1.K of Consumers’ Gas Customer Choice tariff be amended, as follows:

All customer billing and remittance processing functions for services provided under Rate CC will be performed by the Company. The Supplier will be charged a monthly fee of $.30 per customer account. The Company will be responsible for credit and collection activities for the amounts billed directly to the customer by the Company. The Supplier must, at least three business days before the start of each billing month, furnish to the Company, in a format acceptable to the Company, the price per Mcf to be billed to each Supplier-designated pricing category on its behalf or the most recently supplied price will be used. In performing the customer billing and remittance processing function, the Company will refrain from making any false, deceptive or misleading price comparison between the Supplier-designated price and the Company’s GCR factor. A false, deceptive or misleading price comparison includes, but is not limited to, the failure to reveal material facts, the omission of which tends to mislead or deceive the customer.

IV. CONCLUSION AND PRAYER FOR RELIEF.

For all the reasons explained in the preceding sections of this Initial Brief, RESA

respectfully requests that the Honorable Administrative Law Judge issue a proposal for decision

recommending that Consumers implement a pooling program for its end use transportation

customers and directing Consumers to revise its bill message to gas customer choice customers

27 Alternative energy suppliers are subject to Michigan's Consumer Protection Act, MCL 445.901 et seq., which prohibits false, deceptive and misleading statements, acts or practices. Consumers’ Commission-approved Supplier Licensing and Code of Conduct provisions also prohibit alternative suppliers from engaging in fraudulent, deceptive or misleading communications or practices. See, Section F4.(B)(1)(a), Second Revised Sheet No. F-6.00, Consumers' Rate Book. 28 See, MCL 484.2502(1)(a) and (d).

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to remove misleading and anti-competitive comparisons to Consumers gas cost recovery

charge.

Respectfully submitted,

FRASER TREBILCOCK DAVIS & DUNLAP, P.C. ATTORNEYS FOR RETAIL ENERGY SUPPLY ASSOCIATION

Date: May 9, 2018 By: Jennifer U. Heston (P65202) Business Address: 124 W. Allegan, Suite 1000 Lansing, MI 48933 Telephone: (517) 482-5800 E-mail:jheston@fraserlawfirm.com

STATE OF MICHIGAN

BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

In the matter of the application of ) CONSUMERS ENERGY COMPANY for ) authority to increase its rates for the ) Case No. U-18424 distribution of natural gas and for other ) relief ) ____________________________________)

CERTIFICATE OF SERVICE Angela R. Babbitt hereby certifies that on the 9th day of May, 2018, she served the Initial

Brief of Retail Energy Supply Association and this Certificate of Service on the persons

identified on the attached service list via electronic mail.

Angela R. Babbitt

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Service List for U-18424 Administrative Law Honorable Suzanne Sonneborn Michigan Public Service Commission 7109 W. Saginaw Hwy. Lansing, MI 48917 sonneborns@michigan.gov Counsel for Consumers Energy Company H. Richard Chambers Bret A. Totoraitis Robert W. Beach Gary A. Gensch, Jr. Anne M. Uitvlugt Theresa G. Staley One Energy Plaza Jackson, MI 49201 Rick.chambers@cmsenergy.com Bret.totoraitis@cmsenergy.com Robert.beach@cmsenergy.com Gary.genschjr@cmsenergy.com Anne.uitvlugt@cmsenergy.com Theresa.Staley@cmsenergy.com Mpsc.filings@cmsenergy.com Counsel for MPSC Staff Lauren D. Donofrio Amit Singh Monica M. Stephens 7109 W. Saginaw Hwy., 3rd Fl. Lansing, MI 48917 donofriol@michigan.gov singha9@michigan.gov stephensm11@michigan.gov Counsel for Midland Cogeneration Ventures, LP Jason Hanselman Dykema Gossett 201 Townsend, Ste. 900 Lansing, MI 48933 jhanselman@dykema.com

Counsel for Attorney General Celeste R. Gill Joel B. King Assistant Attorney General Michigan Department of Attorney General Special Litigation Division 525 W. Ottawa St., 6th Floor PO Box 30755 Lansing, MI 48909 Gillc1@michigan.gov Kingj38@michigan.gov Counsel for Lansing Board of Water & Light Richard Aaron Kyle M. Asher Jason Hanselman Dykema Gossett 201 Townsend, Ste. 900 Lansing, MI 48933 raaron@dykema.com kasher@dykema.com jhanselman@dykema.com Counsel for ABATE Bryan A. Brandenburg Michael J. Pattwell Clark Hill 212 E. Grand River Ave. Lansing, MI 48906 bbrandenburg@clarkhill.com mpattwell@clarkhill.com Kitty A. Turner KAT@jpollockinc.com Counsel for Attorney General John A. Janiszewski 525 W. Ottawa St. PO Box 30755 Lansing, MI 48909 JaniszewskiJ2@michigan.gov

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Counsel for Residential Customer Group Don L. Keskey Brian W. Coyer University Office Place 333 Albert Ave., Ste. 425 East Lansing, MI 48823 donkeskey@publiclawresourcecenter.com bwcoyer@publiclawresourcecenter.com