News & Insights

Michigan Public Service Commission Wins Combined Appeal

Dykema Team Prevails Before the Michigan Supreme Court, Thwarts Detroit Edison’s Effort to Pass $589 Million In Costs Onto Michigan Ratepayers

May 11, 2009

Dykema, a leading national law firm, today announced that it has successfully represented the Michigan Public Service Commission (MPSC) in a combined appeal before the Michigan Supreme Court regarding recent major rate proceedings by the state’s largest utilities, The Detroit Edison Company and Consumers Energy. An earlier court had described the appeal as among the most complex to ever come before the courts.

At issue were two matters of statewide significance. The first involved whether Detroit Edison could pass through to Michigan ratepayers an acquisition premium of approximately $589 million that Detroit Edison’s parent company, DTE Energy, paid to acquire MCN Energy and its subsidiary MichCon. The MPSC held that Detroit Edison could not pass any of the costs through to ratepayers, and the Court of Appeals reversed the MPSC’s decision. The MPSC appealed to the Michigan Supreme Court. Dykema, on behalf of the MPSC, argued that the Court of Appeals improperly second-guessed the MPSC’s factual findings and that Detroit Edison should be barred from passing through to ratepayers any of the $589 million.

The second appeal involved whether transmission costs can properly be recovered through a statutory cost recovery process, called the power supply cost recovery (PSCR) mechanism. The Court of Appeals affirmed the MPSC’s position that the statute permitted recovery of the costs at issue, but the Attorney General later appealed. On this issue, the MPSC was supported by both Detroit Edison and Consumers Energy.

On May 1, the Michigan Supreme Court ruled 5-2 in favor of the MPSC on both issues, reversing the judgment of the Court of Appeals on the issue of Detroit Edison recovering the acquisition premium, and affirming the Court of Appeals judgment that transmission costs may be recovered through the PSCR mechanism.

Al Ernst, former Assistant Attorney General and lead counsel for the Dykema team, stated, "We are pleased that the MPSC was affirmed on its decision to prevent Detroit Edison from passing on to ratepayers the $589 million acquisition premium related to the purchase of MCN Energy. This was a shareholder matter, not a ratepayer matter – and the Supreme Court correctly reversed the Court of Appeals in favor of the MPSC’s position."

Dykema attorney Gary Gordon, former Chief Deputy Attorney General for the State of Michigan, argued the case to the Supreme Court. "This is an important decision within the energy industry on the issue of recovering transmission costs using a PSCR mechanism," said Gordon. "We are pleased that the Supreme Court ruled in our favor."

Assisting Ernst and Gordon was Dykema attorney Daniel Martin, who handled briefing the appeals. Lead counsel Al Ernst is the head of Dykema’s Energy practice.