## Facts

- Consumers Energy Company sought Michigan Public Service Commission (MPSC) authorization and funding, through its ratemaking proceedings, for a smart grid and advanced metering infrastructure (AMI) program designed to install smart meters.
- The AMI program was intended to give customers access to real-time (or near real-time) energy-consumption information so customers could adjust usage and reduce costs.
- Consumers Energy presented testimony from multiple employees supporting the program and stating that expected changes in the electric industry made smart grid and AMI technology appropriate.
- The MPSC also received testimony from a staff witness who evaluated the request and stated that Consumers Energy’s proposed funding level resembled full deployment rather than a pilot, even though full deployment had not been approved.
- Consumers Energy planned to spend about $200 million on the smart grid and AMI pilot program.
- The staff witness recommended that continued funding for a pilot could be reasonable if costs were controlled and if the requested amount was reduced by roughly $40 million.
- The MPSC expressed caution about the proposal but approved funding at a conservative level for the AMI pilot program, consistent with the staff witness’s recommended downward adjustment and cost-control approach.
- The Michigan Attorney General and the Association of Businesses Advocating Tariff Equity (ABATE) appealed, arguing that the MPSC lacked sufficient evidentiary support for approving AMI pilot costs because the program’s costs and benefits were not shown with adequate certainty.

## Issues

1. Whether the MPSC’s approval of funding for Consumers Energy’s smart grid/AMI pilot program was authorized by law.
2. Whether the MPSC’s determination to approve conservative, reduced AMI pilot funding was supported by competent, material, and substantial evidence on the whole record despite objections that the costs and benefits were insufficiently supported.
3. Whether, applying the deferential standard of review for MPSC ratemaking determinations, the appellate court should decline to reweigh competing testimony regarding pilot-program costs and expected benefits.

## Decision

- The Michigan Court of Appeals affirmed the MPSC’s order approving conservative funding for Consumers Energy’s smart grid and AMI pilot program.
- The court held that the MPSC acted within its lawful ratemaking authority in approving pilot-program cost recovery at a reduced level rather than approving full deployment.
- The court held that the record contained competent, material, and substantial evidence supporting the MPSC’s decision, including testimony from Consumers Energy witnesses and the MPSC staff witness supporting continued pilot funding with cost controls and a significant downward adjustment.
- The court rejected the Attorney General’s and ABATE’s challenge that the MPSC’s decision lacked sufficient evidentiary support, concluding that the challengers had not shown the order to be unlawful or unreasonable under the governing standard of review.

## Legal Principles

- A Michigan court reviewing an MPSC ratemaking order applies a deferential standard: the order is upheld if it is authorized by law and supported by competent, material, and substantial evidence on the whole record.
- “Substantial evidence” means evidence that a reasonable mind could accept as adequate to support the agency’s conclusion; the reviewing court does not decide the issue anew or reweigh competing proofs.
- The MPSC may rely on testimony from utility witnesses and commission staff when determining whether proposed investments and related rate treatment are reasonable.
- When the MPSC treats a proposal as a pilot rather than full deployment, limits the approved level of spending, and conditions approval on cost control, those features may support a finding that the decision is reasonable and supported by the record.
- Challenges asserting that program benefits are uncertain do not warrant reversal where the commission identifies record support for proceeding on a controlled, pilot basis and the reviewing court can identify substantial evidence supporting the commission’s findings.

## Conclusion

In re Consumers Energy Co. upheld the MPSC’s cautious approval of funding for Consumers Energy’s smart grid and AMI pilot program, concluding that the commission lawfully approved a reduced, pilot-level budget and that testimony from Consumers Energy and the commission’s staff supplied substantial evidence supporting the decision against the Attorney General’s and ABATE’s objections about uncertain costs and benefits.


In re Consumers Energy Co., 2012 WL 6766741 (Nov. 20, 2012)