in Re Application of Consumers Energy for Reconciliation of Costs , 310 Mich. App. 614 ( 2015 )

STATE OF MICHIGAN
COURT OF APPEALS
___________________________________________
In re application of CONSUMERS ENERGY
for reconciliation of costs
TES FILER CITY STATION LIMITED FOR PUBLICATION
PARTNERSHIP, May 28, 2015
9:10 a.m.
Appellant,
v No. 314361
MPSC
MICHIGAN PUBLIC SERVICE COMMISSION, LC No. 00-016045-R
Appellee,
and
CONSUMERS ENERGY COMPANY,
Petitioner-Appellee,
and
ATTORNEY GENERAL,
Appellee.
In re application of CONSUMERS ENERGY
COMPANY for 2011 reconciliation
CADILLAC RENEWABLE ENERGY, LLC,
GENESEE POWER STATION LIMITED
PARTNERSHIP, GRAYLING GENERATING
STATION LIMITED PARTNERSHIP,
HILLMAN POWER COMPANY, TES FILER
CITY STATION LIMITED PARTNERSHIP,
VIKING ENERGY OF LINCOLN, INC, and
VIKING ENERGY OF MCBAIN, INC,
-1-
Appellants,
v No. 316868
MPSC
MICHIGAN PUBLIC SERVICE COMMISSION, LC No. 00-016432-R
Appellee,
and
CONSUMERS ENERGY COMPANY,
Petitioner-Appellee.
BEFORE: RONAYNE KRAUSE, P.J. AND WILDER AND STEPHENS, JJ.
STEPHENS, J.
In Docket No. 314361, the Michigan Public Service Commission (“PSC”) issued an order
approving the application of Consumers Energy Company (“Consumers”) for a power supply
cost recovery (“PSCR”) reconciliation for the 2010 calendar year. Relevant to this appeal, it
approved Consumer’s payments to biomass merchant plants (“BMPs”) of $10,566,059 for
capped excess fuel and variable operation and maintenance costs, but denied the request of TES
Filer City Station, Limited Partnership (“TES Filer”), a BMP, for recovery of additional funds
for nitrous oxide (“NOx”) and sulfur dioxide (“SO2”) allowances. TES Filer appeals as of right.
In Docket No. 316868, the PSC issued an order approving Consumers’ application for a
PSCR reconciliation for the 2011 calendar year. Relevant to this appeal, it determined that the
$1,000,000 monthly capped fuel and variable operation and maintenance costs payment to the
BMPs should be adjusted annually by applying the annual United States consumer price index
rate to the $1,000,000, and that the request by TES Filer for an additional recovery of $102,799
for NOx and SO2 allowances would be disallowed. Appellants appeal as of right.
These two appeals were consolidated. See In re Application of Consumers Energy for
Reconciliation of Costs, unpublished order of the Court of Appeals, entered May 21, 2014
(Docket Nos. 314361, 316868). We conclude that the PSC properly disallowed TES Filer’s
request for recovery of additional funds for NOx and SO2 allowances. However, we conclude
that the PSC erred in adjusting the $1,000,000 monthly cap on the fuel and variable operation
and maintenance costs payable to the BMPs.
I. STANDARD OF REVIEW
In In re Application of Consumers Energy Company for Rate Increase, 291 Mich. App.
106, 109-110; 804 NW2d 574 (2010), the applicable standard of review was set forth as follows:
-2-
The standard of review for PSC orders is narrow and well defined.
Pursuant to MCL 462.25, all rates, fares, charges, classification and joint rates,
regulations, practices, and services prescribed by the PSC are presumed, prima
facie, to be lawful and reasonable. See also Michigan Consolidated Gas Co v Pub
Serv Comm, 389 Mich. 624, 635-636; 209 NW2d 210 (1973). A party aggrieved
by an order of the PSC has the burden of proving by clear and convincing
evidence that the order is unlawful or unreasonable. MCL 462.26(8). To
establish that a PSC order is unlawful, the appellant must show that the PSC
failed to follow a statutory requirement or abused its discretion in the exercise of
its judgment. In re MCI Telecom Complaint, 460 Mich. 396, 427; 596 NW2d 164
(1999). A reviewing court gives due deference to the PSC’s administrative
expertise, and should not substitute its judgment for that of the PSC. Attorney
General v Pub Serv Comm No 2, 237 Mich. App. 82, 88; 602 NW2d 225 (1999).
A final order of the PSC must be authorized by law and be supported by
competent, material, and substantial evidence on the whole record. Const 1963,
art 6, § 28; In re Application of Consumers Energy Co, 279 Mich. App. 180, 188;
756 NW2d 253 (2008). Whether the PSC exceeded the scope of its authority is a
question of law that is reviewed de novo. In re Complaint of Pelland Against
Ameritech Mich, 254 Mich. App. 675, 682; 658 NW2d 849 (2003).
The standard of review for an agency’s interpretation of a statute was set forth in In re
Complaint of Rovas Against SBC Mich, 482 Mich. 90, 103; 754 NW2d 259 (2008), quoting
Boyer-Campbell v Fry, 271 Mich. 282, 296-297; 260 N.W. 165 (1935):
“[T]he construction given to a statute by those charged with the duty of executing
it is always entitled to the most respectful consideration and ought not to be
overruled without cogent reasons. However, these are not binding on the courts,
and [w]hile not controlling, the practical construction given to doubtful or obscure
laws in their administration by public officers and departments with a duty to
perform under them is taken note of by the courts as an aiding element to be given
weight in construing such laws and is sometimes deferred to when not in conflict
with the indicated spirit and purpose of the legislature.”
This standard requires “respectful consideration” and “cogent reasons” for
overruling an agency’s interpretation. Furthermore, when the law is “doubtful or
obscure,” the agency’s interpretation is an aid for discerning the Legislature’s
intent. However, the agency’s interpretation is not binding on the courts, and it
cannot conflict with the Legislature’s intent as expressed in the language of the
statute at issue. [Citation omitted; first alteration added; second alteration in
Rovas.]
II. STATUTE AT ISSUE
With 2008 PA 286, the Legislature enacted statutes that allow a qualifying biomass
merchant plant to recover, subject to limitations set forth in MCL 460.6a(8), “reasonably and
prudently incurred actual fuel and variable operation and maintenance costs [that] exceed the
-3-
amount that the merchant plant is paid” for those costs under a contract with an electric utility.
MCL 460.6a(7). Appellants are qualifying BMPs under this statute. The subsection (8)
limitation on recovery, in pertinent part, limits the total aggregate additional amounts that an
electric utility will have to pay to merchant plants to $1,000,000.00 per month, but provides for
annual review of this limit upon petition of a merchant plant and adjustment if each affected
merchant plant files a petition and “the commission finds that the eligible merchant plants
reasonably and prudently incurred actual fuel and variable operation and maintenance costs” that
exceed $1,000,000.00 per month. Subsection (8) in pertinent part further provides:
The annual amount of the adjustments shall not exceed a rate equal to the United
States consumer price index. . . . As used in this subsection, “United States
consumer price index” means the United States consumer price index for all urban
consumers as defined and reported by the United States department of labor,
bureau of labor statistics.
Subsection (8) continues:
The $1,000,000.00 limit specified in this subsection, as adjusted, shall not apply
with respect to actual fuel and variable operation and maintenance costs that are
incurred due to changes in federal or state environmental laws or regulations that
are implemented after the effective date of the amendatory act that added this
subsection. [Emphasis added.]
Thus, the BMPs are entitled to a collective capped amount of up to $1,000,000 per month, as
adjusted, and an uncapped amount if the costs are incurred due to changes in federal or state
environmental laws or regulations that are implemented after the effective date of 2008 PA 286,
which is October 6, 2008.
III. TES FILER’s ENTITLEMENT TO RECOVER FOR NOx AND SO2 ALLOWANCES
TES Filer challenges the denial of its requests for recovery of costs for NOx and SO2
allowances, explaining that the allowances are limited authorizations to emit these substances. It
established that these were “actual fuel and variable operation and maintenance costs.” It asserts
that they were “incurred due to changes in federal or state environmental laws or regulations”
“implemented after” October 6, 2008, maintaining that “implementation” must refer to the date
that some action is required by a law or regulation. The PSC interpreted § 460.6a(8) to mean
that the term “implemented” refers to the date that a federal or state environmental law or
regulation was enacted or promulgated. It further determined that TES Filer was not entitled to
recover the costs of the NOx and SO2 allowances incurred in the 2010 and 2011 calendar years
because the laws or regulations requiring the allowances predated October 6, 2008. We find no
cogent reason to overturn the PSC’s interpretation.
The facts relevant to this issue are as follows:
May 12, 2005 United States Environmental Protection Agency (EPA)
promulgated the Clean Air Interstate Rule (CAIR)
requiring changes to State Implementation Plans (SIPs) to
-4-
include measures to reduce NOx and SO2 emissions [70
Fed Reg 25162 et seq (May 12, 2005)]
August 24, 2005 In proposed rules, the EPA notes that the CAIR requires
emission reduction implementation in two phases, with the
first phase of NOx reductions starting in 2009 and the first
phase of SO2 reductions starting in 2010 [70 Fed Reg
49721 (August 24, 2005)]
June 25, 2007 Michigan Department of Environmental Quality (MDEQ)
promulgates rules on NOx allowances subjecting them to
regulation commencing in 2009 [See 2007 Mich Reg
12, R 336.1802a et seq, indicating rules were filed with
Secretary of State on June 25, 2007 and became effective
immediately]
July 16, 2007 Michigan submits CAIR SIP (the June 25, 2007 MDEQ
promulgated rules) to the EPA [See 74 Fed Reg 41637-
41641 (August 18, 2009)]
December 20, 2007 The EPA conditionally approves Michigan’s SIP if
revisions are made by December 20, 2008 [72 Fed Reg
72256-722631 (December 20, 2007)]
October 6, 2008 Effective date of § 460.6a(8)
June 10, 2009 After missing the December 20, 2008 deadline, MDEQ
submits new SIP to EPA [See 74 Fed Reg 41637-41641
(August 18, 2009)]
June 15, 2009 MDEQ promulgates new rules on NOx allowances, which
is apparently what was sent to the EPA as the new SIP
[2009 Mich Reg 10 (June 15, 2009)]
August 18, 2009 EPA approves Michigan SIP, effective October 19, 2009,
and provides “notice that the December 20, 2007,
conditional approval of July 16, 2007, submittal
automatically converted to a disapproval.” However, it
concluded that the disapproval was inconsequential because
it was “approving both the July 16, 2007 and the June 10,
2009 submittals, in combination, as meeting the CAIR
requirements” [See 74 Fed Reg 41637-41641 (August 18,
2009)]
November 2009 TES Filer incurs NOx allowance expenses for the first
time
July 2010 TES Filer incurs SO2 expenses for the first time
-5-
The § 460.6a(8) statutory phrase, “incurred due to changes in federal or state
environmental laws or regulations that [were] implemented after” October 6, 2008, could be read
to mean that a BMP is entitled to recoup actual fuel and variable operation and maintenance
costs if the requirements of the changes in the laws or regulations were implemented after the
effective date or, alternatively, if the changes to the law or regulations were made (implemented)
after the effective date. In In Re Application of Indiana Michigan Power Co to Increase Rates,
297 Mich. App. 332, 344-345; 824 NW2d 246 (2012), quoting Mich Basic Prop Ins Ass’n v Office
of Fin & Ins Regulation, 288 Mich. App. 552, 559-560; 808 NW2d 456 (2010) (citations omitted),
the Court stated in pertinent part:
A statutory provision is ambiguous if it irreconcilably conflicts with
another provision or when it is equally susceptible to more than one meaning. A
statutory provision should be viewed as ambiguous only after all other
conventional means of interpretation have been applied and found wanting. If a
statute is ambiguous, judicial construction is appropriate. “Where the language of
a statute is of doubtful meaning, a court must look to the object of the statute in
light of the harm it is designed to remedy, and strive to apply a reasonable
construction that will best accomplish the Legislature’s purpose.” Marquis v
Hartford Accident & Indemnity (After Remand), 444 Mich. 638, 644, 513 NW2d
799 (1994). . . .
When construing a statute, “a court should not abandon the canons of
common sense.” Marquis, 444 Mich. at 644. “We may not read into the law a
requirement that the lawmaking body has seen fit to omit.” In re Hurd-Marvin
Drain, 331 Mich. 504, 509, 50 NW2d 143 (1951). When the Legislature fails to
address a concern in the statute with a specific provision, the courts “cannot insert
a provision simply because it would have been wise of the Legislature to do so to
effect the statute’s purpose.” Houghton Lake Area Tourism & Convention Bureau
v Wood, 255 Mich. App. 127, 142, 662 NW2d 758 (2003). Therefore, when
necessary to interpret an ambiguous statute, the appellate courts must determine
the reasonable construction that best effects the Legislature’s intent.
Both TES Filer and the Attorney General maintain that the statute is not ambiguous
because the last antecedent rule supports their opposing interpretations of the statute. This rule
of statutory construction “provides that a modifying or restrictive word or clause contained in a
statute is confined solely to the immediately preceding clause or last antecedent, unless
something in the statute requires a different interpretation.” Stanton v Battle Creek, 466 Mich.
611, 616; 647 NW2d 508 (2002). In Hardaway v Wayne Co, 494 Mich. 423, 429; 835 NW2d
336 (2013), the Court held that “the last antecedent rule does not mandate a construction based
on the shortest antecedent that is grammatically feasible,” quoting 2A Singer & Singer,
Sutherland Statutory Construction (7th ed), § 47.33, pp 487-489 for the proposition that
“[r]eferential and qualifying words and phrases, where no contrary intention appears, refer solely
to the last antecedent. The last antecedent is ‘the last word, phrase, or clause that can be made
an antecedent without impairing the meaning of the sentence.’” (Emphasis added in Hardaway).
Again, the statute provides that the cap “shall not apply with respect to actual fuel and
variable operation and maintenance costs that are incurred due to changes in federal or state
-6-
environmental laws or regulations that are implemented after” October 6, 2008. The Attorney
General argues that the phrase “that are implemented” refers to the antecedent clause “that are
incurred due to changes in federal or state environmental laws or regulations.” TES Filer argues
that the phrase “that are implemented” refers to “changes in federal or state environmental laws
or regulations.” However, this does not clarify what “changes” are being referred to. We note
that the last antecedent word or phrase before “that are implemented” is “federal or state
environmental laws or regulations.” If it is these laws or regulations “that are implemented,” as
opposed to “changes in” these “laws or regulations,” then TES Filer would prevail with respect
to its argument that implementation occurred when the laws or regulations were required to be
carried out. However, this construction would render “changes in” mere surplusage. “Courts
must give effect to every word, phrase, and clause in a statute and avoid an interpretation that
would render any part of the statute surplusage or nugatory.” State Farm Fire & Cas Co v Old
Republic Ins Co, 466 Mich. 142, 146; 644 NW2d 715 (2002). Since the last antecedent rule does
not require a look at the shortest antecedent, and the antecedent that makes sense of all the terms
is “changes in federal or state environmental laws or regulations,” the phrase “that are
implemented” should be viewed as referring to “changes in federal or state environmental laws
or regulations.”
This leaves open the question of whether the “changes” implemented are those required
by the law or regulation, or whether they are the changes to the law or regulation. TES Filer
argues that “changes” are “implemented” when they are actually fulfilled, carried out, executed,
or effectuated. With respect to NOx allowances, TES Filer made the same argument in In re
Application of Consumers Energy Co for Reconciliation of 2009 Costs, unpublished opinion per
curiam of the Court of Appeals, issued April 29, 2014 (Docket Nos. 305066 and 305083). We
adopt the reasoning from that opinion:
On appeal, TES Filer argues that the PSC erred by ignoring the
significance of the word “implemented” in MCL 460.6a(8). TES Filer asserts that
the common meaning of the word “implemented” is “to have carried out, fulfilled,
or effectuated a plan.” TES Filer notes that the rules promulgated by the
Michigan Department of Environmental Quality (MDEQ) in 2007 did not impose
new regulations at that time, but were intended to do so in 2009; thus, the PSC
should have concluded that the 2007 rules, even if in effect during the relevant
period, were not implemented during that same period. The rules were
implemented after MCL 460.6a(8) went into effect; therefore, TES Filer was
entitled to recover its costs. We disagree.
TES Filer ignores the context surrounding the word “implemented” in the
statutory scheme. This Court does not read statutory provisions in isolation, but
instead considers them in context. Robinson v City of Lansing, 486 Mich. 1, 15;
782 NW2d 171 (2010). The NOx emission rules that were applicable to TES
Filer did not change after October 6, 2008, the date that MCL 460.6a(8) went into
effect. At issue in this case is not the meaning of the term “implemented,” but
rather on what date TES Filer was affected by the NOx emission rules. In
context, MCL 460.6a(8) provides that the limit does not apply to specified costs
“that are incurred due to changes in federal or state environmental laws or
regulations that are implemented after the effective date of the amendatory act
-7-
that added this subsection.” MCL 460.6a(8) compares the effective date of the
statute and the date of any changes in state or federal environmental rules. It is
undisputed that MCL 460.6a(8) went into effect on October 6, 2008. The MDEQ
promulgated rules by filing them with the Secretary of State on June 25, 2007.
MCL 24.246(1). The MDEQ’s rules became effective prior to October 6, 2008.
***
The MDEQ’s rules were implemented in 2007; however, the fact that TES
Filer only became subject to the rules in 2009 did not constitute a substantive
change in the rules implemented after October 6, 2008. Regardless of the
meaning of the word “implemented,” the change occurred well before TES Filer
incurred its costs. We conclude that TES Filer was not entitled to recover its NOx
emission costs. [Unpub op at 7.]
Since the phrase “that are implemented” modifies “changes in federal or state environmental
laws or regulations,” it refers to implementation of changes in the law or regulation, and not
implementation of changes required by these laws or regulations. We note that the context of the
statute indicates that the intent was to allow BMPs to recover for the costs of compliance with
new requirements. However, if the requirements were in place before October 6, 2008, even if
compliance was not yet required, the requirements were not new.
With respect to the NOx requirements, TES Filer argues that the relevant changes in laws
or regulations did not occur before October 6, 2008. TES Filer acknowledges that, if
enforceable, Mich Admin Code, R 336.1821 to R 336.1834 would have required the purchase of
NOx allowances in 2009. However, TES Filer points by way of example to R 336.1822(2),
noting that it speaks of “CAIR NOx allowances for the 2009 ozone season control period.” It
notes that under R 336.1803(3), “CAIR NOx allowance” must be defined by reference to 40
CFR 97.102, which provides:
CAIR NOx allowance means a limited authorization issued by a permitting
authority or the Administrator under subpart EE of this part or §97.188, or under
provisions of a State implementation plan that are approved under §51.123(o)(1)
or (2) or (p) of this chapter, to emit one ton of nitrogen oxides during a control
period of the specified calendar year for which the authorization is allocated or of
any calendar year thereafter under the CAIR NOx Program. An authorization to
emit nitrogen oxides that is not issued under subpart EE of this part, §97.188, or
provisions of a State implementation plan that are approved under §51.123(o)(1)
or (2) or (p) of this chapter shall not be a CAIR NOx allowance.
Similarly, 40 CFR 97.302 defines “CAIR NOx Ozone Season allowance” as
a limited authorization issued by a permitting authority or the Administrator under
subpart EEEE of this part, §97.388, or provisions of a State implementation plan
that are approved under §51.123(aa)(1) or (2) (and (bb)(1)), (bb)(2), (dd), or (ee)
of this chapter, to emit one ton of nitrogen oxides during a control period of the
specified calendar year for which the authorization is allocated or of any calendar
-8-
year thereafter under the CAIR NOx Ozone Season Trading Program or a limited
authorization issued by a permitting authority for a control period during 2003
through 2008 under the NOx Budget Trading Program in accordance with
§51.121(p) of this chapter to emit one ton of nitrogen oxides during a control
period, provided that the provision in §51.121(b)(2)(ii)(E) of this chapter shall not
be used in applying this definition and the limited authorization shall not have
been used to meet the allowance-holding requirement under the NOx Budget
Trading Program. An authorization to emit nitrogen oxides that is not issued
under subpart EEEE of this part, §97.388, or provisions of a State implementation
plan that are approved under §51.123(aa)(1) or (2) (and (bb)(1)), (bb)(2), (dd), or
(ee) of this chapter or under the NOx Budget Trading Program as described in the
prior sentence shall not be a CAIR NOx Ozone Season allowance.
Since both of these CFRs refer to state SIPs that have been approved, TES Filer concludes that
references in Michigan’s 2007 rules to CAIR NOx allowances and CAIR NOx Ozone Season
allowances can only refer to allowances authorized by a state plan that has been approved by the
EPA. Since Michigan’s rules were not approved until 2009, TES Filer asserts that the 2007 rules
were nonfunctional. Accordingly, it argues, TES Filer could not have incurred its 2009 NOx
allowance costs due to changes in regulations implemented before October 6, 2008 because the
2007 regulations did not regulate NOx allowances.
This is a compelling argument, especially since the EPA expressly disapproved
Michigan’s 2007 rules when it approved Michigan’s 2009 rules. However, as a matter of state
regulations, the 2007 rules required CAIR NOx allowances for 2009. As stated above, the state
regulations became effective on June 25, 2007 immediately upon filing with the Secretary of
State. While CAIR NOx allowances and CAIR NOx Ozone Season allowances refer to
allowances issued under a federally-approved SIP, this would mean that the 2007 rules required
these allowances at the point that the EPA approved the state SIP. The requirement existed in
2007 but did not mature into an obligation until there was EPA approval. Since the allowances
were required by the 2007 state regulations, the costs of the allowances were incurred due to
2007 changes in state environmental regulations, and the changes in the regulations were
implemented in 2007, before the October 6, 2008 effective date of subsection (8). Accordingly,
TES Filer was not entitled to recoup these costs.
Just as regulations requiring NOx allowances were implemented before October 6, 2008,
regulations requiring SO2 allowances were implemented before October 6, 2008. Although it
did not require that the SO2 allowances be immediately purchased, it is undisputed that in 2005
the CAIR required the SO2 allowances. Since this change in the law was implemented before
October 6, 2008, regardless of the fact that TES Filer did not become subject to the law until
2010, TES Filer is not entitled to uncapped recovery of its SO2 allowances costs.
-9-
IV. ADJUSTMENT METHODOLOGY
In Docket No. 316868, the BMPs challenge the method by which the PSC calculated the
annual adjustment to the $1,000,000 monthly capped limit on the fuel and variable operation and
maintenance costs payment that the utilities must make to BMPs. Again, § 460.6a(8) provides
that the $1,000,000 per month capped limit “may be adjusted” if each affected BMP petitions but
“[t]he annual amount of the adjustments shall not exceed a rate equal to the United States
consumer price index [“CPI”].” The BMPs posited that this should be interpreted to mean that
the Commission should adjust the $1,000,000 monthly limit at a rate equal to the percentage
increase in the annual average CPI between 2009, the year after § 460.6a(8) became effective,
and 2011, the PSCR year at issue. Alternatively, the BMPs proposed that the adjusted monthly
limit from the prior year be multiplied by the annual CPI. However, the PSC interpreted this
provision to mean that the adjustment should be calculated each year by multiplying $1,000,000
by the annual CPI, rather than by a cumulative CPI.
We conclude that the statute is equally susceptible to more than one meaning with regard
to this question and is therefore ambiguous. See In Re Application of Indiana Michigan Power
Co to Increase Rates, 297 Mich. App. at 344. The BMPs argue that use of the plural,
“adjustments,” indicates that cumulative annual “adjustments” were intended. However, use of
the term “adjustments” is not determinative. It could refer to the annual adjustments made each
year without contemplating that they be cumulative. Moreover, if the Legislature had instead
said “the annual amount of the adjustment[] shall not exceed a rate equal to the United States
consumer price index,” it would not have provided clarity regarding what sum is to be adjusted
or regarding whether the term “rate equal to the United States consumer price index” was meant
to reflect the yearly rate or a cumulative rate. However, the PSC’s reasoning on the meaning of
the pluralization is not logical. It posited that
the statute contemplates multiple petitions: “An adjustment shall not be made by
the commission unless each affected merchant plant files a petition with the
commission.” MCL 460.6a(8). Therefore, the use of the plural “adjustments” is
logically related to the fact that the provision is not limited to one merchant plant,
but can [sic] applied to any plant that satisfies the substantive requirements.
The statute allows for and requires petitions from all affected BMPs in order for there to be an
adjustment, but the adjustment made is to the $1,000.000 cap. There is only one annual
adjustment to the cap, not multiple adjustments reflecting the applications of the various BMPs.
In sum, the pluralization of “adjustment” is inconclusive when trying to discern the meaning of
the statute.
The PSC also reasoned that although the statute did not prohibit a cumulative CPI
calculation, it did not expressly provide for such a calculation, and it could not read words into
the statute. However, to conclude that the language of the statute means that the “rate equal to
the United States consumer price index” means solely the rate corresponding to the year of the
PSCR reconciliation would also require that language be added for clarification.
The language of the statute does not provide guidance on whether the CPI to be used for
the annual adjustments is the cumulative CPI or the CPI for a given year. Moreover, it does not
-10-
speak to whether the cap that should be adjusted is the $1,000,000 cap or the $1,000,000 cap as
adjusted in prior years. However, by tying the adjustment to the CPI, it seems clear that the
Legislature’s intent was to account for inflation.1 If the $1,000,000 cap were adjusted each year
based on the CPI rate for that year, the BMPs would receive the inflation-adjusted equivalent of
less than $1,000.000 per month beginning in the 2011 calendar year. Thus, upholding the PSC’s
construction of the statute would lead to a potentially absurd result seemingly at odds with
legislative intent. Since the overriding goal of statutory construction is to give effect to the intent
of the Legislature, In Re Application of Indiana Michigan Power Co to Increase Rates, 297 Mich
App at 344-345, and this requires a construction that avoids absurd results when possible, see
Detroit Int’l Bridge Co v Commodities Export Co, 279 Mich. App. 662, 674-675; 760 NW2d 565
(2008), we conclude that the PSC erred in construing § 460.6a(8). Further, we conclude that it
should be construed to mean that annual adjustments to the $1,000,000 cap shall be calculated by
applying the CPI rate for the PSCR year at issue to the $1,000,000 cap as adjusted in prior years,
or by applying the cumulative CPI rate from 2009 forward to the $1,000,000 cap.
Affirmed in part, reversed in part and remanded for proceedings consistent with this
opinion. We do not retain jurisdiction.
/s/ Cynthia Diane Stephens
/s/ Amy Ronayne Krause
1
We note that Appendix D to 31 CFR 356 provides:
The Consumer Price Index (“CPI”) for purposes of inflation-protected securities
is the non-seasonally adjusted U.S. City Average All Items Consumer Price Index
for All Urban Consumers. It is published monthly by the Bureau of Labor
Statistics (BLS), a bureau within the Department of Labor. The CPI is a measure
of the average change in consumer prices over time in a fixed market basket of
goods and services. This market basket includes food, clothing, shelter, fuels,
transportation, charges for doctors' and dentists' services, and drugs.
In calculating the index, price changes for the various items are averaged together
with weights that represent their importance in the spending of urban households
in the United States. The BLS periodically updates the contents of the market
basket of goods and services, and the weights assigned to the various items, to
take into account changes in consumer expenditure patterns.
We find no basis for disagreement that the CPI is intended to be a measure of inflation.
-11-