2020 Michigan State Reliability Mechanism Capacity Update

Article by Constellation

Last updated: February 21, 2020

In December 2016, The Michigan Public Service Commission (MPSC) passed Public Act 341, which requires alternative electric suppliers (AES) like Constellation who supply power to retail customers to demonstrate that they have sufficient capacity in place to meet their capacity obligation for a four-year rolling basis.

Capacity is the component on electricity bills designed to ensure that there are enough generation resources to serve the grid on the hottest and coldest days of the year at the lowest possible cost. Public Act 341 was put in place to ensure there is enough capacity available to meet Michigan’s state-specific demands.

The bill requires an AES, such as Constellation, to demonstrate its ability to meet these capacity requirements to the state of Michigan. If the AES is not able to demonstrate that it has enough capacity to serve their customers on a 4-year rolling basis, then the supplier is responsible for purchasing capacity at the rate established by the State Reliability Mechanism (SRM). This rate differs by utility and is updated annually on December 1st by the MPSC.

New SRM capacity values for PY 2024/2025 will become available on or around December 2020.  The MPSC’s orders for the most recent SRM capacity values for each utility are summarized in the graph below:

(1): MPSC UPPCO Order (Case U-18254)
(2): MPSC DTE Order (Case U-18248)
(3): MPSC Consumers Order (Case U-18248)
(4): MPSC Cloverland Order (Case U-18258)
(5): MPSC UMERC Order (Case U-18253)

On February 9, 2018, Constellation made an initial filing for the first four-year capacity demonstration period that ran June 2018 through May 2022 and has subsequently filed each February to extend the four-year rolling capacity demonstration which is required by the state. 

This February, Constellation filed to extend the capacity demonstration through May 2024 and was able to provide a demonstration filing to the MPSC for all the customers that we serve to cover their capacity obligation.

Can the State Reliability Mechanism (SRM) charges change?

According to Public Act 341, the SRM must be set at least one time per year typically on December 1st. The rate has already been set through May 2024, but the MPSC has the ability to change the rate more frequently than if a new rate case or Power Supply Cost Recovery filing is made by a utility. Constellation will continue to monitor any filings related to the SRM and will provide updates to customers and channel partners if a change occurs.

What’s next for 2021?

The next filing for capacity obligation will take place in February 2021 for the June 2024-May 2025 reporting period. Later in 2020, several months in advance of the filing, Constellation will contact customers to provide information on the capacity market and will craft a capacity strategy to their specific usage patterns for customer’s considerations.

Constellation is also active in Lansing, Michigan, monitoring Michigan energy policy to provide input on energy matters. We will keep both our customers and channel partners informed if there are any SRM policy changes that could affect customers’ energy bills.

If you’d like to stay informed about what’s happening in Michigan, please visit constellation.com/MIStrategy.

Guest Authors:

Rich Spilky, Principal, Retail Analytics
As a Principal in Retail Analytics at Constellation, Rich develops competitive and leading-edge products for industrial, commercial, and residential customers within competitive markets across the country. He has extensive knowledge and experience in leading retail electric pricing and invoicing initiatives. Rich is proficient in influencing favorable regulatory outcomes affecting the retail energy industry across local, state and federal levels.

Britt Lyons, Principal, Commodities Management Group
As a Principal in Commodities Management at Constellation, Britt delivers market and regulatory analytics, innovative deal structures, and execution strategies to educate and assist our customers with energy procurement.  She supports regional deals in Michigan and New York as well as deals spanning independent system operators (ISOs) nationally where Constellation does business.