City of Coldwater v. Consumers Energy Company
City of Holland v. Consumers Energy Company
Docket Nos. 151051 and 151053
Trial Lawyers’ Bottom Line: Rule 411 does not apply to municipal electricity providers, and the no-switch rule applies only if the customer is presently receiving electricity.
The Coldwater Board of Public Utilities (CBPU) provides power to Coldwater Township and customers throughout. Consumers Electric also provides service in the county. CBPU purchased a parcel of land in Coldwater Township that had an electric service drop that Consumers serviced, but the previous owners had cut off electricity before CBPU purchased the land. Coldwater Township wrote a letter to Consumers to ask if CBPU could provide electric service to the land. Consumers objected, citing Rule 411 of the Michigan Administrative Code and the Court’s decision in Great Wolf Lodge of Traverse City, LLC v Public Service Commision, 489 Mich 27 (2011). Despite the objection, Consumers removed its equipment from the property so the building could be demolished.
In the other case, the Holland Board of Public Works (HBPW) provided electricity in Park Township and was required to provide electric service to any prospective customer who requested it. In 2011, a non-profit purchased a parcel of property within the township. There were no buildings on the land, and no electric service was being provided. Consumers had previously supplied power, but its lines were shut down in 2008. A construction company began a project on the property and requested Consumers to provide energy for the construction trailer. But the non-profit ultimately chose the Holland Board to provide electricity for the property.
Both municipalities sought declaratory relief to determine that their respective municipal utilities could provide power to each parcel. Both circuit courts found that Rule 411 of the Michigan Administrative Code did not apply to municipalities and that MCL 124.3 did not preclude the HBPW from providing electric service to the non-profit. The Court of Appeals affirmed both decisions.
The Court granted leave to determine (1) whether a utility’s right of first entitlement to provide electric service is applicable when a municipal utility is involved and (2) whether a “customer was already receiving service from another utility” in each case.
In a unanimous opinion written by Justice Bernstein, the Court first noted that a municipal corporation is not subject to the Public Service Commission’s jurisdiction. And definition of “utility” in the Administrative Code excludes municipally owned utilities. For that reason, the reference to “utility” in Rule 411 does not include the Coldwater Board or the Holland Board.
The Court then said that Great Wolf Lodge was wrongly decided and conducted a stare decisis analysis. The Court said that the Great Wolf opinion was not workable because it granted jurisdiction without statutory authority. Further, the Court said reliance interests weighed in favor of overruling the case. Thus, the Court overruled the portion of Great Wolf Lodge that applied Rule 411(11) to municipally owned utilities.
The next question was whether MCL 124.3 prevented the property owners from switching electricity providers. That statute says that a municipal corporation cannot provide electrical service “to customers outside its corporate limits already receiving the service from another utility . . . .” This is commonly called “the no-switch rule.” The Court needed to determine the meaning of “customers” and “already receiving.” Because the statute did not define the terms, the Court used the dictionary definition of “customer,” which is “one that purchases a commodity or service.” Therefore, the Court held that the “customer” is the entity receiving electric service, not the building or facilities on the land.
Next, the Court observed that “already receiving” is in the present tense, so the “customer” would have to be in the process of receiving the electricity. The Court applied this analysis to hold that the customers (CBPU and the non-profit) were not “already receiving” electrical service from Consumers.
The Court concluded: “We hold that Rule 411(11) does not apply to municipally owned utilities. We also hold that the word ‘customer’ in MCL 124.3(2) is defined as an entity that receives electric service and that the use of the phrase ‘already receiving’ means that service needs to continue into the present for the no-switch rule to apply.”
Full opinion here.