Questions and Answers about Cooperative Self-Regulation
Q. Why should the Cherryland Electric Cooperative Board of Directors choose to remove the cooperative from regulation by the Michigan Public Service Commission in the area of rates and billing?
A. To regain local control and flexibility, improve our ability to adjust rates up or down to more rapidly reflect the energy market, and to reduce regulatory costs attributed to legal requirements.
Q. Is the idea of 'self-regulation' something new?
A. Not at all. In the majority of states in which electric cooperatives serve, they are not under the jurisdiction of a state public service or public utility commission, because the co-ops are locally-owned by the members. In the cooperative form of business, the members who receive service from the cooperative also own it, and govern and control it by electing directors from their own ranks to serve on the co-op's board of trustees. Municipal electric utilities have never been regulated by the MPSC, and until 1965, Michigan's electric co-ops were not either.
Public Act 167 of 2008, the Cooperative Member Regulation Act, puts into law a principle that is followed in 35 other states that either do not regulate cooperatives at all or leave the decision up to the cooperative to be regulated by the state's public service commission or the board. In fact, of the 857 electric cooperatives serving almost 18 million member-consumers in 47 states, 679 cooperatives are member-regulated, serving their 12.3 million members under the regulation of the member-elected boards of directors.
Q. Why did Michigan co-ops go under Commission jurisdiction in 1965?
A. The co-ops submitted to MPSC regulation in exchange for territorial boundary protection. It was a way for co-ops to try to prevent piracy of their customers and loads by investor-owned utilities, and to prevent them from encroaching on co-op service territories.
Q. If the Board chooses 'self-regulation,' will Cherryland Electric Cooperative lose its territorial protection?
A. No. If the board elects to exempt Cherryland Electric Cooperative from MPSC regulation, Cherryland Electric Cooperative will not lose the benefit of territorial boundary protection.
Q. Will Cherryland Electric Cooperative's rates be 'regulated' or controlled in any way if this proposal is adopted?
A. Yes. Cherryland Electric Cooperative's board of trustees, who are member-owners and rate-payers just like you, will regulate retail rates. Wholesale rates may be regulated by the Federal Energy Regulatory Commission (FERC).
Q. Why would I want to remove Cherryland Electric Cooperative from MPSC regulation?
A. There are several reasons to seek out from MPSC jurisdiction and control, but the major reasons are: 1) a return to local self regulation; 2) more flexibility and effectiveness from Cherryland Electric Cooperative's board of trustees; and 3) economic savings opportunities.
Q. What is meant by "increased flexibility and effectiveness?"
A. Each time Cherryland Electric Cooperative's board of trustees determines it is necessary to adjust rates (either up or down), an application must be submitted to the MPSC. This application process takes a great deal of time, and the approval process can be quite lengthy. In some instances, it has taken the MPSC more than three years to approve an application. Your trustees need the flexibility to react quickly to changing market and competitive positions. They also need to be able to change the cooperative's 'Terms and Conditions of Service' in a timely manner. This process is extremely expensive and time consuming when it must undergo the duplicative scrutiny of the Commission.
Q. What would Cherryland Electric Cooperative's economic savings be if it were no longer under MPSC jurisdiction?
A. Under current circumstances, it is quite expensive to file a rate adjustment application with the MPSC. Not only does the filing require the expenditure of a great deal of Cherryland Electric Cooperative management and staff time in preparing and analyzing materials and details of the adjustment (up or down), but consultants and lawyers have to be employed to assist in preparing and presenting the application to the MPSC. In some cases, it has cost cooperatives more than $100,000 to file a single rate adjustment. Additionally, cooperatives are charged, and will continue to pay, an 'assessment fee' by the MPSC to fund the services the Commission staff performs.
Q. Can Cherryland Electric Cooperative go back under Commission regulation at a later time?
A. Yes. Cherryland Electric Cooperative can be placed back under Commission jurisdiction by an affirmative vote of the membership. This voting process can occur once in 12 consecutive months.
Q. If I have questions, whom should I call?
A. We will be glad to answer any questions you have about current MPSC regulation, the benefits to you and Cherryland Electric Cooperative by voting out from under MPSC jurisdiction, and the balloting process. Call Nick Edson at 231-486-9222 or Tony Anderson at 231-486-9214 Monday through Friday, 7 a.m. to 4 p.m.
Q. Where can I find Cherryland Electric Cooperative's policies for addressing the board and their rates and services rules?
You can find the Rules of Procedure for Member Comment Policy here and you can find the Rates and Service Rules Policy here. These policies are in pdf form and do require Adobe Reader to view.
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