25 1 state of michigan 2 before the michigan public

25

1 STATE OF MICHIGAN

2 BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION

3 In the matter, on the Commission's own

motion, to initiate a contested case

4 proceeding involving Consumers Energy

Company, Michigan Consolidated Gas Case No. U-15929

5 Company, Michigan Gas Utilities

Corporation, and SEMCO Energy Gas Volume 3

6 Company to investigate whether any

clarifications, revisions, or additions

7 should be made to certain approved gas

customer choice tariffs.

8 ________________________________________/

9 MOTION HEARING

10 Proceedings held in the above-entitled matter

11 before Daniel E. Nickerson, Jr., J.D., Administrative

12 Law Judge with SOAHR, at the Michigan Public Service

13 Commission, 6545 Mercantile Way, Room D, Lansing,

14 Michigan, on Tuesday, September 22, 2009, at 9:01 a.m.

15 APPEARANCES:

16 RAYMOND E. McQUILLAN, J.D.

Consumers Energy Company

17 One Energy Plaza Drive, Rm. EP11-241

Jackson, Michigan 49201

18

On behalf of Consumers Energy Company

19

MICHAEL J. SOLO, JR., J.D.

20 The Detroit Edison Company

One Energy Plaza, #688 WCB

21 Detroit, Michigan 48226

22 On behalf of Michigan Consolidated Gas Company

23

24

25 (Continued)

Metro Court Reporters, Inc. 248.426.9530

26

1 APPEARANCES Continued:

2 SHERRI A. WELLMAN, J.D.

Miller, Canfield, Paddock and Stone, P.L.C.

3 One Michigan Avenue, Suite 900

Lansing, Michigan 48933

4

On behalf of SEMCO Energy Gas Company and

5 Michigan Gas Utilities Corporation

6 ERIC J. SCHNEIDEWIND, J.D.

Varnum, Riddering, Schmidt & Howlett, LLP

7 The Victor Center, Suite 810

201 N. Washington Square

8 Lansing, Michigan 48933

9 On behalf of Direct Energy

10 SPENCER A. SATTLER,

Assistant Attorney General

11 6545 Mercantile Way, Suite 15

Lansing, Michigan 48911

12

On behalf of Michigan Public Service

13 Commission Staff

14 - - -

15

16 REPORTED BY: Lori Anne Penn (CSR-1315)

17

18

19

20

21

22

23

24

25


27

1 Lansing, Michigan

2 Tuesday, September 22, 2009

3 At 9:01 a.m.

4 - - -

5 (Hearing resumed following adjournment of July 21,

6 2009.)

7 JUDGE NICKERSON: On the record. Good

8 morning, everyone. This is the date and time set for a

9 motion hearing before the Michigan Public Service

10 Commission in Docket No. U-15929, and this is a case

11 involving the Commission's own motion.

12 My name is Daniel Nickerson, I'm an

13 administrative law judge assigned on this case.

14 Let's take appearances of counsel for the

15 record. Why don't we commence with the moving party

16 here, Mr. Schneidewind.

17 MR. SCHNEIDEWIND: Thank you, your Honor.

18 Eric Schneidewind appearing for Direct Energy.

19 MR. SOLO: Michael Solo appearing on

20 behalf of the Michigan Consolidated Gas Company.

21 MR. McQUILLAN: Your Honor, I'm Ray

22 McQuillan on behalf of Consumers Energy Company.

23 MS. WELLMAN: Sherri Wellman on behalf of

24 Michigan Gas Utilities Corporation and SEMCO Energy.

25 MR. SATTLER: Thank you, your Honor.


28

1 Spencer Sattler appearing on behalf of the Michigan

2 Public Service Commission Staff.

3 JUDGE NICKERSON: All right. Thank you

4 for your appearances this morning.

5 Mr. Schneidewind, I've had an opportunity

6 to review your motion, I also had an opportunity to

7 review the objection to the petition for late

8 intervention filed by Consumers Energy, I think I said

9 that, and by Staff. I believe that was all that was

10 filed with regard to this particular motion.

11 You may proceed, Mr. Schneidewind.

12 MR. SCHNEIDEWIND: Thank you, your Honor.

13 As a procedural matter, I would like to point out that

14 our pleading was filed as a motion to grant petition for

15 late intervention, and pursuant to the Rules of Practice

16 and Procedure before the Commission, and particularly

17 Rule 335(2), the timeframe that we were to observe was to

18 file nine days before the hearing, which in fact we did,

19 but unless a different time is set by the Commission or

20 the presiding officer, parties responding to that motion

21 were supposed to file no less than five days if served by

22 mail, and no less than three days if served by delivery.

23 I do note that I received the Staff pleading yesterday

24 evening at 3:58 p.m., I received a Consumers Energy

25 response yesterday evening at 4:06 p.m., in a timeframe


29

1 that did not permit the detailed type of response that I

2 would have liked to make for the tribunal. So I hope you

3 will indulge me, your Honor, in, first of all, a response

4 to those pleadings, and second of all, I object certainly

5 to the timing. I was under the impression this was a

6 motion and that the timeframes involved in the motions

7 would be observed, and I certainly didn't have a period

8 of time prescribed by the Commission's Rules to review

9 these matters before appearing today.

10 With that procedural comment in mind, I

11 would like to go through the history of this matter and

12 not belabor it, but there are some specifics in which I

13 differ from the pleadings filed by both Staff and

14 Consumers.

15 It is true that the interventions were

16 prescribed by the Commission for June 2nd and a

17 prehearing conference for June 9th. And when Direct

18 Energy prepared and commenced to prepare their pleadings

19 to intervene late, it is true that we filed that on

20 September 8, but it is also true that in the process of

21 preparing to file that pleading, we did become aware of

22 the fact that settlement proceedings had been called by

23 the Commission Staff on September 9. That certainly was

24 a factor that caused us to initiate the intervention.

25 At the time that we became aware of that


30

1 meeting and settlement conference on September 9, we did

2 lodge with the Staff a request, which I made verbally to

3 the Staff, that we be allowed to participate in that

4 proceeding. That request was denied. So as we go

5 through the background and the grounds for our

6 intervention, this becomes a very relevant matter,

7 because the chief objections to our intervention, as I

8 read them, that are made by both Consumers and Staff are

9 that we would, by intervening late, perhaps interfere

10 with or delay a settlement by commenting, by objecting or

11 whatever else. But it's ironic, and indeed I think

12 disturbing, that the very trouble and problem that the

13 Staff and Consumers raise could have been resolved by the

14 Staff if they had allowed Direct Energy to participate in

15 that settlement, then their objections would not have

16 been appropriate. So we're in a position here where the

17 Staff actually caused an event which could have prevented

18 the very problem that they raised, and I'll say more

19 about that later.

20 To go through the traditional

21 intervention test, obviously in Rule 201 we have to have

22 standing, and I think there's little or no question that

23 Direct Energy does meet the criteria for intervention and

24 standing in this case, and specifically the two-prong

25 test that calls for the interest to be within the zone of


31

1 interest protected and a potential injury in fact. The

2 revisions proposed by Staff in their proposed guidelines

3 or revisions would cause significant injury potentially

4 to Direct Energy.

5 First of all, the Staff has proposed to

6 revise the definition of a legally authorized person in a

7 way that might even prevent signature on a contract by a

8 spouse of an account from being presumed to be legally

9 authorized. That certainly would make signing up

10 customers very difficult. The Staff proposes to revise

11 Section F2.1 to add to the length of the timeframe during

12 which a customer can cancel a contract that they've

13 signed; that could be a huge burden to a company that

14 obligates itself to purchase gas for that customer and

15 then finds itself with a cancelled contract. A third

16 point is a proposed revision to Section F2.6 of the rules

17 that would limit the term of all contracts, in other

18 words, vendors such as my client could no longer sign a

19 five-year contract or a four- or a three-year contract, I

20 believe the contracts would be limited to two years; that

21 would change the way we do business. And finally the

22 proposed revisions to Section F2.7 could be read to

23 prohibit verbal or electronic signatures. Once again,

24 this would cause a significant change and added expense,

25 we believe, to the way we do business. So I think


32

1 they're's little doubt that Direct Energy, which is

2 probably the second largest gas Choice provider in the

3 State, would suffer an injury in fact if these revisions

4 are implemented, and certainly is within the zone of

5 interest to be protected.

6 Now, I think all the petitioners have

7 pointed out that the criteria to intervene under Rule 201

8 include good cause for the late intervention, and then

9 certainly a lack that the intervention will not cause

10 delay or prejudice.

11 Going to the issue of good cause, we have

12 pointed out at page 2 of our intervention that there was

13 in fact a hiatus in management responsibility for these

14 matters, and that occurred, it's unfortunate, but it's

15 simply a fact that there was really nobody minding the

16 store or in charge from early June through the end of

17 August.

18 Now, in looking at this issue of whether

19 there's good cause, there is precedent to the effect that

20 the law judge or presiding officer should in fact use

21 discretion rather than automatically denying or granting

22 a motion. In the case of Kowalski versus Fiutowski, 247

23 Mich App 156, the Court did hold, Appeals Court, that it

24 was an error to refuse to exercise discretion; and that's

25 all I'm asking the tribunal and your Honor to exercise


33

1 today. And there is substantial precedent out there in

2 the Commission history for a grant of late intervention

3 and finding that there is good cause. First and

4 foremost, I'd like to point out the Commission's own

5 statements, and I'm not sure I have quite enough copies

6 here.

7 (Document provided to all parties.)

8 MR. SCHNEIDEWIND: And this document that

9 I'm passing out is a letter from the Commission's

10 executive secretary to an individual who presumably

11 wanted to intervene in a case, and her statement is to

12 the effect that -- and it's Case U-12766, I apologize for

13 sort of a blot in there -- that requests for late

14 intervention may be filed any time prior to the close of

15 the hearing record, and that's in paragraph four. And

16 that, I think you have to assume, is the position of the

17 Commission, that requests for late intervention may be

18 lodged at any time during the proceeding. There is not a

19 cutoff point.

20 Another case that I think yields valuable

21 precedent is in regards to the application of DTE Energy

22 Marketing, Inc., for a certificate of public convenience

23 and necessity, Case U-12197. And in that case, the law

24 judge presiding granted Detroit Edison's petition for

25 late intervention literally immediately prior to


34

1 cross-examination of witnesses. Now, in this case,

2 cross-exam of witnesses is not until November, as I

3 recall, and indeed the testimony of intervenors is not

4 scheduled to occur until September 30, eight days from

5 now.

6 Another case, in regards to the

7 application of Michigan Gas Storage Company and

8 Southeastern Michigan Gas Company for authority to merge,

9 Case U-11220, October 29, 1997, the late intervention of

10 Stone Container Corporation was granted at the beginning

11 of the evidentiary hearing. Once again, we are not even

12 at that stage.

13 I participated in Case U-15806 in which

14 the late intervention of NextEra Energy was granted two

15 weeks after the prehearing conference. So there is

16 substantial Commission precedent for the fact that the

17 parties can be granted late intervention and good cause

18 can be found.

19 I do note that the Staff in their

20 opposition to our intervention cite Case U-10059 and

21 10061 where a cooperative was denied intervention, but I

22 think it's worth pointing out that the facts of that case

23 might lead to a somewhat different conclusion, because I

24 believe that in that instance, the cooperative group,

25 instead of intervening in the case matter, had decided to


35

1 pursue direct negotiations with Consumers Energy Company

2 as an alternative to in fact the route of intervention,

3 then the cooperative group decided that they could not --

4 that they would prefer to intervene, and the Commission,

5 it's true, did deny intervention, but it's also true that

6 the cooperative group had been at least allowed to

7 negotiate with the company and try reach a settlement.

8 In our case, we've been denied that opportunity. We have

9 been denied opportunity to get into the settlement

10 conference, even though we applied to do so before the

11 settlement conference was held, albeit on an informal

12 basis. So I think there is substantial precedent not

13 only for late intervention and to find good cause, but

14 also I think the case cited by the Staff actually could

15 be read to hold that a party can be granted late

16 intervention if in fact it's had another opportunity to

17 try to settle the matter and was afforded at least one

18 opportunity to gain input to the case or gain a

19 satisfactory resolution.

20 Now, the second grounds which parties

21 have opposed our intervention, the first being good

22 cause, gets to the point that our intervention will cause

23 a delay or prejudice. And indeed both Consumers and

24 Staff have cited the potential for settlement of this

25 case and that granting intervention at this stage may


36

1 disrupt or somehow delay that settlement process. I

2 think as both parties admitted, a settlement conference

3 was held September 9, and we of course applied to

4 intervene September 8. I find the objections,

5 particularly on the part of Staff, somewhat astounding.

6 Once again, we were aware that a settlement conference

7 was in the offing, we intervened before that date, and we

8 requested the opportunity to participate in that

9 settlement. I'd ask your Honor to consider the fact that

10 if we had been allowed to participate in the settlement

11 conference and provide our input, none of the objections

12 of the Staff to the delay and to the disruption and all

13 that really would have been appropriate, because we would

14 have been in the meeting, we would have had a chance to

15 state our case, and hopefully to join in whatever

16 agreement may have been reached.

17 But I point out also to your Honor, at

18 this stage of the game, there really isn't any document

19 that -- there's conjecture about the fact there may be a

20 settlement, but to my knowledge, and I've certainly poked

21 around a bit to find out, no document as of yesterday had

22 been circulated, no agreement purportedly had been

23 reached as far as I can tell, no timeframe had been

24 established. So we're left with the point where the

25 objection of the Staff, which is that our intervention


37

1 could delay a settlement, could have been prevented if in

2 fact we were allowed to participate in the settlement on

3 the 9th of September, a day after we filed, and certainly

4 more than a day after, or a day after we had verbally

5 requested the opportunity to participate and were

6 rejected in that request.

7 Now, let's take a look at this situation,

8 then. If in fact there is a settlement, and let's assume

9 for the sake of argument that the Staff is correct, that

10 a settlement is produced, if we were allowed to intervene

11 at this stage of the game, what would happen? Well, if

12 you take a look at Rule 333, the fact of the matter is

13 that if a partial -- if we did not agree with the

14 settlement, and that's making an assumption that I don't

15 think is really necessarily the case, we might agree with

16 it, but if we didn't, then the Staff then could file the

17 settlement document, and the Commission, if all parties

18 were not in agreement, would allow a 14-day comment

19 period, we would make a comment, and the Commission would

20 then decide to adopt or reject the settlement. So this

21 great -- the worst case in this situation for Staff if a

22 settlement is in the offing is that under Rule 333, the

23 Commission might allow 14 days for Direct Energy to

24 comment and state concerns with that settlement. Then

25 the Commission, if it were persuaded the settlement was


38

1 good, could go right ahead and adopt that settlement.

2 So in that case, I would suggest to your

3 Honor that the delay involved or disruption is bordering

4 on trivial, but it's certainly minimal. It's a very few

5 days. Compare that with the time and expense of this

6 proceeding, and frankly, appeals, it might go up through

7 the court system if we aren't granted intervention. I

8 think there's no comparison. An intervention at this

9 stage of the game, particularly when there is no

10 settlement, can only allow directed comment, and then the

11 Commission can proceed to adopt a settlement if one

12 develops. That's really all we're asking for.

13 Now let's assume that a settlement does

14 not occur, that's case B. If a settlement does not

15 occur, Direct Energy, in the interest of expediting and

16 streamlining this procedure and avoiding delay and

17 burden, has waived on page 2 of their petition the right

18 to present testimony or to propound discovery questions.

19 So there's no doubt that we will not add to the number of

20 witnesses, we will not burden parties with discovery, we

21 will do everything in our power to make sure that this

22 case proceeds smoothly and on the schedule that the

23 parties would have anticipated. We're not disputing the

24 schedule. So we're willing to make concessions to make

25 sure this case goes forward if it proceeds through


39

1 cross-examination and testimony. And on the other hand,

2 the worst case is if there is a settlement, which is by

3 no means a certainty at this point, that the Commission

4 could go forward over any objections we might place on

5 the record. It seems to me that the argument that our

6 presence in this case would cause a delay or a burden, in

7 view of these concessions that Direct has made and in

8 view of the Commission's rules regarding settlement, the

9 objections are really bordering on immaterial. I mean

10 they -- we will not have a significant impact on this

11 case schedule, even if we wish to do so, which is by no

12 means certain at all.

13 The only other point made among the two

14 documents opposing our intervention is that Consumers did

15 raise the issue that our interests were represented by

16 other parties, and I think it's very clear from the

17 revisions to the rules proposed by Staff that each entity

18 doing business in this state, and certainly large ones

19 such as Direct, have different business models, different

20 marketing methods and each will be impacted differently

21 by the fact that you can not sign long-term contracts if

22 the Staff's proposals are adopted, that you may require

23 electronic signatures, the terms, you know, that

24 presumptions in terms of the legality of signatures may

25 be changed. So I don't think one marketer can represent


40

1 the interests of another simply because they do not

2 market this product in the same way.

3 In conclusion, I guess I would like to

4 make three basic points. Direct really should have been

5 allowed to intervene, but more important, to participate

6 in the settlement talks on September 9. That could have

7 avoided almost all of the concerns raised by Staff and

8 Consumers regarding burden, regarding delay, regarding

9 potential problems from complications or added burden.

10 That did not happen because our request to participate

11 was rejected, but I think that should cause the law judge

12 to review objections, that if we do get in now, that we

13 would impair the settlement talks, to view those as

14 either, as immaterial or lacking in substance. The

15 actions certainly of Staff denied us the chance to

16 eliminate that problem.

17 The second point is that the delay, if

18 any, to a settlement process would be minimal simply

19 because of the Rules of Practice and Procedure which

20 guarantee a party only 14 days to comment, and then the

21 Commission can go ahead and adopt a contested settlement.

22 And if there is no settlement, we will brief issues, but

23 we have volunteered to streamline this by waiving our

24 right to testimony and discovery.

25 In the final analysis, all Direct Energy


41

1 has really asked for here, when you look at our posture

2 in the settlement or our posture in the hearing, waiving

3 testimony, all we have asked for is the right to comment

4 on the record with comments that will be viewed as part

5 of the record. You know, certainly we could comment

6 under 207, but that's not part of the record. So that's

7 what we hope to get from this. And even though the

8 timing is late, the mere right of commenting from a party

9 so greatly affected is one that is not only not

10 disruptive, but is I think the minimum standard for

11 justice in this case. Thank you.

12 JUDGE NICKERSON: Thank you,

13 Mr. Schneidewind.

14 All right, any comments in opposition?

15 Mr. McQuillan.

16 MR. McQUILLAN: Thank you, your Honor.

17 Your Honor, I can identify the issues from the

18 prospective of Consumers Energy, and they're a little

19 different than what Mr. Schneidewind has suggested, which

20 has led us to a rather unusual situation of opposing a

21 late intervention.

22 The docket was commenced in April,

23 interventions should have been filed by June 2nd.

24 According to the documents which Mr. Schneidewind has

25 filed, he represents a very sophisticated client, a huge


42

1 business entity, seventh largest utility company globally

2 as ranked by Forbes Magazine. This is not a mom and pop

3 operation, a small town business, someone who's not

4 sophisticated, someone who's not aware of regulatory

5 proceedings, someone not aware of regulatory rules; this

6 is a very sophisticated entity. This sophisticated

7 entity got actual notice of the docket, according to the

8 documents that I saw attached to the Staff's filing.

9 This talk about a manager didn't do something or did

10 something or anything else hardly rises to good cause,

11 your Honor; that's just a day-to-day decision within the

12 organization as to whether to participate or not. And

13 frankly, months have gone by. This isn't a situation

14 like he had gave us in illustration where someone came in

15 two weeks late and said how about if I get in now.

16 In response to the notion that I didn't

17 file a timely response to this petition to intervene, I

18 would merely direct your attention to the specific rules

19 on petitions to intervene, as well as the specific rule

20 on petition for late intervention which says my answer

21 was due the day before the hearing, so it was a timely

22 answer. Mr. Schneidewind just cited in general responses

23 to general motions, I believe there's a more specific

24 rule on this topic, and it deals with responses to late

25 intervention.


43

1 In terms of why is there such concern by

2 Consumers of another marketer getting into this docket, a

3 lot of things have happened since June 2nd when those

4 petitions to intervene should have occurred, your Honor.

5 The Staff went to an extraordinary length in this docket,

6 for which I commend them certainly, to say that they

7 would provide a draft of their philosophies to all of the

8 parties prior to filing their testimony, and would even

9 consider responses from parties to that draft. Staff did

10 that, parties did respond, there was a lot of input.

11 There was input on behalf of the utilities, there was

12 input on behalf of marketers, there were concerns raised

13 as to what was fair or unfair for customers, and so a lot

14 of interests were represented in that. Staff's testimony

15 then did make modifications, it wasn't some charade where

16 they say, tell us what you think but we're not going to

17 consider it; they made substantial modifications to their

18 positions in response to the input from various parties,

19 including marketing responses frankly, the responses from

20 marketing parties.

21 Discovery has been conducted in this

22 docket. The utilities have answered questions, the Staff

23 has answered a number of questions. Staff's testimony

24 was filed, and as I said, it was a modification of the

25 original philosophies that they presented.


44

1 The next step, again to Staff's credit,

2 was to suggest a discussion where we got everybody

3 together and talked about Staff's position to see if

4 there was common ground. That took place, that was well

5 attended. I would guess there was 30 or 35 different

6 people that attended that particular meeting. There was

7 input from all parties; there was input from the Staff in

8 terms of the complaints that they had experienced over

9 the years from the gas marketing issues, there was

10 concerns from the marketers in terms of length of

11 contract, authorized persons, all of those topics were

12 discussed, none of those were forgotten. There was

13 responses from the utilities in terms of what billing

14 systems could accommodate or how long people, how we

15 would do our planning process, there was a very frank

16 dialogue, give and take by a lot of parties. So to now

17 suggest that another party can come in late and say, you

18 know, I don't agree with this or I don't like that or I

19 don't like this undoes everything. We go back to the

20 beginning now, your Honor, because the concessions that

21 were made by parties in responses to concessions from

22 other parties are off the table. We'd literally have to

23 start over. Now, Mr. Schneidewind may not care about

24 that, that may suit him fine, but it doesn't suit the

25 utility to have gone through this process and come what I


45

1 think is, if we haven't crossed the finish line, we are

2 close to it, your Honor, in terms of a resolution, and if

3 we don't get a final resolution, I believe there's

4 perhaps only one issue on the table that would need to be

5 addressed during a hearing.

6 So when Mr. Schneidewind says, well, I

7 didn't get to attend that particular conference, number

8 one, he could have come to that conference, I doubt

9 anybody would have said, oh, you can't come into the

10 room, we will excuse you from the room. He could have

11 been there in an advisor role, he could have just talked

12 to the other marketers if he didn't want to sit at the

13 table. There's a lot of ways to express a viewpoint from

14 a party, particularly when it's the same viewpoint as the

15 other marketers have, and we've got five, six, seven of

16 them that have been granted intervention in this docket.

17 So it isn't as if the marketers are not represented in

18 this process.

19 But, too, I can understand the Staff

20 saying when we have settlement conferences with people

21 who have been granted intervention, who have followed the

22 rules, who have been granted intervention, attended a

23 prehearing conference, conducted discovery and everything

24 else, we aren't going to let people wander in off the

25 street to say that they like or don't like some aspect of


46

1 it or that they perhaps don't know the history of it or

2 haven't gone through the process of hearing the Staff

3 present its philosophy and gone through the process of

4 giving a response to the Staff and seeing responses from

5 other parties and then seeing the product that the Staff

6 prepared in filing its testimony.

7 So I find that this is a slightly

8 different situation for a late intervention than the

9 usual one where somebody says, oh, you know, it came in,

10 secretary put it in the basket and it didn't get out of

11 the basket in time or that person was on vacation for a

12 couple weeks and it got lost in the shuffle and that's

13 regrettable and the organization would like to tighten

14 its procedures, but we all understand those circumstances

15 can occur. This is a very, very sophisticated business

16 entity who says, well, we had a change this our

17 management sometime in the summertime. Well, what was

18 going on in April, your Honor, when the docket was

19 started, when the notice was given from the Staff? What

20 was going on on June 2nd when the petitions to intervene

21 were due? We don't know. There's been no explanation

22 that said, oh, a secretary left or got sick or went on a

23 maternity leave or something or an attorney or a manager

24 took a new position and was slow in getting his work

25 resigned to other people and this was one of the things


47

1 that fell through the cracks; there's no explanation like

2 that, it's just, well, we had a change of management

3 philosophy once this thing got pretty far down the road,

4 almost to the point of settlement. That's not the same

5 compelling notion as to why someone should get in two

6 weeks late as other situations that have presented

7 themselves to this Commission. So they don't frankly

8 have those kinds of equitable concerns saying, come on,

9 everybody can make a mistake, Consumers makes mistakes,

10 probably Staff makes a mistake or Mich Con makes a

11 mistake; this is very, very sophisticated entity that

12 says, well, at the end of the summer someone else looked

13 at this and said, well, we changed our mind, maybe we

14 should get in there now.

15 There's no reason why they couldn't have

16 been in communication with the Staff through this entire

17 process or with us through this entire process or with

18 other marketers through this entire process. I was not

19 aware of their request to participate frankly. I was

20 aware of their petition to intervene, but not that they

21 requested to show up; and frankly, I don't think that if

22 they had come to the conference they'd have been turned

23 away is my own personal opinion as to how things up here

24 operate on a general basis.

25 So as you put these things together and


48

1 say is there good cause, frankly, there isn't -- I

2 appreciate Mr. Schneidewind's position, you've got to

3 represent your clients -- but there isn't here, this was

4 just a management philosophy from a very sophisticated

5 entity. And number two, does it change anything in the

6 proceeding, and my feeling is yes, it changes everything

7 in the proceeding. There's been a dynamic that's

8 established between the Staff, the companies and the

9 marketers, with customer interests represented as well,

10 and for someone to come in late and say, well, you know,

11 now I don't think I'm going to like that one provision,

12 now I don't think this provision is as favorable to me as

13 I want it, nothing was done in an abstract, everything

14 was done in the give and take of a negotiating session, a

15 very candid negotiating session where a lot of opinions

16 were expressed and a lot of responses were made and

17 concessions that were made were made recognizing that the

18 final result would be acceptable to all the various

19 entities, to the Staff, to the utilities and to the

20 marketers; and so for another marketer to come in late

21 and say, well, I'm not sure I like it that much, I can

22 appreciate that, but they also were in a position where

23 they could have avoided this in the first place, they

24 could have participated from the beginning. They knew

25 about it, Staff had e-mailed it to them or sent it to


49

1 them electronically in some fashion, and they just chose

2 not to do it.

3 So my frustration is that now that we

4 think that this thing is to the point where we

5 practically could be drafting the settlement agreement

6 which we believe had complete consensus at that meeting

7 between all of the participates, we're now saying, I

8 don't know, is Mr. Schneidewind's client going to like

9 this, going to like that, going to want to change this,

10 going to want to change that; we've already had those

11 discussions on those topics, and that's why we feel

12 there's prejudice to us and that it's going to cause

13 delay, and if it does cause delay, if you can do a

14 settlement, it's much quicker than doing a contested

15 settlement which may include not just two weeks to file

16 comments, but may include testimony in support of the

17 settlement, testimony in opposition of the settlement, it

18 may involve a role for the administrative law judge to

19 make a recommendation, there's a lot more to it than just

20 saying oh, the worst case is a two-week delay in the

21 Commission receiving a settlement.

22 So Consumers believes that for these

23 specifics circumstances, this petition to intervene

24 should not be granted. I'm not saying that we're always

25 going to take a position in any other case that petitions


50

1 to intervene are unwise, but due to the circumstances of

2 this docket, we think it's unwise in this case. We'd ask

3 that it be denied.

4 JUDGE NICKERSON: Thank you, sir.

5 Anyone else? Mr. Sattler.

6 MR. SATTLER: Yes, your Honor. Thank

7 you. More than three months have passed since the

8 prehearing in this case, and more than five months have

9 passed since the Commission initiated this proceeding,

10 and during that time, your Honor, Staff has devoted

11 numerous hours to preparing its testimony in this case

12 and to discussing settlement with the other parties; and,

13 your Honor, if you allow Direct Energy to intervene now,

14 you're going to place all the time and effort that Staff

15 devoted to its testimony and all the time and effort it

16 devoted to settlement discussions at risk. Direct Energy

17 hasn't provided a good reason to do this. It's not as if

18 Direct Energy didn't know about the case; the Commission

19 mailed a copy of its order initiating this case to Direct

20 Energy when it issued the order, but at that time, Direct

21 Energy chose not to intervene.

22 There is, however, good reason to deny

23 Direct Energy its petition to intervene. As I noted,

24 Staff has devoted numerous hours to its testimony and to

25 settlement, and permitting Direct Energy to intervene


51

1 prejudices Staff and all the other parties that have

2 participated in those negotiations as Mr. McQuillan has

3 described them. And also, it could potentially prolong

4 the proceeding. If Direct Energy intervenes and disrupts

5 the settlement proceedings, it's going to be a much

6 longer proceeding than it would otherwise.

7 To address Mr. Schneidewind's point that

8 we didn't allow them to participate in the settlement, it

9 is true, and the reasons we didn't allow them to

10 participate are the same today as they were then: We

11 were concerned, we had the same concerns then that we

12 have now, we were concerned that they would bring new

13 issues to the table that would disrupt the settlement.

14 We had enough parties at the table, we didn't need one

15 more party with different issues, and we were concerned

16 that it would prolong the proceeding if they disrupted

17 the settlement. They didn't file their petition until

18 the very day before the settlement. We knew shortly

19 before then that they were interested in participating,

20 but nonetheless, it was very close to the date that we

21 had scheduled for the settlement conference.

22 And let me tell you about the time and

23 effort you'd be putting at risk if you allowed them to

24 intervene. After the prehearing, Staff distributed its

25 proposed tariffs to all the parties to allow them an


52

1 opportunity to comment on our proposed tariffs informally

2 so that we could incorporate those comments into the

3 tariffs that we actually filed, and Staff undertook the

4 substantial task of reviewing all those comments, I

5 believe that every party commented, and made a decision

6 on each one whether or not we were going to incorporate

7 those into Staff's tariffs. Staff met with all the

8 parties for a day and discussed all the remaining issues

9 that hadn't been resolved previously when we amended our

10 proposed tariffs. A lot of preparation went into that

11 meeting, and Staff has met with the parties since to

12 discuss other outstanding issues. Staff is still

13 discussing settlement, and we believe we are close to a

14 settlement. In fact, we would like to distribute

15 tariffs, revised tariffs tomorrow to all the parties to

16 see if they think it accurately reflects what we talked

17 about in our settlement discussion.

18 So Staff has gone to great time and

19 effort to allow Direct Energy -- I'm sorry. We've gone

20 through great time and effort, and to allow Direct Energy

21 in the case at this point jeopardizes everything Staff

22 has been working toward, because Direct Energy does bring

23 new issues to the table. For example, one of the issues

24 that they've raised with us informally is the automatic

25 renewal of the fixed-price contract, and that was not an


53

1 issue that was brought to the table by any other party,

2 and frankly, Staff doesn't want to bring that issue to

3 the table.

4 I believe that we have listened to their

5 comments informally. Mr. Schneidewind implied that we

6 completely kept them from the table, but we have their

7 comments, we have sat down and met with them, so Staff

8 has met and considered Direct Energy's concerns.

9 In conclusion, your Honor, it's not

10 unprecedented to deny a party's petition for late

11 intervention. In fact, as we pointed out in our reply

12 brief, the Commission denied a party's petition to

13 intervene in a case very similar to this.

14 Mr. Schneidewind would have you believe that that case is

15 distinguishable because that party was allowed to

16 negotiate with the other parties in that case; but like I

17 mentioned, we have listened, Staff has listened to Direct

18 Energy's concerns informally, we haven't completely kept

19 them from the table. I think that the circumstances in

20 that are very similar to this case, and I think that the

21 language from the case speaks for itself in just how

22 similar the circumstances are.

23 The Commission in that case held: The

24 Commission agrees with the ALJ that the MMCG has failed

25 to make any showing of good cause to justify the


54

1 tardiness of its request to intervene. From the

2 statements made during oral argument and the

3 presentations contained in its application for leave to

4 appeal, it is clear that although the MMCG was well aware

5 of the filing deadline for interventions, it nevertheless

6 decided to intervene in a timely manner -- decided not to

7 intervene in a timely manner -- I'm sorry. It

8 nevertheless decided not to intervene at that time;

9 however, that the MMCG may now regret its decision not to

10 intervene in a timely manner is not sufficient reason to

11 excuse its tardiness. I think the same exact reasoning

12 applies here.

13 And because allowing Direct Energy to

14 intervene will prejudice the parties, it may prolong the

15 proceeding, and Direct Energy hasn't given any good

16 reason your Honor should do that. That's it.

17 JUDGE NICKERSON: All right. Thank you,

18 Mr. Sattler. One question, Mr. Sattler. Staff's

19 decision to not allow Direct Energy to participate in the

20 settlement, would that have been the case if it had been

21 any party that was not, any company that was not a party

22 to the proceeding? In other words, were you singling out

23 Direct Energy because they were Direct Energy, or would

24 Staff's decision have applied to any company that was not

25 a party to this proceeding at that particular time?


55

1 MR. SATTLER: Yes, I believe that Staff's

2 decision would have applied to any party that was not a

3 party to the proceeding at that time.

4 JUDGE NICKERSON: You said the same thing

5 I should have avoided, any party. Any company that was

6 not a party to the proceeding?

7 MR. SATTLER: Yes, any company that was

8 not a party to the proceeding. I believe our position

9 would have been consistent if there had been another

10 company that wanted to participate that was not a party.

11 JUDGE NICKERSON: All right. O.K.

12 Anyone else?

13 MR. SOLO: Yes, your Honor.

14 JUDGE NICKERSON: Mr. Solo.

15 MR. SOLO: Thank you. MichCon also

16 objects to the late intervention of Direct Energy, and

17 for the reasons clearly stated by Consumers Energy and

18 the Staff. The Company contends that no good cause has

19 been established for late intervention, and allowing late

20 intervention at this late stage would be prejudicial to

21 the parties based on all the reasons provided by

22 Consumers and Staff. That's all, your Honor.


24 Mr. Solo.

25 Ms. Wellman.


56

1 MS. WELLMAN: Your Honor, SEMCO and MGUC

2 also object to the late intervention as a matter of

3 precedent. I do not think Direct Energy has met the

4 standard for good cause. I think it opens the door to

5 granting late interventions any time.

6 And I would point out to your Honor that

7 this correspondence that was handed out by

8 Mr. Schneidewind dated February 9, 2001, is a

9 correspondence from the executive secretary, and as I'm

10 sure your Honor is aware, the Commission only speaks

11 through its orders, not through its staff. And I would

12 note that she only indicates that you may file late

13 interventions, there's no indication that they're

14 granted. Thank you.

15 JUDGE NICKERSON: Thank you, Ms. Wellman,

16 appreciate that.

17 All right. Mr. Schneidewind, I know you

18 want to respond. You have five against you.

19 MR. SCHNEIDEWIND: Well, I think it's

20 noteworthy that among the five against me, there are none

21 of the intervenors present, and indeed we contacted all

22 of the intervenors and determined that they had no

23 objection to our participation, so it's really the

24 companies and the Staff that oppose.

25 And once again, I guess I would like to


57

1 stress the fact that it's truly unfortunate we --

2 Mr. McQuillan says, gee, Direct could have shown up at

3 this meeting and nobody would have objected, but indeed

4 we asked to show up and indeed there was an objection,

5 and rather than to provoke some confrontation, we chose

6 not to attend.

7 If you step back from this and look at

8 the magnitude of the business interests affected and then

9 ask, O.K., what is the prejudice or harm to the process,

10 the fact is if there is this agreement which is basically

11 a done deal, and that's certainly what has been presented

12 here, it will be circulated, it will be presented to the

13 Commission, and at the end of the day, if Direct is

14 granted party status, it will have only the right to file

15 comments and to do that within 14 days. We won't be able

16 to disrupt. If there are no more meetings, if there's

17 just a draft being circulated, what's to disrupt? We'll

18 file our comments. That's it. That's what we're allowed

19 to do under the Rules.

20 So I would ask, you know, your Honor,

21 also to consider that to be precise about it, it was a

22 situation where nobody was in charge of this issue

23 through the whole summer at Direct, it wasn't where

24 somebody was sitting there saying, I don't want to do

25 anything; it's where, I am given to understand, where the


58

1 person who used to be in charge was no longer, but they

2 had not placed a new person in charge. So there was a

3 hiatus, it wasn't somebody sitting there twiddling their

4 thumbs. That's an honest description of what happened.

5 But once again, all I ask for at the end

6 of the day here is if there's a settlement, the right to

7 comment within 14 days; if there isn't a settlement, the

8 right to file briefs and reply briefs. That's all we're

9 going to get out of this, and that's not disruptive and

10 that's not going to upset deals that have been made,

11 simply filing comments. So my response is that there is

12 no delay and no prejudice here if we are granted

13 intervention. Thank you, your Honor.

14 MR. SATTLER: Your Honor, may I respond

15 to that?

16 JUDGE NICKERSON: It's his motion, he has

17 the last word, so we'll wrap it up here.

18 All right. Mr. Schneidewind is

19 absolutely correct, that the ALJ does have discretion,

20 and I will exercise that discretion, and the discretion I

21 will exercise is the application of the facts as they

22 have been presented to the Rules which are applicable in

23 this particular case.

24 Now, in this case the Commission's order

25 was issued on April 16, 2009; along with that Commission


59

1 order was a press release. In addition to the order and

2 the press release, also on April 16, a copy of the order

3 was served electronically to Direct Energy Services,

4 among many others involved. The prehearing was set in

5 the Commission order for June 9th, 2009. Now, the

6 intervention was also set for June 2nd, 2009, which was

7 seven days before the prehearing. Direct Energy filed

8 its petition to intervene on September 8, 2009, some

9 three months after the date for filing of the petition to

10 intervene. Three months is significant in this

11 particular case. It is not the example that

12 Mr. McQuillan pointed out where it's a couple weeks late

13 due to some issues at the company; everybody understands

14 those sorts of things, everyone makes mistakes, and

15 that's understandable, but in this particular case, three

16 months is significant.

17 Now, the Rules of Practice and Procedure

18 before the Commission, Rule 201 specifically provides

19 that the petition for late intervention must show good

20 cause, it must show there will not be delay, and it must

21 show that it will not unduly prejudice the proceedings.

22 Good cause in this particular case,

23 Mr. Schneidewind indicates that in June, I believe he

24 said the June timeframe to the end of August was the

25 period of time where there was the hiatus at Direct


60

1 Energy. Well, that doesn't explain what happened between

2 the notice in April to the June time period. And the

3 good cause really has to be something legally

4 significant, such as no notice, which is not alleged

5 here, or that the notice was somehow fatal, and that's

6 not alleged here either. So I don't find that there's

7 good cause.

8 As it relates to the delay, I think

9 Mr. McQuillan and Mr. Sattler both indicated that they've

10 exerted a great amount of time, energy, resources and

11 even good will towards the settlement discussions, and

12 they're very close, they indicate, to actually issuing

13 something, the tariff, which would be the written

14 evidence of the settlement discussions.

15 Now, I recognize the Commission said that

16 this matter shall be commenced or shall be wrapped up, or

17 that the proceedings shall terminate by April of 2010,

18 but that's not the delay that we need to focus on in this

19 particular case; the delay we need to focus on is the

20 delay to the proceedings, and allowing a party to

21 intervene at this particular time I think would delay the

22 proceeding.

23 But even more to the point is the

24 prejudice to the parties that have participated and have

25 been involved in these settlement discussions. Again, a


61

1 lot of time, energy, resources and give and take back and

2 forth, and now to interject yet another party into that I

3 think, as Mr. McQuillan indicates, does significantly

4 change the dynamics of the matter.

5 So for all those reasons, I think that

6 good cause has not been shown, and I think that there

7 would be prejudice to the parties, and so the petition

8 for intervention, late intervention filed by Direct

9 Energy Services I'm ruling should be denied on this date.

10 All right. Is there anything else for

11 the record?

12 MR. McQUILLAN: Nothing further, your

13 Honor. Thank you.

14 MR. SCHNEIDEWIND: No, your Honor.


16 all, very much.

17 (At 9:51 a.m., the hearing adjourned.)

18 - - -

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25


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1

2

3 C E R T I F I C A T E

4

5 I, Lori Anne Penn (CSR-1315), do hereby

6 certify that I reported in stenotype the proceedings had

7 in the above-entitled matter, that being Case No.

8 U-15929, before Daniel E. Nickerson, Jr., J.D.,

9 Administrative Law Judge with SOAHR, at the Michigan

10 Public Service Commission, 6545 Mercantile Way, Lansing,

11 Michigan, on Tuesday, September 22, 2009; and do further

12 certify that the foregoing transcript constitutes a true

13 and correct transcript of my stenotype notes.

14

15

16

17 ______________________________________

18 Lori Anne Penn, CSR-1315

19 33231 Grand River Avenue

20 Farmington, Michigan 48336

21

22

23 Dated: September 23, 2009

24

25


25 1 state of michigan 2 before the michigan public

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