Michigan Commission Adopts Framework for Utility Performance Metrics

The Michigan Public Service Commission on Feb. 27 approved a staff proposal establishing financial incentives and penalties for electric utilities to improve their performance and enhance grid reliability. The proposal includes metrics to measure utility performance about reliability, safety, and other factors that will encourage utilities to expedite distribution system upgrades and improve grid reliability.

In June 2024, the commission sought public input from various stakeholders on the initial proposal and commission staff incorporated this feedback into the final proposal. The approved proposal contains seven performance metrics, including metrics to track power restoration time during extreme and mild weather conditions, average duration of power outages, and number of customers experiencing four or more outages every year.

In 2023, the commission established the Financial Incentives and Disincentives workgroup, a part of its MI Power Grid initiative, to introduce metrics to improve utility performance and reduce power outages. The customer-focused multi-year initiative was launched in 2019 to ensure Michigan residents can fully benefit from clean, distributed energy resources.

Apart from developing reliability and safety metrics, the commission directed the workgroup to explore rate structures for applying incentives and disincentives, known as the “Reliability-Plus” approach. The commission approved the proposal with modifications, prioritizing improvements to fundamental distribution reliability. Other related issues, such as the impact of growing distributed generation and increasing electric vehicle demand on the grid, which are part of the “Reliability-Plus” approach, will be addressed in future phases of the workgroup’s efforts.

The order directed electric utilities DTE Electric Co. and Consumers Energy Co. to submit their mechanisms for determining financial incentives and penalties by April 15, 2025. The commission set the maximum limit for penalties and financial incentives at $10 million for 2026.

The commission stated in the order that it will initiate the first independent proceeding to review metrics by Oct. 15, 2027, and it will also release guidance on the review process for the metrics before this date.