July 11, If you have any questions or concerns with the enclosed, please do not hesitate to contact. Very truly yours,

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1 124 West Allegan Street, Suite 1000 Lansing, Michigan T (517) F (517) Thomas J. Waters twaters@fraserlawfirm.com (517) July 11, 2017 Via Electronic Filing Ms. Kavita Kale, Executive Secretary Michigan Public Service Commission 7109 W. Saginaw Hwy. Lansing, MI RE: MPSC Docket No. U R Reply Brief Dear Ms. Kale: Enclosed for filing in the above-referenced matter, please find the Reply Brief of Cadillac Renewable Energy, LLC, Genesee Power Station Limited Partnership, Grayling Generating Station Limited Partnership, Hillman Power Company, LLC, TES Filer City Station Limited Partnership, Viking Energy of Lincoln, Inc., and Viking Energy of McBain, Inc., along with Proof of Service of same. me. If you have any questions or concerns with the enclosed, please do not hesitate to contact Very truly yours, Fraser Trebilcock Davis & Dunlap, P.C. Thomas J. Waters sjo Enclosures FRASER TREBILCOCK DAVIS & DUNLAP PC LANSING DETROIT GRAND RAPIDS

2 STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the application of ) CONSUMERS ENERGY COMPANY ) for the Reconciliation of Power Supply ) Cost Recovery (PSCR) Costs and ) Case No. U R Revenues for the Calendar Year ) ) REPLY BRIEF OF CADILLAC RENEWABLE ENERGY, LLC, GENESEE POWER STATION LIMITED PARTNERSHIP, GRAYLING GENERATING STATION LIMITED PARTNERSHIP, HILLMAN POWER COMPANY, LLC, TES FILER CITY STATION LIMITED PARTNERSHIP, VIKING ENERGY OF LINCOLN, INC., AND VIKING ENERGY OF MCBAIN, INC. Dated: July 11, 2017 FRASER TREBILCOCK DAVIS & DUNLAP, P.C. Thomas J. Waters (P37829) David E. S. Marvin (P26564) Aaron L. Davis (P77406) Fraser Trebilcock Davis & Dunlap, P.C. 124 W. Allegan, Suite 1000 Lansing, MI Telephone: (517) addresses: twaters@fraserlawfirm.com adavis@fraserlawfirm.com

3 TABLE OF CONTENTS I. REPLY TO CONSUMERS ENERGY COMPANY... 1 II. CONCLUSION AND PRAYER FOR RELIEF... 3 i

4 NOW COME Cadillac Renewable Energy, LLC, Genesee Power Station Limited Partnership, Grayling Generating Station Limited Partnership, Hillman Power Company, LLC, TES Filer City Station Limited Partnership, Viking Energy of Lincoln, Inc., and Viking Energy of McBain, Inc. (collectively as the Biomass Merchant Plants or BMPs ), by and through their attorneys, Fraser Trebilcock Davis & Dunlap, P.C., and, pursuant to the schedule established by Administrative Law Judge Sharon L. Feldman ( ALJ ), submit this Reply Brief in support of the BMPs request for recovery of a portion of their fuel, variable operation and maintenance ( O&M ) and environmental costs pursuant to Sections 6a(7)-(9) of Public Act 286 of 2008, MCL 460.6a(7)-(9) ( Act 286 ). I. REPLY TO CONSUMERS ENERGY COMPANY The BMPs wish to address only a limited portion of Consumers' Initial Brief. Specifically, the BMPs wish to address statements on pages 8 and 12 of Consumers' Initial Brief where it states that: FRASER TREBILCOCK DAVIS & DUNLAP, P.C. LAWYERS LANSING, MICHIGAN In her direct testimony, Company witness Jenny L. Rickard addressed settlements with the Biomass Merchant Plants ( BMPs ) in accordance with the Commission s Order in MPSC Case No. U and pursuant to MCL 460.6a(7) and (8). 2 TR The Company has Power Purchase Agreements ( PPAs ) with seven wood waste fueled BMPs. 2 TR 225. In 2015, the BMPs performed in accordance with their respective PPAs and were paid according to their terms. Based on invoices received, the Company believes that the BMPs incurred expense of approximately $11.6 million in 2015, which is subject to adjustment due to the limitation in monthly recoverable expense. 2 TR 226. As indicated on line 50, column (h) of Exhibit A-3 (MTD-3), based on invoices received, the Company believes that BMPs incurred a recoverable expense of $11,630,451 in (Consumers' Initial Brief, p 8) 1

5 Read in isolation, the last sentence of the foregoing might give rise to a potential ambiguity. Company witness Rickard's proposed recoverable expense of $11,630,451 is significantly less than the BMPs' requested recovery of $13,197,742. As Consumers' witness Hunley testified, however, Company witness Rickard's testimony should be disregarded for purposes of calculating the BMPs' 2015 cost adjustment: "As the adjustments in the testimony of Company witness Rickard do not relate to 2015 BMP costs, they should be disregarded for purposes of calculating the adjustment." 2 Tr 216. In its Initial Brief, Consumers further addresses the BMPs' costs as follows: Staff witness Gretchen M. Wagner presented a summary of Staff s adjustments to the Company s 2015 PSCR Reconciliation. 3 TR Ms. Wagner alleged that the Company s overrecovery amount for the 2015 PSCR year was $19,753,728, which is inclusive of interest. 3 TR 679. Staff proposed five adjustments: (1) an increase of $50,010 to the Company s beginning balance as the result of the Commission s Final Order in MPSC Case No. U R; (2) the removal of the CSX Transportation, Inc. ( CSXT ) litigation costs that was included in fuel expense;... and (5) an increase in the December Purchased, Interchange & Renewable Power costs 3 TR As indicated by Company witness Hunley, the Company adopted Staff s adjustments to the beginning overrecovery balance, the removal of the CSXT litigation costs, and the increase in the total Purchased and Interchange Power costs as it relates to the BMPs. 2 TR (Consumers' Initial Brief, p 12) (emphasis added) The Staff's Initial Brief accepts the BMPs' requested cost recovery as follows: "Lastly, Staff did not propose any adjustment to the Biomass Merchant Plants' ("BMPs") costs." FRASER TREBILCOCK DAVIS & DUNLAP, P.C. LAWYERS LANSING, MICHIGAN (Staff's Initial Brief, p. 2) Thus, both the MPSC Staff and Consumers accepted the BMPs' claimed fuel and O&M costs of $13,197, Moreover, neither the Staff nor Consumers, or any other party, 1 Exhibits BMP-1, line 27 and BMP-2, column E. 2

6 objected to TES Filer City's request for an additional $82,125 in CSAPR seasonal NOx allowance costs that are not subject to the statutory cap. Given the foregoing, the BMPs, Consumers, and the MPSC Staff all agree on the cost recovery to which the BMPs are entitled, $13,279,867. II. CONCLUSION AND PRAYER FOR RELIEF The BMPs respectfully request that the ALJ issue a PFD recommending the following findings and conclusions: 1. The BMPs are eligible, under MCL 460.6a(7), to recover, subject to the statutory cap, the amount of their actual reasonably and prudently incurred fuel and variable O&M costs that exceeded the amount that the BMPs were paid for those costs pursuant to their contracts with Consumers Energy Company. 2. A CPI adjustment, under MCL 460.6a(8), of % is reasonable and appropriate. 3. The Commission should approve as the capped statutory amount to be paid to the BMPs by Consumers Energy for costs incurred by the BMPs during The method for allocating the $13,197,742 in capped statutory payments to the BMPs reflected in Exhibits BMP-1 and BMP-2 should be approved. 5. In addition to the monthly capped statutory payments, $82,125 in CSAPR NOx allowance costs should be approved for uncapped recovery by TES as costs incurred due to changes in federal or state environmental laws or regulations implemented after October 6, FRASER TREBILCOCK DAVIS & DUNLAP, P.C. LAWYERS LANSING, MICHIGAN In total, $13,279,867 in statutory payments to the BMPs should be approved in this proceeding. 7. Consumers Energy should release the 20% hold-back, plus interest, to the BMPs within five business days of a final order issued in this proceeding, consistent with the procedures approved in MPSC Case No. U

7 Respectfully submitted, FRASER TREBILCOCK DAVIS & DUNLAP, P.C. Attorneys for Cadillac Renewable Energy, LLC, Genesee Power Station Limited Partnership, Grayling Generating Station Limited Partnership, Hillman Power Company, LLC, TES Filer City Station Limited Partnership, Viking Energy of Lincoln, Inc., and Viking Energy of McBain, Inc. Date: July 11, 2017 By: Thomas J. Waters (P37829) Business Address: 124 W. Allegan, Suite 1000 Lansing, MI Telephone: (517) FRASER TREBILCOCK DAVIS & DUNLAP, P.C. LAWYERS LANSING, MICHIGAN

8 STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the application of ) CONSUMERS ENERGY COMPANY ) for the Reconciliation of Power Supply ) Case No. U R Cost Recovery (PSCR) Costs and ) Revenues for the Calendar Year 2015 ) CERTIFICATE OF SERVICE Susan J. Oberlin certifies that on the 11 th day of July, 2017, she served a copy of the Reply Brief of Cadillac Renewable Energy, LLC, Genesee Power Station Limited Partnership, Grayling Generating Station Limited Partnership, Hillman Power Company, LLC, TES Filer City Station Limited Partnership, Viking Energy Of Lincoln, Inc., and Viking Energy Of McBain, Inc., upon the parties identified on the attached service list via .

9 Administrative Law Judge Hon. Sharon Feldman Michigan Public Service Commission 7109 W. Saginaw Hwy. Lansing, MI Counsel for Consumers Energy Company Robert W. Beach Anne M. Uitvlugt Gary A. Gensch, Jr. Consumers Energy Company One Energy Plaza Jackson, MI Counsel for Michigan Public Service Commission Staff Lauren Donofrio Bryan Brandenburg Assistant Attorney General 7109 W. Saginaw Hwy. Lansing, MI Counsel for Michigan Environmental Council (MEC) / Sierra Club Christopher Bzdok Tracy Jane Andrews Olson Bzdok & Howard 420 E. Front Street Traverse City, MI chris@envlaw.com tjandrews@envlaw.com Kimberley@envlaw.com karla@envlaw.com SERVICE LIST Case No. U R 2

10 Michael Soules 1625 Massachusetts Ave., NW, Ste. 702 Washington, DC Counsel for AG Bill Schuette John A. Janiszewski Michael E. Moody 525 W. Ottawa St., 6 th Floor PO Box Lansing, MI JaniszewskiJ2@michigan.gov Moodym2@michigan.gov Joel King Michigan Department of Attorney General ENRA Division PO Box Lansing, MI Kingj38@michigan.gov Counsel for Midland Cogeneration Venture Limited Partnership David R. Whitfield Warner Norcross & Judd LLP 900 Fifth Third Center 111 Lyon Street, NW Grand Rapids, MI dwhitfield@wnj.com 3