UNPUBLISHED

PER CURIAM.

Residential Customer Group (hereinafter "Residential") appeals as of right the January 31, 2017 order of the Michigan Public Service Commission (MPSC) in Case No. U-18014, which allowed DTE Electric Company (DTE) to increase its rates, and annual revenues to increase by approximately $184 million. Specifically, this appeal involves the same challenges Residential has raised in several prior cases involving DTE and Consumers Energy Company in regards to the implementation of an Advanced Meter Infrastructure (AMI) and smart meter program. We affirm.

I. STANDARD OF REVIEW

As this Court explained in In re Application of Consumers Energy Co to Increase Rates, 322 Mich.App. 480, 486-487; 913 N.W.2d 406 (2017) (citation and internal caselaw omitted):

"Constitutional claims are . . . reviewed de novo." Ligon v City of Detroit, 276 Mich.App. 120, 124; 739 N.W.2d 900 (2007).

We also note the following passage of In re Consumers Energy Co App, 322 Mich App at 493-494 because it is pertinent to all of Residential's arguments in this appeal:

II. SMART METERS AND MPSC JURISDICTION

Residential contends that the MPSC lacks statutory authority to issue orders or approve tariffs that require the installation of smart meters. Specifically, Residential challenges the authority of the MPSC to permit DTE to require customers electing to opt out of the smart meter program to pay surcharges. Residential argues that the MPSC should have required DTE to consider and implement an opt-in program where customers are given notice and an opportunity to reject smart meter installation and to avoid costs for the decision to decline the new technology. According to Residential, the MPSC improperly relied on rulings from prior proceedings that are non-binding because they did not comprise contested or formal ratemaking cases. Having relied on a faulty procedure, Residential asserts that the MPSC erred in foreclosing the presentation of evidence and argument for the alternative opt-in approach that Residential advocates.

Residential's arguments have previously been rejected by this Court in a published opinion, and we must follow precedent set by another panel of this Court in cases issued after November 1, 1991. MCR 7.215(J)(1); Johnson v Heite, 243 Mich.App. 578, 593; 624 N.W.2d 738 (2000). Notably, in In re Consumers Energy Co App, 322 Mich App at 489, this Court addressed Residential's contention that

As noted, this Court has previously rejected identical arguments by Residential. Id. at 490-491. We explained that while it is true that no statute specifically allows a utility to require customers to participate in a smart meter program or to pay surcharges if the customer opts out of the program, id. at 490, this is because the decision to switch to smart meters "can only be described as a management prerogative." Id. Residential's "suggestion that the [M]PSC could order [a public utility] to develop an opt-in program is clearly the type of action found invalid in Union Carbide [v Pub Serv Comm], 431 Mich [135,] 148-150[; 428 N.W.2d 322 (1988]." In re Consumers Energy Co App, 322 Mich App at 490. Thus, the suggestion that the MPSC could direct DTE to use an opt-in program lacks merit. Id. Further, because "approval of the opt-out fees was a proper exercise of the [M]PSC's ratemaking authority[]" with respect to another public utility (i.e., Consumers Energy), id. at 491, the MPSC's approval of DTE's opt-out fees similarly constitutes a proper exercise of its authority. We are bound to follow this Court's earlier ruling in In re Consumers Energy Co App, 322 Mich App at 480, as a published decision of this Court decided after November 1, 1990. MCR 7.215(J)(1). In the absence of any basis to deviate from this Court's prior decisions, Residential's arguments are again rejected.1

III. CONSTITUTIONAL CLAIMS

Residential asserts that requiring customers to use smart meters without their consent raises privacy concerns and is violative of due process. Residential argues that its constitutional claims cannot be avoided despite DTE's lacking the status of a state actor because the MPSC's approval fulfills the requirement of state action. According to Residential, the overly-intrusive nature of smart meters facilitates unreasonable searches and seizures and the possible mishandling of the private consumers' data. Residential contends, however, that the adoption of an "opt-in" tariff would alleviate these concerns.

In In re Consumers Energy Co App, 322 Mich App at 491-493, this Court addressed and rejected Residential's argument that "the PSC's disregard of Consumers' customers' concerns about privacy, data collection, and the transmittal of data violates due-process and Fourth Amendment principles." This Court held "that the installation of a smart meter on a customer's home does not violate the customer's rights under the Fourth Amendment of the United States Constitution because Consumers is not a state actor." Id. at 491. Because DTE, as did Consumers, lacks the status of a state actor, we again reject Residential's arguments on this issue. Id. at 492-493; MCR 7.215(C)(2) and (J)(1).2

For the first time on appeal, Residential asserts a claim that the installation of smart meters is a criminal act in violation of MCL 750.539d, which pertains to the installation of a recording or transmitting device in a private location without consent. Arguments raised for the first time in an appellate reply brief are insufficient to present an issue for appeal. Blazer Foods, Inc v Restaurant Props, Inc, 259 Mich.App. 241, 252; 673 N.W.2d 805 (2003). Further, while Residential claims that smart meters are overly intrusive and capable of discovering exactly when and how much energy is used by each particular device inside a home, which Residential posits will permit DTE to monitor an individual's behavior within his or her residence, it cites no evidence to support this assertion. Reliance on hypothetical or speculative injuries is insufficient to establish a constitutionally-based claim of injury. See Mich Ed Ass'n v Superintendent of Pub Instruction, 272 Mich.App. 1, 7; 724 N.W.2d 478 (2006) ("Mere hypothetical or conjectural injuries do not satisfy the constitutional requirements for standing.").

IV. COST BASIS — OPT-OUT CHARGES

Residential argues that the MPSC's orders continuing the opt-out program surcharges are unlawful and unreasonable because they are improperly reliant on prior MPSC rulings and do not comply with the substantial evidence test. According to Residential, the imposition of these surcharges results in duplicative charges on opt-out customers. Further, while DTE failed to present a qualified witness to substantiate its position that customers opting out of the smart meter program are causing additional costs to DTE, Residential's expert testified that the opt-out customers did not increase DTE's expenses and that the surcharges could be entirely eliminated if DTE would permit customers to self-report their monthly electrical usage.

DTE's opt-out fees were initially set in MPSC Case No. U-17053. In that case, the MPSC's order explained:

The MPSC Staff agreed with DTE's "method for calculating the proposed fees based on cost of service principles, but disagreed with the number of participants." Id. at 4. The Staff estimated that 15,500 customers would participate in the program, which would yield "an initial fee of $67.20, and a monthly fee of $9.80." Id. By the time the matter reached a decision by the administrative law judge, over 3,200 customers had expressed concerns with the program. Id. at 7. This indicated that DTE's estimate was too low, and as such, the administrative law judge advocated adoption of the Staff's recommendation. Id. The MPSC concurred, explaining:

The amount charged to those opting out of DTE's smart meter program was also examined in MPSC Case No. U-17767. In that case, the MPSC's order states the following relevant conclusions:

In this appeal, Residential again argues that the opt-out charges should be eliminated. Residential first contends that there was no evidence presented in the current proceeding supporting the amount of the fees. The reason for this failure is simple: DTE was not seeking to alter the opt-out fees, which had been set in Case No. U-17053. As the MPSC has explained before, there is no need for the MPSC to take new evidence on an issue that has been decided previously, absent a showing that circumstances have somehow changed. In re Consumers Energy Co App, 322 Mich App at 493-494. See also Pennwalt Corp, 166 Mich App at 9. Further, Residential is incorrect when it contends that opt-out customers are charged both to opt out of the smart meter program and for the costs of implementing the smart meter program. As the MPSC previously explained, opt-out customers are given credits to ensure that they do not incur duplicative charges for the costs of the smart meter program. In re Application of DTE Electric Co to Increase Rates, order of the Public Service Commission, entered December 11, 2015 (Case No. U-17767), p 100.

While In re Consumers Energy Co App, 322 Mich App at 494-496, dealt with Residential's challenges to Consumers' opt-out fees, we note that this Court similarly found it appropriate for the MPSC to rely on its prior decisions that initially set the opt-out fee where no relevant changes in the circumstances were shown. The instant matter concerns DTE's opt-out fees, but the analysis is essentially the same. Because the reasonableness of the fees were established in a prior case, there is no need for the MPSC to continually revisit the question absent any relevant changes in the circumstances. See id.

Residential's suggestion that the fees could be eliminated or substantially reduced by allowing customers to read their own meter's electrical usage, save for one annual reading each year by DTE, lacks merit. Residential relies on Commission Rule 114, which is codified as Mich Admin Code, R 460.114:

Residential contends that DTE should be required to allow opt-out customers to self-read and report their usage because the rule permits a utility company to allow such a method of reporting energy consumption. While it would certainly be permissible for DTE to permit opt-out customers to report their energy usage on a monthly basis, as the MPSC aptly recognized, DTE nonetheless retains the statutory authority to read the meters on a regular basis. Residential's proposal essentially amounts to a request that the MPSC control DTE's decision with regard to meter reading in a situation where DTE has been given discretion by the MPSC's own rules. The MPSC cannot control or dictate DTE's management decisions. Union Carbide Corp, 431 Mich at 148. In addition, the present case is not a rulemaking proceeding. While the MPSC may have the ability to create rules and regulations "for the conducting of the business of public utilities," MCL 460.55, that authority is not implicated in this case, see Union Carbide Corp, 431 Mich at 152 (distinguishing between the PSC's authority to act in a rate case as opposed to a rulemaking proceeding).

The only change in circumstances that have been demonstrated as implementation of the smart meter program has progressed is that the number of customers choosing to opt out of the program is substantially fewer than what the MPSC anticipated when the opt-out fees were initially determined and set. This change would only lead to an increase in the opt-out rates. But DTE has not requested a rate increase at this point in time, instead asking the MPSC to delay any such decision until the program is fully implemented and the number of opt-out customers is definitively established. The MPSC's adoption of DTE's suggested approach was lawful and reasonable, and thus subject to affirmance.

V. RETROACTIVE RATEMAKING

Residential argues that the MPSC, relying on its earlier decision in Case No. U-17767, erred when the MPSC rejected Residential's claim that DTE should not be permitted to recover expenses arising from income taxes incurred in 2012 because it constitutes retroactive ratemaking.

"MCL 460.556 provides the [M]PSC with the power to prescribe uniform methods of keeping accounts for electric utilities." Attorney General v Pub Serv Comm, 262 Mich.App. 649, 651; 686 N.W.2d 804 (2004). Retroactive ratemaking, however, is not permitted. Id. at 655-656. "Retroactive ratemaking . . . involves a change either upward or downward in the rates charged by a utility for its services under a lawful order. . . ." Id. at 657, citing Detroit Edison Co v Pub Serv Comm, 221 Mich.App. 370, 375-376; 562 N.W.2d 224 (1997). Rather, "rates are set in the commission's legislative capacity, and therefore must be construed like statutes and only be given prospective effect." Pub Serv Comm, 262 Mich App at 655. As discussed by our Supreme Court in Detroit Edison Co v Pub Serv Comm, 416 Mich. 510, 523; 331 N.W.2d 159 (1982), "the essential principle of the rule against retroactive ratemaking is that when the estimates [of costs on which rates are based] prove inaccurate and costs are higher or lower than predicted, the previously set rates cannot be changed to correct for the error; the only step that the MPSC can take is to prospectively revise rates in an effort to set more appropriate ones." Retroactive ratemaking does not occur where no adjustments are made to previously set rates, and instead, "only future rates [are] affected." Pub Serv Comm, 262 Mich App at 658. When it comes to ratemaking, deferred expenses are not considered past expenses; rather, once "expenses [are] deferred, they [become] expenses incurred in the year to which they were deferred." Id.

The MPSC has previously approved the accounting methodology4 used by DTE in MPSC Case No. U-16864 to account for deferred federal and state income taxes, wherein it ordered:

Similarly, in MPSC Case No. U-10083, the MPSC found the accounting method DTE proposed to use in the current case to be not only acceptable but also preferable, stating:

It has been recognized that the amortization of expenditures "becomes a current expense even though it reflects expenditures that were . . . in the past," and as such "amortization does not constitute retroactive ratemaking." Assoc of Businesses Advocating Tariff Equity (ABATE) v Public Serv Comm, 208 Mich.App. 248, 261; 527 N.W.2d 533 (1994) (citation omitted). Thus, the deferred taxes pertinent to DTE in this matter are not considered a past expense for purposes of ratemaking. Because of their deferral, they are treated as a current expense subject to amortization. Pub Serv Comm, 262 Mich App at 658.

Residential briefly contends that the MPSC's decision should be reversed because the amount DTE seeks to recover for the deferred taxes will be covered by a different line item, one that takes into account the federal, state, and local taxes DTE expected to incur. Residential conflates the expense at issue, which is a deferred tax from an earlier year, with taxes that were anticipated to be incurred for the projected test year. These are different expenses and must be treated as such.

We affirm.