Michigan Energy Overview
In 2008 the Michigan Legislature passed PA 295 & PA 286 which set the framework for Michigan’s Energy Policy until 2015. PA 295 established a renewable energy standard, consisting of a renewable energy capacity portfolio under which, 10% of an electric provider’s energy must come from renewable sources. PA 286 allowed for the Public Service Commission (PSC) to issue orders providing that up to 10% of an electric utility's average retail sales may take service from an alternative electric supplier (AES) at any time.
With Michigan being ranked as the 12th most expensive electric State in the country, Governor Snyder, the Michigan Senate, and the Michigan House of Representatives are in the initial phase of addressing Michigan’s energy future in hopes of a comprehensive, long-term, and cost effective solution. Below is a brief explanation of where the Executive Office, Senate, and House are positioned regarding the “Energy Discussion.”
On March 13th, Governor Snyder released his energy message and discussed Michigan’s energy future. During his message, Governor Snyder highlighted his goals for Michigan’s energy legislation based on these four pillars:
o Environmental Protection
Snyder’s message suggested that a key challenge will be to dramatically reduce wasted energy, an effort that will save money for families and businesses as well as lessen the demand on the state’s power grid. He suggested that power can be made more reliable through plans to deploy “smart” meters that help utilities locate outages and restore power more quickly.
Michigan has been one of the 10 states most-dependent on coal. His message suggested that Michigan must continue to focus on adaptability and replace outdated coal plants and expand the use of newer, cleaner technologies such as natural gas and renewables. Snyder maintained that Michigan can reach a goal of 30 to 40 percent renewables plus waste reduction within a decade.
Governor Snyder’s message furthered by maintaining that continued generation needs to be part of a healthier future, with plans to reduce mercury emissions, pollution that creates acid rain and cut down on airborne particles. He continued that Michigan is a leader in terms of safety measures tied to high-volume hydraulic fracturing. We will remain vigilant, and also continue exploring ways to promote and adopt alternative transportation fuels and autonomous vehicle technology.
On March 3rd, the Chairman of the House Committee on Energy (Representative Nesbiit, R-Lawton) introduced six bills of an eight bill package. The other two Sponsors included Representative Jason Shepard (R-Monroe) and Representative Brett Roberts (R-Charlotte). A brief description of each bill is below.
• HB 4297 (Nesbitt) – Eliminates the electric and natural gas utility energy optimization standard as of the end of 2015.
• HB 4298 (Nesbitt) – Eliminates self-implementation of proposed rates by utilities and prescribes that refunds be to customers overcharged rather than reduced future rates.
• HB 4299 (Nesbitt) – Modifies certain references in 1951 PA 35, concerning intergovernmental contracting by municipalities, to comport with amendments to 1939 PA 3 proposed in HB 4298.
• HB 4300 (Nesbitt) - Modifies certain references in 1909 PA 279, the home rule city act, to comport with amendments to 1939 PA 3 proposed in HB 4298.
• HB 4301 (Nesbitt) - Modifies certain references in 2008 PA 167, the electric cooperative member-regulation act, to comport with amendments to 1939 PA 3 proposed in HB 4298.
• HB 4302 (Nesbitt) - Modifies certain references in 2008 PA 295, the clean, renewable, and efficient energy act, to comport with amendments to 1939 PA 3 proposed in HB 4298.
• HB 4303 (Roberts)– Allows a natural gas utility to file with the Public Service Commission a plan to expand its distribution infrastructure in unserved or underserved areas, and upon commission approval recover the costs of that expansion through increased rates for all customers.
• HB 4304 (Sheppard)– Prohibits a natural gas utility from recovering in rates any fines or penalties it pays pursuant to 1929 PA 9, concerning natural gas utilities generally, or 1969 PA 165, concerning gas safety standards.
Since July of 2014, the Chairman of the Senate Energy & Technology Committee (Senator Nofs, R-Battle Creek) has hosted a number of workgroup meetings with key energy stakeholders in an effort to introduce a comprehensive energy plan for Michigan’s future. Senator Nofs has not introduced any policy but we expect in the upcoming weeks he will introduce his legislative package. While he has yet to introduce any specific legislation, we have gathered intelligence that he will focus among the following principals:
• Energy efficiency: Repeals Energy Optimization standard for electric utilities upon enactment of new energy law; maintain EO for natural gas, but with new opt-outs; extra credit for efficiency under Clean Energy Standard.
• Renewable energy: Transitions to a Clean Energy Standard based on emissions profile of a combined cycle natural gas plant for range of pollutants; gives extra credit to zero emissions technologies such as wind, solar, hydro and nuclear; requires utilities to offer programs to customers wanting to purchase additional renewable energy.
• Net energy metering (NEM): Increases current 150kW cap on NEM installations and requires dynamic pricing options where possible. He might require "DG customers pay for use of the grid" and evaluates different billing plans.
• Energy choice: Maintains current 10% cap but requires current choice customers and those in the queue to make one-time declaration of whether to remain as an EC customer or return to regulated service.
• Planning and Regulatory Issues: Institutes new Integrated Resource Planning process; plans will be updated every 3-5 years; requires 5, 10, and 15-year forecasts of expected load; considering whether to revise Certificate of Necessity provisions required for new construction.
• Other Issues: Potentially allow for utility rate of return on power purchase agreements; would eliminate or restructure Utility Consumer Participation Board.
On June 29th, Senator Mike Nofs and Senator John Proos introduced SB 437 & SB 438 which provides for the following:
SB 437 (Nofs): would update the current Integrated Resource Planning (IRP) process to focus more as a tool for planning and spending authorization where future utility investments would be evaluated by the MPSC based on a stricter set of criteria to ensure greater reliability, adaptability and affordability.
SB 438 (Proos): would seek to eliminate the current renewable and energy efficiency mandates as well as provide specific and important upgrades for distributed generation, net metering, and on-bill financing.
In addition, on March 25th, Senator Mike Shirkey (R-Jackson) introduced SB 235 which provides the Public Service Commission the ability to increase the percentage of Energy Choice within Michigan.
House and Senate Democrats:
Further, On March 3rd, Representative Bill LaVoy (D-Monroe), Democratic vice chairman of the House Energy Policy Committee, and Senator Hoon-Yung Hopgood (D-Taylor),Democratic vice chairman of the Senate Energy and Technology Committee, announced legislative Democrats’ principles to increase renewable energy generation in Michigan.
• Through 2014, renewable energy projects have brought nearly $3 billion in investment to Michigan, and utilities are on track to meet the 10 percent goal required in current law.
• The primary focus of the Democratic guidelines will be to increase Michigan’s renewable portfolio standard (RPS) and increase energy efficiency standards. An RPS increase would generate as much as $6 billion in economic activity and create tens of thousands of jobs. The Michigan Public Service Commission (MSPC) noted that in 2012, every dollar that utilities spent on energy efficiency saved consumers an estimated $3.83 in reduced energy costs.
• Build on the success of the current bipartisan RPS goals with a new target of 20 percent by 2022, allowing “off-ramps” for new technologies and more affordable alternatives.
• Forbid surcharges to consumers for meeting the new RPS target.
• Close the loophole that allows certain corporations from accessing out-of-state energy markets unless they can demonstrate a direct need based on jobs and cost to consumers, and provide that any savings in that reform be used to reduce rates for residential payers.
• Raise energy efficiency standards to 2 percent, further reducing costs for residential and industrial utility customers.
• Develop an affordable long-term strategy that ensures a single Michigan energy market that unites our two peninsulas.
In addition to these eight bills, Representative Sam Singh (D-East Lansing) has introduced HB 4055 which would increase and continue the Energy Optimization Standard for the State of Michigan.
Sarah Hubbard, Principal: Shubbard@acuitasllc.com