Advanced Energy Perspectives

At Summer Break, Michigan’s Energy Legislation is Far from Settled

Posted by Liesl Eichler Clark and JR Tolbert

Jun 16, 2016 12:30:00 PM

    

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For nearly two full years, the state of Michigan has been debating its energy future. Just before Memorial Day, legislators finally took a committee vote on a comprehensive package of legislation that would have a dramatic impact on the state’s electric power system. With the legislature now adjourned for the summer, there is still much to be determined: The House has its own package and work remains to be done on the Senate floor. Much progress has been made thus far to improve these bills and provide greater market certainty for advanced energy companies. What else is needed comes down to priorities. Advanced Energy Economy and the Michigan Energy Innovation Business Council (Michigan EIBC) have four we consider key to an advanced energy future for Michigan.

Priority One: Protect the Renewable Portfolio Standard (RPS) and Energy Optimization (EO) Standard

When Senate Bills 437 and 438 were introduced in July 2015, the legislation was a broadside attack on Michigan’s successful renewable energy and EO standards. The bills would have repealed the RPS and phased out the EO in 2017. This action would have sent a clear market signal to advanced energy companies that Michigan was closed for business.

The current version of the legislation isn’t all we would want in terms of certainty, but it does represent progress. The RPS is still phased out in favor of an Integrated Resource Planning (IRP) process, but the package now includes a floor of 10% renewable energy for investor-owned utilities. Additionally, the legislation sets a renewable energy plus energy efficiency goal of 35% by 2025. Raising the voice of the industry, AEE and Michigan EIBC continue to push for the RPS to demonstrate that Michigan is committed to additional renewable development and to maintaining a mechanism for market access (more on that later).

Much progress has been made specifically on energy efficiency as well. The current language extends the renamed Energy Waste Reduction targets until January 1, 2021. This was a hard-fought negotiating point for the efficiency industry to ensure a marketplace until the IRP process is fully vetted and running.

Finally, the legislation will require the Public Service Commission to consider progress toward these goals when reviewing utility IRP submissions. This directive signals the legislative intent that the goals actually be achieved, providing much-needed teeth to the IRP process.

Priority Two: Improve the Structure for Demand Response

Michigan has long had a broken system for demand response (DR), having been ranked by FERC as the state with the most untapped DR potential. Throughout the process, AEE and Michigan EIBC have proposed legislative language to address some of the policy mistakes that have prevented the state from unleashing this market. While the current package doesn’t fully address our concerns, there is new language that would expand consideration of DR as part of the IRP process. 

Priority Three: Ensure a Competitive Marketplace for Advanced Energy

Michigan’s existing RPS has been one of the country’s most successful in terms of keeping ratepayer impact to a minimum and spurring development owned and operated by third-party providers. In fact, the standard was so successful that both Consumers Energy and DTE Energy removed legislatively approved surcharges from utility bills in 2015. Much of this success can be traced to Michigan’s 50-50 rule, which barred utilities from owning more than 50% of the renewable energy built to comply with the RPS.

Unfortunately, lawmakers have failed to include this provision in the legislative package under consideration. This is a failure that threatens to shut the Michigan market to third-party developers, limiting competition and resulting in higher costs for ratepayers. We will continue to push for greater market access as the legislation moves forward.

One positive development is inclusion of a voluntary “green pricing” program, which would expand opportunities for companies to voluntarily purchase renewable energy through their utility provider. To make Michigan more attractive to the growing number of companies seeking to procure more of their energy from renewable sources, these provisions should be strengthened. Specifically, the legislation should provide customers enrolling in the voluntary program the opportunity to obtain the full benefits of a long-term fixed-price schedule for these resources. It should also ensure that customer demand for renewable energy leads to additional renewable energy development, not simply re-allocate existing projects or credits.

Priority Four: Save Net Metering

A perfect example of the distance traveled on this legislative package can be found in net energy metering (NEM). As recently as three weeks ago, the legislation was set to do away with NEM. In its place, owners of distributed generation systems would have been required to sell all the power they produce to the utility at the wholesale price and then buy back all of the energy they use at the higher retail rate. 

Had the legislature continued down this path it would have destroyed the economics of distributed generation. The proposal was vehemently opposed by the solar industry and several times appeared to threaten negotiations all together.

The good news is that progress has been made. The current language grandfathers all existing net metering customers and directs the Commission to consider a rate structure for these customers. While this is an improvement, both AEE and Michigan EIBC find the language directing the Commission to be overly restrictive and short-sighted, as it leans so heavily towards costs while ignoring the benefits of distributed generation to the electric grid. It would be better for the legislature to adopt the House approach and leave Michigan’s successful NEM statute in place.

The legislative process is far from over. Both houses of the legislature broke for summer last week with no movement on the Senate floor for the energy legislation, and many issues are still in play.

Michigan now enters the campaign cycle – what many in Lansing refer to as the “silly season.” It is unlikely there will be a formal vote on such meaningful legislation in September and October, with an election looming, but it is possible. And after November, of course, is lame duck. Many parties have regularly said that the people of Michigan will not be served with deep, thoughtful, well-crafted legislation if it comes out of lame duck. So it’s possible that Michigan’s energy future will not be decided this session. A new House will be sworn in in January. The Senate will remain the same. But the legislative process will begin anew.

Whatever happens, AEE and Michigan EIBC will continue to fight for improvements in the package – including ensuring this new policy leads to additional clean energy deployment and that advanced energy companies have the ability to compete in the Michigan marketplace.

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Topics: State Policy Update

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Advanced Energy Perspectives is AEE's blog presenting news, analysis, and commentary on creating an advanced energy economy. Join the conversation!

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