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December is shaping up to be a busy month in the Michigan legislature as lawmakers will likely cast their first votes to overhaul the state’s energy policy.
The first plan to emerge from committee comes from House Republicans seeking to replace the state’s renewable and energy efficiency standards, passed in 2008, as well as amend Michigan’s Retail Open Access law.
While the plan — sponsored by Republican Aric Nesbitt, who chairs the House Energy Policy Committee — has received Gov. Rick Snyder’s endorsement, various interest groups say it will do little to encourage renewable investment and will eventually “choke off” Michigan’s hybrid electric choice law that allows customers representing up to 10 percent of a utility’s load to choose an alternative energy supplier.
The plan had bipartisan support, as well as opposition, in committee.
House bills 4297 and 4298 would set a clean-energy goal — not a standard — of 30 percent by 2025, which could be met by renewables and energy efficiency. Utilities would get incentives based on the amount of efficiency they invest in.
After initially calling for an end to electric choice, Nesbitt’s plan would keep the 10 percent cap on participating in the program, but tighten rules for entering and leaving the alternative market.
Overall, the plan establishes an in-depth Integrated Resource Planning process for utilities to follow when planning future capacity and investments, which supporters say will continue to drive renewable and efficiency investments.
Clean-energy and competition advocates say Nesbitt’s plan is a start but still far off the mark. The electric-choice provisions and clean-energy goal were reportedly compromises after original language eliminated both of them, which critics say the plan is still a veiled effort to do.
Aside from an “energy message” in March, Snyder hadn’t yet backed a specific plan moving the state forward.
“Reducing energy waste, on-bill financing, and having at least 30 percent of our energy come from our cleanest sources — renewables and energy waste reduction — are all things that were in my March special message, and I am excited to see support for them,” Snyder said in a statement in support of Nesbitt’s plan.
Meanwhile, a Senate committee is working on its own energy proposal that observers say could also move forward next month.
Both plans getting hearings at the committee level — and therefore most likely to be voted on — are backed by Republicans, which hold majorities in both chambers.
‘It will kill choice’
Nesbitt told MLive.com his updated plan to keep Michigan’s 10 percent choice program is a “good compromise” between those who wanted to expand it and those who wanted it eliminated.
However, there’s a strong sentiment among the energy deregulation community that it does the latter, as major utilities have sought.
“I don’t think there’s any debate: It will kill choice,” said Rick Coy, legal counsel with the Association of Businesses Advocating Tariff Equity, or ABATE. “The combination of all the restraints and restrictions on it does not preserve choice.”
Choice supporters point to the fact that those who would leave their alternative energy supplier to go back to a regulated utility would be barred from switching again for 15 years. Even those waiting in a “queue” to participate, as thousands of customers are right now, and opt to leave the queue would not be able to change to an AES for 20 years — without ever even switching to one.
Coy said there are “about half a dozen traps along the way,” both for alternate suppliers and customers, that would make it uneconomic to go with an alternate supplier.
Requirements are placed on alternate suppliers to stay in the market that will cost them more money, Coy said, and that create “artificial shortages” in capacity in their service area. Additionally, those participating in electric choice would have to pay the full generation costs for the utility they leave plus the costs of getting electricity from an alternate supplier.
“There’s no reason to put all those hooks and barbs in, unless you’re trying to protect a monopoly,” Coy said. “It’s the strangest anti-economic development program I’ve ever seen, to push companies and jobs out of the state in preference for a monopoly.”
In a Detroit News op-ed, the president and CEO of DTE Energy, Steve Kurmas, said Nesbitt’s plan is “an important step toward securing an affordable, reliable and clean energy future for Michigan.”
“Perhaps most importantly, the legislation addresses the fundamental problems with Michigan’s current electricity regulations while retaining the current 10 percent cap on ‘retail open access,’” Kurmas wrote.
Within the IRP process, Coy also notes that there is no requirement for competitive bidding. For example, if a utility needs to build new generation to make up for plant retirements, utilities are not required to bid the process out for potentially less costly projects or a scenario in which a utility buys power from an independent supplier.
“The concept of the IRP is correct,” Coy said. “The detailed implementation is flawed. What this legislation does is make the utility of tomorrow look a lot like the monopoly of yesterday. We’re going backwards in terms of what the future is.”
Larry Ward, executive director of the Michigan Conservative Energy Forum, agrees. He said independent producers in Michigan are already getting “squeezed out” of their Power Purchase Agreements with utilities.
“These businesses are the job-creating ones,” Ward said of independent producers. “Competition has to come from somewhere.”
Ward also predicted there may be some amendments on the House floor that create exemptions for school districts that can participate in electric choice to save money.
30 percent ‘goal’
Another major change inserted into the latest version of Nesbitt’s bill, proposed by Democratic Rep. Julie Plawecki, calls for a 30 percent renewable and efficiency goal by 2025. A DTE official reportedly said the utility supports the 30 percent goal.
Clean-energy advocates were quick to point out that it was lower than Snyder’s 40 percent goal he announced in March and actually represents a relatively small increase in renewable generation over the next 10 years.
If Michigan continues at a 1.5 percent rate of efficiency gains, that knocks off 15 percent of the goal on top of the 10 percent already achieved under current law — leaving 5 percent growth in renewables over the next 10 years.
“They’re going to do that anyway,” Ward said of the utilities. “When you set a goal, you want it achievable, but you also want it strong. Five percent really isn’t asking them to do anything if you do the math.”
Sam Gomberg, energy analyst with the Union of Concerned Scientists, points out that efficiency growth may even be greater than 1.5 percent based on the incentives baked into the bill for utilities.
“I appreciate the amendment and trying to kick the ball forward,” Gomberg said. “But it doesn’t do anything a renewable energy standard does in terms of certainty, market development and something to sink your teeth into.”
After originally eliminating an efficiency standard, Nesbitt’s plan now calls for what Gomberg called a “shared savings” scenario where utilities receive ratepayer-funded incentives to invest in efficiency beyond 1 percent a year.
He called it an “interesting, counterintuitive” way to structure an efficiency program and advocated for an IRP to require at least 1 percent under the assumption that it’s the “most reasonable and prudent” plan for a utility going forward.
Getting to this point with Nesbitt’s bills was perhaps the most controversial aspect of them. The committee went months without holding hearings on the bills before taking them up again — with significant alterations — over two lengthy sessions on Nov. 4 and Nov. 5.
“It surely was no civics lesson,” Coy said of the process. “Legislators were asked to vote on things they were never asked to read, much less understand or question.”
Other Republican lawmakers also reportedly criticized the way Nesbit brought amendments forward.
“I wasn’t too impressed with the process it went through,” said Ward, of the Michigan Conservative Energy Forum.
He noted that several “good amendments” were brought up during committee that “didn’t see the light of day.”
“Some of it was probably by design — get enough votes to move it to the House floor and let the rest of the House have a crack at it with amendments,” he said. “In reality, it left a whole lot of work still to be done by the rest of the membership. Usually things come out of committee a little cleaner than that.”