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Michigan utility customers who put surplus electricity they generate back onto the power grid will be paid a lower, avoided-cost rate after June 1.

The Michigan Public Service Commission (MPSC) issued an order Wednesday replacing the state’s net metering policy with an avoided-cost tariff based on how much utilities would pay to build the same amount of generation themselves.

Liesl Eichler Clark, president of the Michigan Energy Innovation Business Council, said the decision will create uncertainty for customers and installers.

“I see this as complicated, unfair and costly to the industry,” Eichler Clark said, noting that the new rate will vary depending on the local utility.

In 2016, MPSC staff was tasked by the legislature with studying a replacement for net metering that would better reflect the cost of serving customers who produce their own electricity. Under net metering, excess generation is credited at retail costs of electricity.

Under the “inflow/outflow” billing mechanism adopted Wednesday, based on a February staff report, customers buy electricity at retail rates and are credited for surplus generation at the utility’s avoided-cost rate in the next billing period.

The MPSC said in a statement the new model ensures distributed generation customers are “assessed for their fair and equitable use of the electrical grid.”

The billing mechanism must be included in utility rate cases filed after June 1. Utilities are also allowed to file their own distributed generation tariffs “if desired.”

Customers enrolled in net metering before the first DG rate is approved after June 1 will be grandfathered for 10 years. Read the MPSC’s full order below.

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Andy compiles the Midwest Energy News digest and was a journalism fellow for Midwest Energy News from 2014-2020. He is managing editor of MiBiz in Grand Rapids, Michigan, and was formerly a reporter and editor at City Pulse, Lansing’s alternative newsweekly.

3 replies on “Michigan to replace net metering program with avoided-cost tariff”

  1. Not to knock the reporter/author, but why not mention the actual price difference in the two cost? Some of us are not in Michigan or the effected areas, and I am sure the current consumer would be interested…

  2. With utilities trying to avoid taking care of customers helping with clean power generation and sustainability, i cant wait to see battery tech become more affordable. Those customers will leave the grid all together. I have already seen this happen.

  3. With that said. They will also lose their meter charge their facility charge and all their other possible charges. This will make for an interesting future for the utilities.

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