Michigan Senate Proposals Put Clean Energy, Consumers at Risk

May 5, 2016 | 8:46 am
Sam Gomberg
Senior Analyst

New proposals in the Michigan Senate fall flat when it comes to advancing clean energy resources and protecting consumers. The bills—Senate Bill 437 and 438—would repeal the state’s energy efficiency and renewable energy standards, put an end to fair compensation for folks who generate their own electricity, and enact a planning process that puts utilities, not the people of Michigan, in the driver’s seat when it comes to the state’s energy future.

The Michigan Senate is currently considering legislative proposals that would be a bad deal for consumers. More work is needed to ensure a reliable and affordable energy future for Michigan. Photo: © Creative Commons/Brian Charles Watson (Wikimedia)

The Michigan Senate is currently considering legislative proposals that would be a bad deal for consumers. More work is needed to ensure a reliable and affordable energy future for Michigan. Photo: Brian Charles Watson/CC BY (Wikimedia)

New energy legislation in Michigan has been a long time in the making. Senators Nofs—Chair of the Energy and Technology Committee—and Vice-Chair Senator Proos originally introduced legislation last summer, but were sent back to the drawing board over a litany of concerns from many of their colleagues and stakeholders, including UCS.

The last six months were spent mostly behind closed doors working on revisions. But the latest versions reveal amendments that are mostly semantics. The ultimate impact of these bills remains the same: Kill the state’s successful clean energy standards, deal a blow to the state’s burgeoning rooftop solar industry, and put in place a utility planning process that won’t adequately ensure that Michiganders have a say in their energy future.

Strong commitments to renewables and efficiency protect the interests of Michiganders

There shouldn’t be any debate over whether renewables and efficiency are critical elements of an affordable, low-risk and sustainable electricity supply.

Utilities have exceeded the state’s efficiency standard of 1 percent annual savings and the Public Service Commission reports that consumers are realizing $4.38 in savings for every $1 invested in rate-payer funded efficiency programs. Research conducted by the state also shows a robust and cost-effective pool of efficiency resources still available in Michigan.

But utilities won’t invest in efficiency without a strong standard because the benefits of efficiency primarily flow to consumers. Avoided exposure to volatile fossil fuel prices, savings on electricity bills, and avoided investment in expensive power plants are all consumer benefits that don’t drive utilities to invest. It’s up to state policy to protect consumers. And a proven and effective way to do that is with a strong energy efficiency standard.

The state’s renewable energy standard is also a success. Utilities have met the current 10 percent standard in less time and at less cost than originally anticipated. Since the standard was enacted in 2008, the cost of renewable energy resources has fallen by more than 60 percent, and more than 1,500 megawatts of new renewable energy has been developed in Michigan, driving almost $3 billion in capital investments. Looking ahead, multiple analyses, including those conducted by UCS and the state conclude that Michigan could achieve at least 30 percent renewable energy by 2030.

But the current renewable energy standard leveled off last year and without legislative action, the state could miss out on a golden opportunity to accelerate its clean energy transition. The recent extension of federal tax credits for renewable energy through 2021 provides Michigan with access to diversify its electricity portfolio with even more cost-effective renewable energy in the near-term. Developers in other states are already announcing major projects to take advantage of these renewed incentives. A strengthened renewable energy standard would ensure that Michigan doesn’t miss out.

A direct attack on Michigan’s rooftop solar market

The current proposal in the Senate would end net metering in Michigan and replace it with a compensation system that puts utility profits over consumer benefits (Source: Wikimedia)

The current proposal in the Senate would end net metering in Michigan and replace it with a compensation system that puts utility profits over consumer interests. Photo: Wikimedia

The Senate proposals also take aim at Michigan’s nascent rooftop solar market. Senate bill 438 would repeal the state’s net metering laws—where customer-owned generation is compensated at retail rates, effectively offsetting onsite electricity usage.

In its place, Senator Proos proposes a buy-all/sell-all arrangement where customers who generate their own electricity would be forced to sell that electricity to utilities at wholesale rates—typically about 3 to 5 cents per kilowatt-hour (kWh). They would then be required to buy their electricity demand from utilities at retail rates: typically about 15 cents per kWh.

This arrangement would essentially put an end to the small-scale solar industry in Michigan and is unfair to consumers who wish to self-generate. Much like repealing the state’s clean energy standards, this proposal puts utility interests ahead of consumer interests, and does not advance a more affordable and sustainable electricity portfolio.

“Integrated resource planning” will not fix the problem

Senator Nofs has stated the intent of these proposals is to replace the clean energy standards with an “integrated resource planning” (IRP) process that requires utilities to submit plans for meeting energy demand every four years for approval by the Public Service Commission. Experience across the nation has shown that these processes are typically utility-dominated, meaning the approved plan maximizes benefits and minimizes risk for the utilities as opposed to the consumer. Rarely does this process on its own lead to robust investments in non-traditional resources such as efficiency and renewables.

Simply put, an IRP process is not an adequate substitute for strong clean energy standards and does not capture the consumer benefits of investing in these resources. The proper role for an IRP process would be to complement, rather than replace, strong clean energy standards, allowing for a robust and transparent evaluation of how to maximize the benefits and minimize the costs of investments in renewables and efficiency.

Back to the drawing board…again

It is disappointing that after all of the debate, and after all of the data and analytics that have been put forth to support Michigan strengthening its commitment to renewables and efficiency, the Senate proposals continue to miss the mark.

Members of the Michigan Senate should avoid the urge to pass this legislation for the sake of passing something, or because the policy debate has carried on for almost two years.

Michiganders deserve strong policies that will protect their interests. The current versions of Senate Bills 437 and 438 are not it.