Last week, I testified before the state Senate Energy and Technology Committee in support of legislation that would preserve the reliability of Michigan’s energy supply and enable our state to move to a more modern, efficient and sustainable energy infrastructure.
Senate Bills 437 and 438, sponsored by Republican Sens. Mike Nofs and John Proos, address several vital issues facing our state as we approach a critical juncture in the way energy is generated and delivered.
SB 437 directly addresses the key weakness in current policy that undermines reliability. The bill would require any electric provider serving Michigan customers to be fully accountable for supplying the electric generating capacity their customers rely on.
The federal government expects that accountability, but Michigan’s current law allows one category of providers — deregulated retail energy marketers — to sidestep this responsibility. Without firm plans to support the electric capacity of retail customers, the reliability of electric supply for all Michigan customers is at risk.
The retail energy marketers operating in Michigan are the state’s third largest energy supplier. But instead of building and operating power plants, those retail marketers rely on DTE power plants and other existing generating capacity to serve their customers.
A focus on reliability is critical because we have already begun what will be a fundamental transformation of the electric generation sector here in Michigan. On April 15, 10 coal-fueled generating plants were shut down across our state. Over the next 15 years Michigan will retire 60 percent of its coal-fired generation, amounting to 30 percent of its total generation.
Most of Michigan’s coal-fueled power plants were built many years ago. They were built with enough extra capacity to ensure reliability in case a plant shut down unexpectedly, or when hot weather spiked the need for power, or when a booming economy created demand for a steel mill expansion or a new auto plant.
DTE and Michigan’s other utilities, including co-op and municipal systems, are making plans to replace retiring plants with renewables and cleaner power plants fueled by natural gas. Michigan’s current energy laws require these regulated providers to have enough secure power sources to serve their customers. Not so with the non-regulated retail marketers. And as power plant retirements shrink the generating capacity that the retail marketers have relied on, the reliability of our state’s entire grid could be put at risk.
The Michigan Public Service Commission raised this issue in a report last year that cites “a gap in planning and procurement of adequate resources for the long-term for customers served under the Customer Choice Program.”
The proposed legislation provides a framework for a long-term plan for reliable electric supply by holding all energy providers accountable for their fair share of local supply.
Some might claim that this legislation will kill the market served by retail energy marketers in Michigan. This misrepresents the true intention of the policy. The bills preserve this supply option for customers while also taking steps to protect all customers by ensuring each energy provider meets its fair share of our state’s reliability requirements. What would kill retail marketers’ activity is the lack of adequate resource planning.
Michigan, just like most states around the country, is required to maintain a 15-percent generation reserve margin, a cushion to protect against unforeseen events. A material dip in that margin could compromise reliability. As we retire and rebuild power plants in Michigan, it is easy to see that not properly planning for the 10 percent of Michigan served by retail marketers could fundamentally undermine two-thirds of this reserve margin and seriously threaten the state’s reliability.
That’s why lawmakers should secure Michigan’s energy future by voting in favor of these bills. Doing so would shift the coming transformation from a challenge to an opportunity to transition to more efficient and more sustainable energy sources for our state — a transition that will benefit Michigan’s families and businesses for decades to come.
Gerry Anderson is chairman and CEO of DTE Energy.