Michigan energy overhaul wins big support

Jonathan Oosting
Detroit News Lansing Bureau

Lansing Michigan legislators Thursday approved a sweeping plan to rewrite state energy policy, backing a late-breaking agreement brokered by Gov. Rick Snyder in the final hours of the lame-duck session.

The heavily lobbied plan, which won bipartisan support before the House and Senate adjourned for the year, would create new approval processes for utilities planning to replace aging coal-fired power plants, increase a mandate for renewable energy production and largely maintain the state’s limited “electric choice” program.

Snyder, who shook hands on the Senate floor after final passage, called the legislation a “major milestone” for the state.

“We’re going to have a very adaptable policy, but it’s going to focus on reliability, affordability and environmental sustainability,” he said.

Rep. Aric Nesbitt, chairman of the House Energy Committee, said the energy overhaul will make Michigan residential rates “more competitive” but stopped short of guaranteeing a reduction. He highlighted increased energy efficiency incentives and competitive bidding requirements for new generating facilities.

“I think it’s a win for our residential rate payers, it’s a win for our businesses and job creators here in the state, and it’s a win to make sure we have the energy capacity in the long term to keep the lights on,” said Nesbitt, R-Lawton.

Snyder helped negotiate a critical breakthrough on the choice front, bridging a gap between alternative energy suppliers and utilities — Detroit-based DTE Energy and Jackson-based Consumers Energy — that had battled over proposed regulations in an earlier Senate plan but both celebrated the new deal.

The final legislation won over some House Republicans who feared that a proposed “capacity charge” pushed by the utilities could have effectively killed the choice program, which allows alternative and out-of-state suppliers to provide 10 percent of Michigan’s electricity at unregulated and typically lower rates.

The choice program is primarily used by large manufacturers and school districts that say it has saved them significant cash on power needs for big buildings. A choice coalition led by the Grand Rapids Chamber of Commerce worked with Snyder over the past week to finalize the deal.

Rep. Gary Glenn, a leading choice advocate, voted against the package to honor a promise he made to a group he worked with on the issue, but he appeared to go out of his way to praise the final product before his colleagues voted.

“As I understand the bills …, there are significant improvements in energy policy that will benefit rate payers,” he said, “and from my view it’s a good starting point from which hopefully we will expand energy choice in the future.”

Utilities have argued alternative suppliers are not helping to fund investments in the energy grid they rely on, leaving traditional customers to essentially subsidize the network. But critics feared proposed capacity fees could have made choice rates for business and schools uncompetitive or forced them back to DTE or Consumers.

The new deal sets clear parameters for the Michigan Public Service Commission to determine if a fee is necessary, how high it could rise or if it would be more appropriate for an alternative supplier to secure capacity demands through a three-year auction process.

“It goes about it in a little different way, but it still does provide that reliability that we think is most important,” said John Austerberry of DTE, who added the final deal would benefit residential customers, too.

“They rely on a reliable source of energy, day in and day out, and the bills have several provisions that protect affordability as well as continuing the transition to cleaner sources of energy production,” he said Thursday before the votes.

In a nod to utilities, the proposal would allow the state’s electric choice share could shrink below 10 percent for six years if a large number of customers leave the program because of market spikes or other factors. But the program is quite popular, with roughly 11,000 potential customers waiting to join.

The House approved the bills Thursday afternoon in a series of bipartisan 79-28 and 76-31 votes, capping a dramatic final lame-duck week in the lower chamber that included a marathon Wednesday session and all-night negotiations on the energy proposal, which Snyder first began pushing for in a March 2015 special message.

The Senate approved the House changes in 33-4 votes.

The proposal would require Michigan utilities to buy or produce at least 15 percent of their energy from renewable sources by 2022, building on the 10 percent by 2015 standard they already met. The bill expands the definition of renewables to include geothermal, steam, wood biomass and more.

The plan would also create a goal of meeting 35 percent of the state’s energy needs through waste reduction efficiency programs and renewable sources by 2025. It would also increase incentives for utilities to adopt emergency efficiency programs.

“That’s going to be significant,” said Rep. Sam Singh of East Lansing, who helped lead negotiations for Democrats. “We’ve already saved billions of dollars over the close to nine years we’ve had these programs in place, and we’ll continue to save money at that level and magnitude as we go forward.”

The plan approved Thursday dropped a proposed charge for energy customers who participate in net metering programs, generating their own supply through solar panels or other renewable sources to add back into the grid.

Instead, the legislation tasks the Michigan Public Service Commission with developing an “appropriate tariff” for new net metering customers after determining whether their use of power lines or other energy infrastructure is a significant cost.

Rep. Tom Barrett, R-Potterville, voted against the bill and said it should have explicitly required the commission to also consider the cost benefits of net metering, suggesting the provision “makes us vulnerable to stifling innovation.”

But Singh called the net metering language a good “compromise” after the Senate plan, which he felt was “too onerous for individuals and businesses” that generate their own power.