POLICY

Mich. goes face to face with pivotal energy issues in 2015

U.S. EPA's Clean Power Plan already has prompted legislators and regulators across the nation to take a closer look at a laundry list of energy issues in their states.

Perhaps nowhere is the debate as robust as Michigan, which faced pivotal policy decisions even before the Obama administration proposed a landmark rule on June 2 to slash carbon dioxide from power plants by almost a third.

Michigan Gov. Rick Snyder (R) in November 2012 laid out a general framework for updating energy policies in the state with a goal of promoting affordability, reliability and environmental protection. And for the past two years, there have been studies, policy papers and work groups on a range of topics, including retail electric choice, energy efficiency and renewable energy.

"All along, the view has been that 2015 is the right year for action," Michigan Public Service Commission spokeswoman Judy Palnau said.

Now, with the start of a new legislative session just weeks away, there's a new focus and new questions about how the EPA rule will influence long-simmering policy debates.

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The Michigan Public Service Commission last week issued an order requiring utilities and other electricity suppliers across the state to submit supply-and-demand projections through 2019.

The commission also invited the Midcontinent Independent System Operator, the grid operator for most of Michigan, and PJM Interconnection LLC to provide comments.

The commission cited as a catalyst for the order a projection by MISO earlier this fall that Lower Michigan could face a 3-gigawatt shortfall in generation capacity as soon as 2016 because of coal plant retirements related to EPA's Mercury and Air Toxics Standard.

The projected capacity shortage was also the focus of a report prepared last month by consultants on behalf of the state's largest utilities, DTE Electric and Consumers Energy.

The report scrutinized Michigan's hybrid electricity market, under which up to 10 percent of utilities' retail electric load can shop for an alternative supplier.

"The current regulatory framework creates uncertainty for energy providers as to which customers need to be served and when," said the report by Public Sector Consultants. "Due to the hybrid market structure, some customers avoid paying the utilities' resource planning costs, which makes it difficult to ensure adequate energy supply."

Choice debate

Detroit-based DTE, which sells electricity to 2.1 million customers in southeast Michigan and wants to end electric choice, said it faces retirement of 60 percent of its coal fleet and the retail choice law has been the "clear driver" of the capacity shortage projected by MISO.

Michigan is at a critical juncture in its energy future at which decisions will be made that will shape the state's generating fleet for years to come, the utility said.

DTE said it will have sufficient generating capacity in 2016 to serve bundled customers -- those who buy energy and delivery service -- but it is not securing capacity for retail access customers.

"In order to mitigate threats to affordability and reliability, we believe 2015 is the right time to address these challenges through comprehensive energy legislation," the utility said in a recent presentation.

Proponents of expanding retail choice, meanwhile, said utilities are misleading by linking coal plant retirements and the projected generation shortfall to the state's retail choice law.

"The reliability issues that the utilities continually raise are a smokescreen," said Wayne Kuipers, a former state senator who leads the Energy Choice Now coalition, a group of 1,300 mostly small businesses advocating to expand retail electric competition.

Michigan's retail electric rates are higher than Midwest and national average rates, he said, because most consumers are tethered to monopoly utilities. He also insists the state would be better prepared to meet EPA's carbon proposal in a competitive marketplace.

"Competitive markets work," Kuipers said. "If we had let the market control the discussion, they would have already factored that in."

Mike Shirkey, a Republican state representative, introduced a bill last year that would remove the cap on electric competition. The measure never emerged from committee. But Shirkey, who won a seat in the Michigan Senate last month, is expected to continue to push the issue.

Revisiting renewables

Michigan legislators are also expected to re-examine the state's renewable energy standard when they return to Lansing next month.

A 2008 law required utilities to get 10 percent of generation from renewable resources by the end of 2015 -- a target that utilities will meet with little trouble, and at a lower cost than initially projected.

Snyder has broadly expressed support for more renewables, and the chief executive of one of the state's largest electric utilities, CMS Energy Corp., said earlier this year that he expects the requirement to be expanded (EnergyWire, April 25).

James Clift, policy director for the Michigan Environmental Council, a consumer and environmental advocacy group, said he believes the state can continue to add renewable power at the same pace it has since the 2008 standard was approved -- a rate equal to 1 to 1.5 percent of the total generating capacity.

A continued, predictable buildout of wind and solar energy would serve renewable energy developers and utilities that buy the energy for consumers alike, and help Michigan avoid the boom-bust cycles that have plagued other states.

Clift acknowledges that updating the state's renewable energy law could be muddied by uncertainty over how the Clean Power Plan will look in its final form. The issue is also intertwined with other policy debates that have been teed up for legislators, including electric choice, net metering, distributed generation and energy efficiency.

"It's hard to address one without looking at the big picture," he said.

Twitter: @jefftomich | Email: jtomich@eenews.net

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