Michigan Municipal Electric's Weeks calls for revamp of FERC cost allocation plan

Does the Federal Energy Regulatory Commission's cost allocation plan for new transmission disproportionately affect certain regions? During today's OnPoint, Jim Weeks, executive director of the Michigan Municipal Electric Association and a member of the MISO Northeast Transmission Customer Coalition, explains why he believes Michigan is being unfairly affected by FERC's proposed plan. He discusses movement in Congress to address the issue and gives his take on how FERC should allocate the costs of new transmission.


Monica Trauzzi: Hello and welcome to OnPoint. I'm Monica Trauzzi. Joining me today is Jim Weeks, executive director of the Michigan Municipal Electric Association and member of the Miso Northeast Transmission Customer Coalition. Jim, thanks for coming on the show.

Jim Weeks: Great, great to be here. Thanks for having me.

Monica Trauzzi: Jim, things are heating up in Michigan right now over a cost allocation of new transmission lines. Why is Michigan different from other states when it comes to cost allocation and how has FERC decided to handle Michigan in its plans?

Jim Weeks: Well, FERC has a tariff where they have decided that they're going to socialize the costs for all new transmission that fall into a category of MVP or a multi-value project. Michigan, what's happening right now in Michigan that makes this a little unique is, we passed, in 2008, our own renewable energy bill, Public Act 295. And we, under that bill, identified a wind zone board. We said what would be the best area in Michigan to invest in transmission? Where could we get the most benefit for the investment? And we decided to -- after the board issued its report, they decided that Zone 4, which is in the thumb of Michigan would be the best place to invest. We're going to have a $510 million investment in the thumb in Michigan and that's going to be able to provide us 5000 megawatts of renewable energy that would be wind energy. Public Act 295 also has within it the criteria to meet the 10 percent RPS requirement by 2015, that you have to utilize your renewable generation from within our state. So ...

Monica Trauzzi: But the idea here is that Michigan would benefit even from this FERC proposal from the additional renewables that would come online. You don't see that same benefit though?

Jim Weeks: No, we really don't. We don't see -- you know, for $510 million we get 5000 megawatts and that alone would allow us to reach -- the 5000 megawatts in the thumb is enough to have a 13.2 percent of your retail sales to come from wind. We also have many other types of renewable sources, whether it be biomass or hydroelectric that's we've invested in and solar we're invested in. So what we're afraid that's going to happen is that if you just socialize the cost of the transmission, then instead of -- you kind of take out the advantages that Michigan has. And so if we're in the thumb and for 510 million, we can get 5000 megawatts, once we've reached that -- that 10 percent, so we have an advantage as far as our grid, what we've already invested in our grid and how we would be able to utilize an existing grid to get a lot of renewables from the thumb region and as soon as we hit that 10 percent cap, what's going to happen is if you're a wind developer, you're not going to look at the cost of the infrastructure anymore. You're just going to look at where's the wind the best. We're afraid that were going to have 5000 megawatts and have maybe about 1500 megawatts built, reach our 10 percent and then when developers are going to say, okay, the wind is best out West, Michigan is paying 20 percent of the bill. That's because on this tariff they said we're going to socialize this space on a load racial share.

Monica Trauzzi: So, but could Michigan benefit then from selling some of the renewables that it's producing?

Jim Weeks: If Michigan wasn't subsidizing to the tune of potentially 500 million a year, we could sell that. Again, you take away our advantage in that our renewables and for the amount we have to put in to our existing grid, that does give us an advantage. Now, we don't have the wind capacity factor that a North Dakota or South Dakota might have, but we don't have to put the amount of money into our infrastructure. So, again, for $510 million we get 5000 megawatts. But if everybody is paying the equal amount, then the natural advantages that we have as far as the location of the wind to the grid, you take that away. It's really an anti-renewable tariff when it comes to Michigan.

Monica Trauzzi: So this coalition has formed against FERC's proposal. Who's involved in this coalition? Because it's a variety of different groups that have come together.

Jim Weeks: Yeah, and it's really even gotten more support of recent. So we started off, it was Attorney General Mike Cox and now it's, after the election, Attorney General Bill Schuette. We have the Association of Businesses advocating tariff equity, that would be your General Motor, that would be Chrysler, Marathon, Ford, GM, our large industrial users. You've got the Michigan Municipal Electric Association, R41 municipal members, Consumers Energy and Detroit Edison are also part of that coalition. And recently we had a House concurrent resolution, House Concurrent Resolution 9, that was brought before the House Energy and Technology Committee, that passed by 21 to 0 vote. So, again, it's a nonpartisan or a bipartisan issue. It's now on the House floor. We've recently had a letter from Governor Schneider sent to FERC. And the concurrent resolution in the letter from the governor asked FERC to grant our request for a rehearing and to modify the order.

Monica Trauzzi: And Senator Debbie Stabenow has also stepped in here, calling for Congress to have some hearings specifically in the Energy and Commerce Committee. Where do you -- or Energy and Natural Resources --

Jim Weeks: Right.

Monica Trauzzi: Where do you see this going in Congress?

Jim Weeks: Well, you know, I'm not sure. But Senator Stabenow certainly being a member of that very important committee and asking Chairman Bingaman to hold a hearing, we're hoping that there will be a hearing. We think that the long-standing principle of beneficiary pays and looking at cost causation, we still think that is the right way to go. And, you know, if there's some economic -- if we see some economic gains, we've seen nothing out of MISO that have shown us any modeling that would suggest that we benefit at all, from a reliability standpoint or from an economic standpoint. So really --

Monica Trauzzi: Are you asking for special treatment though from Michigan? I mean some might say this looks like you're asking for special treatment.

Jim Weeks: Yeah, I mean they might ask that. Well, we're just saying let's continue historically what we've done. The persons, the customers that benefit and those that cause the costs, there should be a nexus between that. If you benefit you pay. If you caused a cost you pay. Those that don't benefit, we don't benefit. We haven't seen the benefits. MISO hasn't shown us the benefits. You know we have 21 members of the House Energy Committee that are all split between Democrats and Republicans. The governor of the Michigan Chamber and I left out the Michigan Environmental Council even put a card in support for House Concurrent Resolution 9. So really, all of the customers on one side, including the environmental groups in Michigan, have said this is really unfair to Michigan because we're subsidizing the western part of MISO for them to develop wind energy, then to compete against Michigan, when we already are going to make our investment.

Monica Trauzzi: All right, it's an ongoing debate. We're going to end it right there. Thank you for coming on the show. I appreciate it.

Jim Weeks: Well, thank you very much, appreciate being here.

Monica Trauzzi: And thanks for watching. We'll see you back here tomorrow.

[End of Audio]



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