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Sunday, 03 September 2017 16:43

‘The fix is in’: Groups say utilities threaten choice market as new energy laws take effect

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An ongoing case before the Michigan Public Service Commission over maintaining adequate electricity supplies into the future is prompting concerns over rising energy costs and unnecessarily spending $1 billion on new power plants.

The issue has one state lawmaker proclaiming that “the fix is in.”

Since Michigan’s new energy laws took effect in April, the MPSC has met with a spectrum of energy-related stakeholders over how to implement aspects of the new laws, including energy efficiency, renewable energy and long-term utility planning.

In the two years it took to craft the bipartisan, comprehensive energy bills, one of the most contentious topics hinged on Michigan’s electric choice market and the perceived attempts by investor-owned utilities to make shopping for electricity on the open market uneconomical.

Utilities DTE Energy and Consumers Energy claim their ratepayers are in effect subsidizing those who shop for electricity from “Alternative Electric Suppliers” by making sure there are adequate, reliable electricity supplies in-state. Alternative suppliers argue that their ability to import electricity and compete with utilities presents a cheaper option for businesses and public schools. In the end, lawmakers agreed to hold Michigan’s 10 percent electric choice market in place, leaving it to competing sides and state regulators to hash out the details over maintaining reliability in the coming years.

Now some are crying foul, saying state regulators are bending to the wishes of utilities in a way that could end electric choice simply by making it too expensive to buy from alternative suppliers. One of the controversial proposals before the MPSC would be require alternative energy suppliers to source the electricity they sell from within the state through a “local clearing requirement,” most likely from DTE or Consumers or through building new power plants.

State Rep. Gary Glenn, R-Williams Township, who also chairs the House Energy Policy Committee, has been leading the fight against utilities and the MPSC. He notes that MPSC attorneys warned the three appointed commissioners months ago that having an in-state requirement would not improve reliability and would cost customers. He asked those attorneys to testify before his committee in August, which was rebuffed by MPSC Chairman Sally Talberg, who offered instead to testify herself.

Critics also say now that having an in-state requirement could lead to the over-building of about 1,200 megawatts worth of electricity, or the equivalent of about $1 billion for a new power plant.

“We’re talking about all electricity customers having to pay an extra $1 billion for an overbuild that accomplishes nothing except to allow utilities to squeeze their competitors out of business,” Glenn told MiBiz. “Then there is a broader question about the separation of powers and who gets to make energy policy in Michigan: elected representatives or two or three unelected appointees on the MPSC not accountable to anybody?”

In filings with the MPSC, Consumers Energy has maintained that its customers continue to subsidize customers who take advantage of electric choice — or “Retail Open Access,” and that having a local generation requirement “ensures a sufficient amount of generation is located close to loads, to account for the constraints of the transmission system.”

MPSC spokesperson Nick Assendelft stressed the case is ongoing and no final decisions have been made over an in-state requirement.

“The Commission will take all the evidence into consideration on this complex topic,” Assendelft said in an email. “Commissioners are working toward agreement on a capacity demonstration process under the state’s new laws in a process that has been a transparent, collaborative and ongoing effort.”

“I fully recognize that it’s business as usual,” Glenn responded about the process the MPSC is using and how it is gathering input. “They’re used to acting with impunity under the expectation that the issue is so complex that no one will call them out.”

WIDE OPPOSITION

A variety of groups representing alternative energy suppliers, businesses and public schools have joined Glenn in opposing the plans, saying the proposal would raise rates and effectively end electric choice in Michigan. Critics say there’s a strong likelihood of litigation against the MPSC should the plan move forward.

They also point to a July 25 letter from State Reps. Rob Verheulen, R-Walker, and Chris Afendoulis, R-Grand Rapids, saying that an in-state requirement was specifically removed from the final legislation that passed.

“We thought this was an issue settled by the Legislature,” said Joshua Lunger, director of government affairs for the Grand Rapids Area Chamber of Commerce, adding that it has the potential to “kill the electric choice program in the near future.”

Teresa Ringenbach, a senior manager of government and regulatory affairs with alternative supplier Direct Energy, added that the regional grid operator, Midcontinent Independent Systems Operator (MISO), has its own rules for energy companies acquiring generation within different zones of its service territory, and that alternative suppliers would be governed by those provisions, not the MPSC’s stipulations.

“The concern has become: Is this an end-run around the legislature to make it so impossible to make capacity requirements that it will kill electric choice? That doesn’t mean our customers won’t get capacity, it just means that will probably be really expensive,” Ringenbach said.

While she said there are still some other clarifying questions around Michigan’s market moving forward, this is not the direction Ringenbach expected the process to be going “in any way, shape or form” after what she and others felt was settled in the new energy laws.

“Where it was going was going well,” she said of the stakeholder meetings between April and mid-June before an MPSC order came out directing staff to look into a local requirement. “Then you hear the screeching of the brakes on June 15 when the order came out.”

Glenn said while the stakeholder process had been promising at the start, the MPSC appears headed in a direction that largely benefits investor-owned utilities. He says it mirrors a process that’s taken place over the rates utilities pay independent power producers for renewable energy and is in a similar stage of development.

“Since it is happening on two different issues,” Glenn said, “it’s hard not to conclude that the fix is in.”

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