A proposed settlement between Consumers Energy and independent power producers could lead to hundreds of megawatts of solar power being built within the next four years.
On Thursday, the utility filed the proposed settlement with the Michigan Public Service Commission hoping to resolve a more than year-long dispute with solar developers looking to sell power to Consumers.
Multiple developers have challenged the amount Consumers is required to pay them under the federal Public Utility Regulatory Policy Act, or PURPA. Under the 1978 policy, utilities are required to purchase power from independent producers at the “avoided cost,” reflecting the amount it would cost the utility to build itself. Critics have claimed Consumers Energy proposed avoided costs rates that made their projects uneconomic to build.
The settlement is supported by the Solar Energy Industries Association as well as Cypress Creek Renewables, a national solar developer that has been an ongoing critic of Consumers Energy’s PURPA position. The groups had withheld support of Consumers’ proposed Clean Energy Plan calling for 6,000 megawatts of solar to be added to its system by 2040.
Thursday’s agreement says Consumers will use “commercially reasonable efforts” to interconnect 584 MW of solar by Sept. 1, 2023, which developers are ready to build. The utility aims to connect 150 MW of third-party power a year.
“The settlement demonstrates Consumers Energy’s commitment to clean, affordable and reliable energy for Michigan,” Consumers spokesperson Katelyn Carey said in a statement. “(Thursday’s) settlement announcement was supported by the Solar Energy Industries Association and a broad coalition of renewable energy developers who are equally committed to invest in renewable energy. We are pleased to work with these stakeholders to ensure a clean, affordable and reliable energy future for our state.”
The proposed settlement would resolve multiple PURPA complaints against Consumers, including a challenge before the Michigan Court of Appeals.
Over the past two years, Consumers and DTE Energy have seen an unprecedented number of interconnection requests as renewable energy costs declined and while regulators studied avoided costs, resulting in a significant backlog of projects, as MiBiz previously reported. The utilities have challenged developers over avoided cost rates as well as whether the capacity is needed. If utilities show the power is not needed on the system, they can pay developers a lower rate.
Consumers has more than 3,500 MW of projects in the “interconnection queue.” More than 3,300 MW of projects, or 94 percent, have agreed to the settlement.
SEIA Vice President of State Affairs Sean Gallagher said the group has worked with Consumers for “several months” to clear the backlog of PURPA projects.
“SEIA and its allies developed a settlement agreement that can clear the PURPA queue and achieve the best possible outcomes for renewable energy developers and investors,” Gallagher said in a statement.
The rates set for the 584 MW to be built in the coming years is “expected to result in significant savings for the Company’s customers when compared to the possibility of contracting at the same rates with the more than 3,500 MW of relevant projects” pending,” according to the settlement. After that, the company’s PURPA purchases “will be made at prices that more accurately reflect the Company’s actual avoided costs.”