2016 Michigan Energy Roundup: Legislature Writes Obama Utility Scheme Into Michigan Law

(This article is the first in a three-part series discussing major changes made by the Michigan Legislature to energy regulation in the state. Those changes are now enrolled in statute as Public Acts 341 and 342 of 2016.)

After a marathon two-day, lame-duck session, the Michigan Legislature completed and enacted new electric utility legislation that has been the focus of debate for the past two years. Ironically, the original purpose of the proposed legislation — to accommodate sweeping new federal regulations ordered by the Obama administration — appears obsolete after Donald Trump won the presidential election on Nov. 8.

But pressure from the state’s major utilities, and two years of lobbying, helped push the Legislature to move ahead anyway, even though the President-elect has promised to rescind the Obama administration’s energy regulations as one of his first acts in office.

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The final wording of the new law appears to protect Michigan’s small electricity choice program — a win for electricity choice customers. However, the measure also continues a problematic “net metering program” that does help diversify electricity sources across the state, but does so by subsidizing household solar installations. The legislation also expanded a mandate that now requires utilities to get 15 percent of their power from renewable sources (up from 10 percent).

Throughout the debate, utilities focused on the need for system stability that was endangered by proposed Obama administration regulations. Heavy-handed federal regulation and tight market conditions made closure of several DTE and Consumer’s Energy coal generation plants seem unavoidable and these utilities warned that Michigan faced potential energy shortages.

The big commercial utilities responded by promoting plans to build new natural gas and renewable generation facilities (for which they receive a guaranteed profit). They also continued to advance conservation programs within their operating territories — for which the utilities benefit through a variety of state and federal programs.

However, while they warned about threats to system reliability, the big utilities simultaneously undercut that message by promising to “keep building renewables and … retire our coal fleet,” regardless of what happened in the regulatory realm. But replacing low-cost, reliable, easily dispatchable generation capacity like coal with unreliable, nondispatchable, and subsidy-dependent capacity like renewables actually diminishes energy system stability.

As debate on the new Michigan law entered its final phase, I advised using a wait and see approach — there was nothing to be gained from rushing through legislation devised to respond to the Obama administration’s regulatory plans. The legislation's proposed changes may become unnecessary and obsolete under a Trump administration. Plans to close coal generation plants in Michigan leave the state vulnerable to any future electricity shortages or price spikes; completely avoidable and self-inflicted wounds.

However, on the evening before the close of the lame-duck session, Governor Rick Snyder mounted a last-minute push, demanding the new law be passed. The Governor’s involvement forced a compromise between the state’s two major utilities and alternative energy suppliers, addressing concerns that Michigan’s small energy choice program was in danger of being killed off. That agreement was sufficient to reassure House Republicans and, the following afternoon, the main bill in the proposal passed easily in a 79-28 vote. The Senate followed up, approving the updated bills in a 33-4 vote. Gov. Snyder signed the bill — now Public Act 341 of 2016 — on December 21.