Alternative Energy Rates Disputed

April 11, 2005
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LANSINGAfter three years of research into solar energy systems, Michael McGuire decided that a two-kilowatt solar system was right for his family's cabin 25 miles north of Menominee in the Upper Peninsula.

But he's waited to buy and install the $15,000 system because Michigan had no program allowing him to sell the excess energy back to the local power company.

Although the wait is over for McGuire after state Public Service Commission (PSC) approval of a net metering program, he and other homeowners, along with some environmental groups, said the program provides little incentive for businesses and residential customers to generate renewable energies.

"This is barely a nod to the consumers," said McGuire, whose cabin is in Daggett Township. "The idea of a net metering program is to stimulate the growth of renewable energy and, as it stands, this program is not a big deal."

But state and industry officials say the program will offer flexibility for utilities, while providing incentives to reduce fossil fuel consumption and a guaranteed market for excess renewable energy.

"The idea here is not for customers to make money, but to meet their energy needs using cleaner energy," said Tom Stanton, director of the PSC's renewable energy program.

Net-metered customers generate some or all of their electricity on-site, which is subtracted from the amount of the utility's power they consume. For example, a customer could use 100 kilowatt hours (kWh) of a utility's electricity, but generate 20kWh from a wind generator at home, resulting in a bill for the remaining 80kWh.

Customers will receive credit for excess production that is sent back to the grid. The credit will carry over from month to month, but unused credits will revert to the utility after 12 months to help offset program costs.

The amount of energy that can be sold back is limited to 0.1 percent of a utility's peak load of electricity, which could range from 150kW for Upper Peninsula Power Co. to 7 megawatts for Consumers Energy.

Michigan is the 39th state to establish a net metering program, which includes wind, solar, hydroelectric and other renewable energy sources. Utilities can apply to include hydrogen fuel cells and other emerging technologies.

Even though the program is voluntary, PSC Chair Peter Lark said 11 utilities that signed a December 2004 agreement — including the Edison Sault Electric Co., Alpena Power Co. and Consumers Energy — will participate.

David Gard, an energy policy specialist for the Michigan Environmental Council, said that while there are good intentions behind the program, some provisions might inhibit participation.

"I'd be delighted if lots of people signed up for this, but I don't think it provides much of an incentive for consumers," he said.

Gard said the program hurts consumers because the utilities don't buy power back at the same price the public pays to use it, but rather a retail generation rate for producers of energy, which varies anywhere from 2 cents to 8 cents less per kilowatt hour.

Paul Feorene already sells electricity produced by the 20kW wind generator on his farm in Montague, near Lake Michigan. But he said the utilities have an advantage because of the lower price they pay for customers' energy, and so allowing them to keep the excess credits will help level the playing field.

"The utility companies already have a monopoly across the state, but if they truly want to engage the small producers, the extra $20 to $100 these credits might be worth won't break them," he said.

But Steve Stubleski, a general rate analyst for Consumers Energy, said requiring utilities to buy back power at the same price it's sold would result in lost revenue because they don't own the lines that distribute the electricity.

The PSC's Stanton agreed that such a requirement would be unfeasible.

"There are some who feel that the utilities should give all of the money back, but to do that the money either has to come from the shareholders' pockets, which they won't stand for, or the utility has to charge other customers extra to make up for it," he said.

In addition, the ceiling of 0.1 percent of a utility's peak load was considered too low by some of the 26 people who submitted comments to the PSC. But Stanton said that roughly 20,000 megawatts of electricity are consumed in Michigan during the summer, and the program's limit — equal to about one-tenth of 1 percent — is more than adequate.

At that pace, he said, it would take 40,000 customers each with a 5kW solar system to reach the limit.

Although there's a wide range of energy consumption in a variety of homes, the average Michigan home uses 500 to 700kWh of electricity per month.

"That's a very big number, and when you look at the rate of participation for other states' systems, it could be a long time before we push that limit," Stanton said. "But if it happens, then we'll go back to the PSC."    

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