Business executives briefed on new state energy laws

November 14, 2008
| By Pete Daly |
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Business executives now have new decisions to make about their electricity use, including the source of their purchased electricity, use of renewable energy credits and energy conservation plans, if any.

The Grand Rapids Area Chamber of Commerce brought in two experts last week for a business forum on "Interpreting the Energy Package" that was signed into law in early October by Gov. Jennifer Granholm.

The experts said that, in some cases, businesses will have to wait for more information as rules are developed; in other cases, they must act now or miss the boat.

Eric J. Schneidewind, an attorney at the Lansing office of Varnum Riddering Schmidt & Howlett, and Monica Martinez, a commissioner with the Michigan Public Service Commission, were the presenters.

In the early 1980s, Schneidewind served six years as an appointee on the MPSC, including four years as chair. He said three elements of the legislation will affect businesses: a revision of the "customer choice" law, a Renewable Portfolio Standard, and net metering for customers.

The previous law allowed electrical customers of Consumers Energy and DTE to choose an alternative supplier, which could save those customers money. The new law caps the total amount of electricity from alternative suppliers at 10 percent of the total transmitted over the major utility company lines.

"If you want to get on choice, you'd better move, because that capacity is going to fill up," said Schneidewind.

Rates are also going to be de-skewed over time so that businesses are not subsidizing residential users, but Schneidewind said the actual savings to larger businesses will be "pretty small," which means the prices offered by electricity sources other than Consumers Energy and DTE will continue to be "extremely competitive" with the prices charged by Consumers and DTE.

Schneidewind said a major impact of the new energy package will be faster implementation of rate increases, and up-front rate increases to cover the cost of interest on new power plant construction.

"Now the customers will be paying the interest cost on construction before the plant is even in service," said Schneidewind. He said the interest can equal 20 percent of the total cost of a new plant.

He noted that West Michigan will probably feel the effects of that particular clause in the new laws first, because Consumers Energy — which serves many electricity customers on the west side of the state — wants to build a new coal-fired plant in Bay City. He described it as a "cost bump on the horizon" if the MPSC approves a certificate of need for the plant. Schneidewind said he expects Consumers Energy to file a formal application with the MPSC within two months, to build the coal-fired plant.

One of the laws, PA 295, is the Clean, Renewable and Efficient Energy Act sponsored by Sen. Patricia Birkholz of Saugatuck. Schneidewind said it amounts to a "mini-revolution" in energy conservation in Michigan. He said it requires the utilities to ensure that 10 percent of their electricity supplies are renewable energy from wind, solar, wood, biomass, waste material and existing hydro-electric installations. He said the law also will reward the utilities for reducing the amount of energy they sell and helping their customers reduce their energy use through various conservation measures.

Costs for implementing an energy efficiency program will be passed on to customers. Large electricity customers can opt out of the utility company program, but would then have to file a plan with the MPSC on how they will conserve energy.

The utility companies can buy renewable energy and also build their own facilities to generate up to 50 percent of their required renewable energy supplies. In order to comply with the renewable portfolio standards law, the Michigan utilities can also meet some of their renewable energy requirement by buying renewable energy credits generated in Michigan, similar to the carbon credits now being bought and sold around the world.

"Physical delivery (of electricity) is not necessarily required," said Schneidewind.

The new Michigan laws stipulate that a company or individual who generates renewable energy, whether for sale or for their own private use, will be earning Renewable Energy Credits, called RECs.

For example, said Schneidewind, a commercial wind farm in Northern Michigan could be selling its electricity locally but it is also generating RECs, and it could sell those RECs to Consumers Energy. He sketched another scenario in which the owner of a wind turbine in Consumers Energy territory could be selling that electricity to Consumers while selling the RECs (earned simultaneously) to DTE.

Even a homeowner who installs wind or solar energy-producing equipment will be earning RECs that can be sold to anyone, including the major utility companies, under the new laws. The REC factor, like the net metering component, should be an incentive for sales of wind and solar energy devices in Michigan.

Schneidewind said the law requires the MPSC to "set up their own program (for RECs). They will have a Michigan renewable energy credit certification operation." The administrative rules for Michigan RECs need to be completed within a year, he added.

Net metering is another new aspect of the energy package, but there are complications. The net metering benefit generally applies to homeowners who have installed a renewable energy source. If at some time it generates more electricity than the owner is using, that excess goes back into the grid and the utility company that owns the transmission lines would owe that homeowner an energy credit. The energy credit is just that — energy only. There will be no cash payments to homeowners by the utility companies, and there is a cap on the total amount of electricity the utility must accept in net metering, that being equal to 1 percent of the utility's electricity supply, according to Schneidewind.

The actual value of the net metering energy credit is in doubt, too, due to conflicting clauses in the law that will have to be worked out, according to Martinez.

The net metering language was added "literally the night before we passed the act," said Martinez.

She also said the MPSC is also working on new standards for a net metering interconnection with the electrical grid.

Although many components of the energy package were first proposed early this year, some of the new twists were added at the last minute.

Both Schneidewind and Martinez encourage energy customers to monitor the MPSC Web site for new filings by utilities and customers, especially the bid process plan the major utilities will use when buying renewable energy from independent suppliers. The utilities have until March to file that plan.
Business executives now have new decisions to make about their electricity use, including the source of their purchased electricity, use of renewable energy credits and energy conservation plans, if any.

The Grand Rapids Area Chamber of Commerce brought in two experts last week for a business forum on "Interpreting the Energy Package" that was signed into law in early October by Gov. Jennifer Granholm.

The experts said that, in some cases, businesses will have to wait for more information as rules are developed; in other cases, they must act now or miss the boat.

Eric J. Schneidewind, an attorney at the Lansing office of Varnum Riddering Schmidt & Howlett, and Monica Martinez, a commissioner with the Michigan Public Service Commission, were the presenters.

In the early 1980s, Schneidewind served six years as an appointee on the MPSC, including four years as chair. He said three elements of the legislation will affect businesses: a revision of the "customer choice" law, a Renewable Portfolio Standard, and net metering for customers.

The previous law allowed electrical customers of Consumers Energy and DTE to choose an alternative supplier, which could save those customers money. The new law caps the total amount of electricity from alternative suppliers at 10 percent of the total transmitted over the major utility company lines.

"If you want to get on choice, you'd better move, because that capacity is going to fill up," said Schneidewind.

Rates are also going to be de-skewed over time so that businesses are not subsidizing residential users, but Schneidewind said the actual savings to larger businesses will be "pretty small," which means the prices offered by electricity sources other than Consumers Energy and DTE will continue to be "extremely competitive" with the prices charged by Consumers and DTE.

Schneidewind said a major impact of the new energy package will be faster implementation of rate increases, and up-front rate increases to cover the cost of interest on new power plant construction.

"Now the customers will be paying the interest cost on construction before the plant is even in service," said Schneidewind. He said the interest can equal 20 percent of the total cost of a new plant.

He noted that West Michigan will probably feel the effects of that particular clause in the new laws first, because Consumers Energy — which serves many electricity customers on the west side of the state — wants to build a new coal-fired plant in Bay City. He described it as a "cost bump on the horizon" if the MPSC approves a certificate of need for the plant. Schneidewind said he expects Consumers Energy to file a formal application with the MPSC within two months, to build the coal-fired plant.

One of the laws, PA 295, is the Clean, Renewable and Efficient Energy Act sponsored by Sen. Patricia Birkholz of Saugatuck. Schneidewind said it amounts to a "mini-revolution" in energy conservation in Michigan. He said it requires the utilities to ensure that 10 percent of their electricity supplies are renewable energy from wind, solar, wood, biomass, waste material and existing hydro-electric installations. He said the law also will reward the utilities for reducing the amount of energy they sell and helping their customers reduce their energy use through various conservation measures.

Costs for implementing an energy efficiency program will be passed on to customers. Large electricity customers can opt out of the utility company program, but would then have to file a plan with the MPSC on how they will conserve energy.

The utility companies can buy renewable energy and also build their own facilities to generate up to 50 percent of their required renewable energy supplies. In order to comply with the renewable portfolio standards law, the Michigan utilities can also meet some of their renewable energy requirement by buying renewable energy credits generated in Michigan, similar to the carbon credits now being bought and sold around the world.

"Physical delivery (of electricity) is not necessarily required," said Schneidewind.

The new Michigan laws stipulate that a company or individual who generates renewable energy, whether for sale or for their own private use, will be earning Renewable Energy Credits, called RECs.

For example, said Schneidewind, a commercial wind farm in Northern Michigan could be selling its electricity locally but it is also generating RECs, and it could sell those RECs to Consumers Energy. He sketched another scenario in which the owner of a wind turbine in Consumers Energy territory could be selling that electricity to Consumers while selling the RECs (earned simultaneously) to DTE.

Even a homeowner who installs wind or solar energy-producing equipment will be earning RECs that can be sold to anyone, including the major utility companies, under the new laws. The REC factor, like the net metering component, should be an incentive for sales of wind and solar energy devices in Michigan.

Schneidewind said the law requires the MPSC to "set up their own program (for RECs). They will have a Michigan renewable energy credit certification operation." The administrative rules for Michigan RECs need to be completed within a year, he added.

Net metering is another new aspect of the energy package, but there are complications. The net metering benefit generally applies to homeowners who have installed a renewable energy source. If at some time it generates more electricity than the owner is using, that excess goes back into the grid and the utility company that owns the transmission lines would owe that homeowner an energy credit. The energy credit is just that — energy only. There will be no cash payments to homeowners by the utility companies, and there is a cap on the total amount of electricity the utility must accept in net metering, that being equal to 1 percent of the utility's electricity supply, according to Schneidewind.

The actual value of the net metering energy credit is in doubt, too, due to conflicting clauses in the law that will have to be worked out, according to Martinez.

The net metering language was added "literally the night before we passed the act," said Martinez.

She also said the MPSC is also working on new standards for a net metering interconnection with the electrical grid.

Although many components of the energy package were first proposed early this year, some of the new twists were added at the last minute.

Both Schneidewind and Martinez encourage energy customers to monitor the MPSC Web site for new filings by utilities and customers, especially the bid process plan the major utilities will use when buying renewable energy from independent suppliers. The utilities have until March to file that plan.
Business executives now have new decisions to make about their electricity use, including the source of their purchased electricity, use of renewable energy credits and energy conservation plans, if any.

The Grand Rapids Area Chamber of Commerce brought in two experts last week for a business forum on "Interpreting the Energy Package" that was signed into law in early October by Gov. Jennifer Granholm.

The experts said that, in some cases, businesses will have to wait for more information as rules are developed; in other cases, they must act now or miss the boat.

Eric J. Schneidewind, an attorney at the Lansing office of Varnum Riddering Schmidt & Howlett, and Monica Martinez, a commissioner with the Michigan Public Service Commission, were the presenters.

In the early 1980s, Schneidewind served six years as an appointee on the MPSC, including four years as chair. He said three elements of the legislation will affect businesses: a revision of the "customer choice" law, a Renewable Portfolio Standard, and net metering for customers.

The previous law allowed electrical customers of Consumers Energy and DTE to choose an alternative supplier, which could save those customers money. The new law caps the total amount of electricity from alternative suppliers at 10 percent of the total transmitted over the major utility company lines.

"If you want to get on choice, you'd better move, because that capacity is going to fill up," said Schneidewind.

Rates are also going to be de-skewed over time so that businesses are not subsidizing residential users, but Schneidewind said the actual savings to larger businesses will be "pretty small," which means the prices offered by electricity sources other than Consumers Energy and DTE will continue to be "extremely competitive" with the prices charged by Consumers and DTE.

Schneidewind said a major impact of the new energy package will be faster implementation of rate increases, and up-front rate increases to cover the cost of interest on new power plant construction.

"Now the customers will be paying the interest cost on construction before the plant is even in service," said Schneidewind. He said the interest can equal 20 percent of the total cost of a new plant.

He noted that West Michigan will probably feel the effects of that particular clause in the new laws first, because Consumers Energy — which serves many electricity customers on the west side of the state — wants to build a new coal-fired plant in Bay City. He described it as a "cost bump on the horizon" if the MPSC approves a certificate of need for the plant. Schneidewind said he expects Consumers Energy to file a formal application with the MPSC within two months, to build the coal-fired plant.

One of the laws, PA 295, is the Clean, Renewable and Efficient Energy Act sponsored by Sen. Patricia Birkholz of Saugatuck. Schneidewind said it amounts to a "mini-revolution" in energy conservation in Michigan. He said it requires the utilities to ensure that 10 percent of their electricity supplies are renewable energy from wind, solar, wood, biomass, waste material and existing hydro-electric installations. He said the law also will reward the utilities for reducing the amount of energy they sell and helping their customers reduce their energy use through various conservation measures.

Costs for implementing an energy efficiency program will be passed on to customers. Large electricity customers can opt out of the utility company program, but would then have to file a plan with the MPSC on how they will conserve energy.

The utility companies can buy renewable energy and also build their own facilities to generate up to 50 percent of their required renewable energy supplies. In order to comply with the renewable portfolio standards law, the Michigan utilities can also meet some of their renewable energy requirement by buying renewable energy credits generated in Michigan, similar to the carbon credits now being bought and sold around the world.

"Physical delivery (of electricity) is not necessarily required," said Schneidewind.

The new Michigan laws stipulate that a company or individual who generates renewable energy, whether for sale or for their own private use, will be earning Renewable Energy Credits, called RECs.

For example, said Schneidewind, a commercial wind farm in Northern Michigan could be selling its electricity locally but it is also generating RECs, and it could sell those RECs to Consumers Energy. He sketched another scenario in which the owner of a wind turbine in Consumers Energy territory could be selling that electricity to Consumers while selling the RECs (earned simultaneously) to DTE.

Even a homeowner who installs wind or solar energy-producing equipment will be earning RECs that can be sold to anyone, including the major utility companies, under the new laws. The REC factor, like the net metering component, should be an incentive for sales of wind and solar energy devices in Michigan.

Schneidewind said the law requires the MPSC to "set up their own program (for RECs). They will have a Michigan renewable energy credit certification operation." The administrative rules for Michigan RECs need to be completed within a year, he added.

Net metering is another new aspect of the energy package, but there are complications. The net metering benefit generally applies to homeowners who have installed a renewable energy source. If at some time it generates more electricity than the owner is using, that excess goes back into the grid and the utility company that owns the transmission lines would owe that homeowner an energy credit. The energy credit is just that — energy only. There will be no cash payments to homeowners by the utility companies, and there is a cap on the total amount of electricity the utility must accept in net metering, that being equal to 1 percent of the utility's electricity supply, according to Schneidewind.

The actual value of the net metering energy credit is in doubt, too, due to conflicting clauses in the law that will have to be worked out, according to Martinez.

The net metering language was added "literally the night before we passed the act," said Martinez.

She also said the MPSC is also working on new standards for a net metering interconnection with the electrical grid.

Although many components of the energy package were first proposed early this year, some of the new twists were added at the last minute.

Both Schneidewind and Martinez encourage energy customers to monitor the MPSC Web site for new filings by utilities and customers, especially the bid process plan the major utilities will use when buying renewable energy from independent suppliers. The utilities have until March to file that plan.

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