Government and Sustainability

Suppliers and utilities still at odds

Proposed energy bills could greatly affect state’s electric choice market.

September 23, 2016
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Michigan still is awaiting an energy plan, and an announcement last week by Gov. Rick Snyder that discussions between the State of Michigan and the Midcontinent Independent System Operator have produced “a framework that facilitates a state approach for establishing adequate electrical resources to meet reliability requirements,” isn’t putting everyone at ease.

According to a release from the governor’s office, a proposal will be submitted to the Federal Energy Regulatory Commission in November that addresses capacity and cost concerns related to Michigan’s 10 percent electric choice market.

“This process will produce real solutions to a serious problem and shows the positive outcomes that are possible when there is a spirit of partnership between the state and MISO,” Snyder said in the release.

John Bear, MISO CEO, said his organization collaborated with the Michigan Agency for Energy and Michigan Public Service Commission to develop a provision designed to “meet Michigan’s resource planning needs.”

Under the proposed framework, states would have an option to select a “State Compensation Mechanism” for procuring electrical resources.  

Under that mechanism, the Michigan Public Service Commission would set a capacity charge after a contested proceeding.  

An alternative electric supplier would have an opportunity to find other capacity — presumably at a lower price — or pay that charge to the utility with the responsibility for procuring capacity to cover that load in a last resort (e.g. DTE or Consumers Energy).

The utility that had to purchase capacity would have three years to purchase that capacity.

Under the proposal, MISO would be in charge of setting amounts of capacity to be procured to meet reliability rules and evaluate capacity arrangements used to meet resource adequacy requirements. 

Sally Talberg, chairman of the Michigan Public Service Commission, said the proposal “identifies the resource adequacy requirement three years in advance of the need,” and “creates the opportunity” to procure any needed capacity resources.

Valerie Brader, executive director of the Michigan Agency for Energy, said her agency will continue to work with the Michigan legislature to enact “needed reforms.”

There currently is a package of bills, SB-437 and SB-438, introduced by Sen. Mike Nofs, R-Battle Creek, in front of the legislature related to Michigan’s energy future.

SB-437 is the bill dealing with electric choice and alternative energy suppliers.

It has been hotly contested over the past year, with electric choice customers and alternative energy suppliers saying the bill would effectively kill electric choice in Michigan, and utilities saying the legislation is needed to ensure capacity and prevent future brownouts or blackouts in the state.

Maureen Saxton, spokesperson for Energy Choice Now, said without knowing what will be in the final proposal, it’s hard to have a reaction, but she said from the press release, the insertion of the Public Service Commission into the MISO free market capacity purchase process most likely would be bad for electric choice in Michigan.

“The Michigan Public Service Commission would then have the authority to set the price for alternative energy suppliers,” Saxton said.

While the Michigan Public Service Commission could act to ensure electric choice in the state, there is a concern that the opposite will occur.

“We need to see the details,” Saxton said. “We need to know a lot more before we have a reaction.”

Saxton said the press release from the governor makes one thing absolutely certain, however: “Senate Bill 437 absolutely shouldn’t be passed with this lingering out there. There is already so much complexity with the energy debate, and now it introduces a whole other layer of complexity along with a lot of uncertainty of what this proposal will actually do to the choice market.

“Everyone, especially lawmakers, needs to understand how this proposal interplays with the legislation they are looking at.”

Saxton said a lot of West Michigan job makers and several public schools benefit from the AES market.

Consumers Energy believes the proposal is an important companion piece to SB-437, which it supports.

“We support the MPSC and MISO’s efforts to reform the MISO process to make it more fair and reliable,” Consumers Energy said in a statement.

Dan Bishop, director of media relations for Consumers Energy, said reliability is a major concern for Consumers Energy and DTE.

Bishop said while reliability hasn’t been a big issue in Michigan previously, Consumers and DTE believe it will be in the future.

Both companies have shut down coal power plants in compliance with the U.S. Environmental Protection Agency requirements, and with the federal Clean Power Plan looming, surplus energy quickly is decreasing, he said.

“The issue is the mainly out-of-state AES serving the electric choice market are not assuring the state that they have enough power for their customers,” Bishop said.

Bishop said the mechanism being proposed would require alternate suppliers to assure the state they have power for their customers.

“The state needs a guarantee they have the capacity,” Bishop said.

Under Michigan’s electric choice system, up to 10 percent of electricity customers can choose to contract with AES for electricity.

Bishop said as Consumers Energy plans for the future, it is only taking into account 90 percent of Michigan’s energy consumers, which are its customers, but it could be held responsible for the 10 percent of choice customers if there isn’t enough capacity from the AES.

“Reliable and affordable energy is the driver of the Michigan economy,” Bishop said. “It has been and it will be in the future, and working with customers, regulators and the communities to make sure Michigan has a sound energy plan is our job.”

Saxton said there has never been a reliability issue in Michigan, and the AES have “lived by every single rule the utilities live by, from guaranteeing reliability to renewable mandates.”

She also said MISO already requires a 15 percent margin of reserve power, which she said is a large margin compared to other states.

Saxton noted many of Michigan’s largest employers have come out against SB-437, as did the Grand Rapids Area Chamber of Commerce.

Nofs said earlier this month that he will continue to push for passage of SB-437 and SB-438 before the end of the year.

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