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Energy compromise wins big in both chambers, heads to governor’s desk

December 21, 2016

Article courtesy of MIRS News Service

It took an entire session to do it, but legislation designed to shore up Michigan’s electricity market amid declining in-state production passed the House today 79-28 on the back of an 11th-hour deal spearheaded by Gov. Rick SNYDER and the Grand Rapids Chamber of Commerce.

The unique agreement is one in which most major sides of this much-lobbied proposal can declare some level of victory. The meat of the package, SB 0437, was passed 79-28 and SB 0438 was passed 76-31. 

The bills were sent back over to the Senate, which concurred on both bills, 33-4, sending them to the Governor. 

“This is a win, win, win — for our ratepayers, our economies and for our long term reliability in the state,” said Rep. Aric NESBITT (R-Lawton), who led negotiations in the house. 

Nesbitt said he believes that rates will “be more competitive” in the long term under this deal, but declined to say, specifically, whether the package would bring them down. 

For the incumbent utilities, the percentage of electricity customers being served by choice marketers could conceivably roll backward if the percentage of customers fall below the current 10 percent cap and there’s nobody waiting to take their place. 

If the 10 percent cap were to dip below 10 percent, it would have to stay there for six years if no additional customers in the queue were to sign up for choice. 

It also requires customers who leave their choice provider to commit to DTE, Consumers or the other incumbent utility for six years before returning to the choice market.

The alternative energy suppliers (AES), however, believe the new agreement provides more certainty that the 10 percent cap on electric choice won’t wither and die as they felt the Senate-passed version of SB 0437 and SB 0438 did. 

It allow AES companies to avoid paying a four-year fee to cover the costs of an incumbent utility’s new power plant if they can prove to the Michigan Public Service Commission (MPSC) that they have their power needs covered three years into the future. 

The new deal also gives customers a chance at seeing rate relief in times of lower-than-expected energy needs by eliminating what was known as a “decoupling” provision. 

Most Democrats were fine with what was worked out, in that it raised the amount of energy Michigan would need to generate from renewable sources from 10 to 15 percent by 2022. 

The new version would no longer make that 15 percent a floor, meaning power companies could regress in their commitment to renewable energy once they hit the renewable portfolio standard (RPS), but few believe power companies will pull the plug on wind turbines and solar generation once they make the investment to go in that direction. 

What counts as “renewable fuel” was also expanded to include steam power, woody biomass fuel and geothermal energy. 

Enough of the issues House Minority Floor Leader Sam SINGH (D-East Lansing) brought to the table in regards to energy efficiency and net metering were addressed to bring over a significant number of Democrats. 

“It obviously took us much longer than we wanted to, to get to the finish line,” Singh said. “And we were pleased that the Senate brought over a template that we could work with that we could make a number of changes to get both sides of the aisle comfortable with it.” 

Language charging net metering uses grid fees were dropped, pleasing both sides of the aisle, and was instead replaced with a study to see if it would be appropriate to levy a tariff, such as for use of the wires. Everyone currently using net metering would be grandfathered into the current program. 

Singh was also pleased with the removed 1 percent cap on energy waste reduction incentives to reward energy efficiency of 1.5 percent or higher. 

The compromise came literally on the brink of the Legislature adjourning for the 2015-16 session and only came about after Snyder invited the Grand Rapids Chamber of Commerce, Dow Chemical and other major private-sector clients to the table for negotiation. 

Rep. Ed MCBROOM (R-Vulcan) offered an amendment that would commission an impact study for the construction of a power transmission line between the Lower Peninsula and Upper Peninsula, essentially paving a path to construction. 

The amendment essentially proposed to reinsert HB 4575 from last year. McBroom blamed utilities as “duplicitous” partners in crafting the policy who withheld support from the line. 

McBroom forced a roll call vote on the amendment — a process that stalled proceedings on the floor. McBroom was granted the vote and the amendment failed, 47-60. 

Rep. John KIVELA (D-Marquette) spoke in favor of the amendment, but ultimately opposed the legislation because of the loss of the amendment. 

After a Michigan Chamber of Commerce-backed proposal passed the Senate 26-11 in November, the bills stalled in the House when a pro-electric choice contingent, lead by Rep. Gary GLENN (R-Larkin Twp.), managed to prevent a majority of Republicans from supporting the bill.

Without the 31 “yes” votes in the Republican caucus to satisfy the so-called “Hastert Rule” of no legislation moving from the House without the support of a majority of the majority caucus, the bills looked dead in the water. 

Sources told MIRS the Governor became engaged about a week ago and negotiations were slow in coming to any common ground. The electric choice community saw SB 0437 as requiring them and their customers to pay the types of fees that destroyed the choice market in the Indiana Michigan Power region of Southwest Michigan. 

However, the Governor’s team, lead by lead lobbyist Dick POSTHUMUS and Valerie BRADER, the executive director of the Michigan Agency on Energy, helped pound out a compromise at around 7 p.m. Wednesday that wasn’t agreed to in concept until around 11 p.m. 

A special victory for the Governor was the inclusion in SB 0438 of energy waste reduction language. In addition to the extension of the 2021 sunset on the current program by one year, the Michigan Agency for Energy is required to promote, increase awareness of and actively engage in energy waste reduction. 

At that point, the Legislative Service Bureau worked through the night on the necessary language while Posthumus and Snyder sold previously reluctant GOP House members on the new compromise. 

“I want to commend the Governor’s administration for helping with the give and take on both sides of the energy debate,” said Andy JOHNSTON, vice president of government affairs of the Grand Rapids Chamber. 

His members saw the compromise as creating stability in the choice market and a better option than kicking the issue into the 2017-18 session.

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