Michigan Public Service Commission pushes ahead on state electricity choice decision
The Michigan Public Service Commission (MPSC) on Friday pushed forward with a decision that requires all state electric providers demonstrate ability to meet capacity four years out, amid opposition from the chairman of the state’s House Energy Policy Committee.
Case No. U-18197 has been controversial, but now, with a second order, the MPSC has said providers can submit capacity demonstrations for the coming period. That process has been split in two, though, with investor-owned electric utilities needing to submit plans by Dec. 1, 2017 and other providers, including municipal utilities, electric cooperatives and alternative electric suppliers, needing to do so by Feb. 9, 2018. An order necessitating utilities and alternative suppliers prove they can supply customers with Michigan-generated energy will begin applying in 2022.
After the initial four-year-out demand, the MPSC will require providers demonstrate their ability to meet the next year’s supply annually. Further, if alternative electric suppliers cannot or choose not to arrange to meet new requirements, they can instead turn to local utilities to provide capacity service, the charges of which would be based on a rate determined by the MPSC. Electric providers can plan on up to 5 percent of their capacity to be gained through the annual capacity auction maintained by MISO, the regional grid operator.
The decision follows on the heels of a series of technical conferences the commission had arranged to study the capacity demonstration process, as well as a comment period that Sally Talberg, chairman of the MPSC, said represented a transparent, collaborative and open process that had been helpful on a controversial issue.
“This issue has generated a lot of attention and the Commission carefully considered the law in its entirety and the diverse viewpoints and legal arguments from stakeholders,” Talberg said during the decision meeting. “The LCR (local clearing requirement) was not ‘removed’ from the law. The law explicitly defines the local clearing requirement and the Commission’s role in setting the LCR with technical assistance from MISO. The Commission considered each and every provision in the law and how these provisions work together as a cohesive framework. For these and other reasons stated in today’s order, the Commission believes its decision is expressly authorized by the law.”
Yet the decision is likely to meet opposition from the state legislature — notably from state Rep. Gary Glenn (R-Larkin Township).
From the beginning of the case, Glenn has stood in opposition to the MPSC’s pending decision, saying that it flouts an energy law argued over until the end of 2016. That law allowed for schools and major corporations to buy electricity off the regional wholesale market and maintained a 10 percent cap on the total retail electric sales for the state. Local clearing requirements had been eliminated from that bill, largely because doing so was one of the few ways to get it to pass.
“The commission has safely implemented this new law,” Talberg said in an interview with the Daily Energy Insider. “This does require all suppliers to demonstrate they have sufficient supply, but we’ve given maximum flexibility in terms of options consumers can use to meet requirements. They can use resources from outside of the local area or zone, they can do management programs, so they can cost effectively serve their customers.”
“We think with this flexibility and with the supply that appears to be available at the regional level, they can lock that in and they will be able to be competitive and maintain the viability of the electric choice program here in Michigan,” she said.
Opponents like the Michigan Schools Energy Cooperative have raised the point that such language could effectively kill the Electric Choice program, and it was stricken from the original bill for just that reason. DTE Energy and Consumers Energy, in turn, could use their market dominance to either refuse to sell to alternative energy suppliers or sell to them above market price, the cooperative has said.
That same cooperative released findings in July that the choice program had saved the state’s schools more than $140 million. Although the MPSC decision may change some business models, Talberg notes the future impact of that decision could depend on customers’ arrangement with their suppliers.
Ten alternative energy companies could be affected by the decision, with trickle down to 200 school districts and thousands of businesses benefiting from the 10 percent electric choice market. Glenn argues that the decision could drive up electricity costs for customers that buy power from alternative energy supplies. Excess electricity would have to be purchased from DTE Energy and Consumers Energy, or through construction of their own power plants.
The utilities, notably, have been large proponents of the MPSC order. Customers like Dow Chemical Co., however, have not.
“This is clearly a back-door attempt by unelected bureaucrats to eliminate Michigan’s Electricity Choice program by bureaucratic regulation, a protectionist scheme that was pushed by the state’s two monopoly utilities in the last legislative session but was expressly rejected by the people’s elected representatives,” Glenn said in a statement.
In the past, he has threatened to sue state regulators if the proposed locational requirements were passed. Talberg, however, said the MPSC’s decision making process has been legal and a faithful interpretation of the new law.
“Typically when a legislature is concerned about an agency’s implementation of a law, they would create a law to overturn that,” Talberg said. “The commission’s orders are subject to appeals processes within a court to establish legality. In terms of the legislative role, it’s in terms of more oversight. What the commission is more focused on is sound decisions based on the letter of the law we have before us today. There has been a lot of accusations about the commission’s motivations, but we’ve remained focused on the substance of the matter before us. It’s a complicated issue.”
