Michigan lawmakers consider bill to remove cap on distributed generation
A bill under consideration in the Michigan House of Representatives would eliminate the 1 percent cap on distributed generation in order to grow the rooftop solar industry, but opponents say the bill does nothing to ensure all customers pay their fair share to maintain a reliable electric grid.
Electric utilities, environmental groups, and other stakeholders offered testimony at a Feb. 17 hearing for Michigan House Bill (HB) 4236, sponsored by Republican state Rep. Gregory Markkanen, vice chair of the Michigan House Energy Committee.
Both Consumers Energy, Michigan’s largest energy provider, and DTE Energy, oppose H.B. 4236 and stated that the bill would have negative consequences for many electric customers they serve.
In a letter of opposition addressed to the House Energy Committee, Cathy Wilson, executive director of State Governmental Affairs at Consumers Energy, said the legislation, if enacted, would raise the cap without assuring that all customers pay their fair share of the costs to maintain a reliable, affordable and sustainable energy system.
“Increasing the cap provides more of a cost shift to other customers which will impact those who are most vulnerable,” Wilson said. “Low-income families are less likely to afford solar panels and they end up taking on more of the cost burden.”
Private rooftop solar customers receive a credit for excess power sent back to the grid based on the power supply component of their retail rate, minus transmission charges.
Consumers Energy is concerned about the cost of purchasing the “outflow” credit from private roof-top solar customers, and suggests it be similar to what it pays for other energy purchases. “If, for example, we were to purchase energy from the Midcontinent Independent System Operator’s wholesale energy markets, the purchase price would be approximately one-third the price of the current outflow credit” for roof-top solar customers, Wilson explained.
DTE Energy, which in 2019 announced its goal of net-zero carbon emissions by 2050, also submitted comments to the committee that outlined concerns about HB 4236.
Camilo Serna, vice president of Regulatory Affairs for Detroit-based DTE Energy, said the company is concerned about the “absence of a solution to address the continued shifting of costs from customers with rooftop solar systems to customers without it.”
In 2019, the commission shifted from net metering to the current distributed generation model, which DTE said was a step in the right direction, but did not eliminate the cost-shifting issue completely.
“Distributed generation customers not only draw power from the grid, but they also export power to the grid,” Serna said. “The constant fluctuation in their demand for power results in their utilization of the grid at a level 23 percent higher than the average residential customer.”
The Michigan Manufacturers Association (MMA), which says represents 29 percent of electricity sales in Michigan, also opposes the bill.
Mike Johnston, vice president of Government Affairs at MMA, said that the current 1 percent cap on distributed generation results in marginal impacts on price and reliability. However, he said as solar and other renewable resources increase as a percentage of the grid, questions about reliability increase.
“Reliability is hampered as other baseload generation sources are unable to match the fluctuations resulting from intermittency,” Johnston said. “On price, ratepayers are forced to buy power that does not contribute to reliability, which is an unnecessary cost increase.”
A number of environmental groups are in support of the bill. The Michigan League of Conservation Voters (MLCV) and Michigan Environmental Council (MEC) say the current law restricts job growth, investment, and access to affordable energy.
Meanwhile, the electric companies testified on their own commitment to advancing renewable energy and addressing climate change.
Consumers Energy noted that in late 2020 the company agreed to voluntarily double its distributed generation program’s participation limit to 2 percent. Consumers noted it took 12 years to reach the first cap of 1 percent on distributed generation and that raising the cap to 2 percent provides “significant opportunity for growth.”
DTE Energy said it was on pace to nearly triple its renewable generation by 2030. The company also implemented one of the nation’s largest renewable energy programs, known as MIGreenPower, which has more than 20,000 customers enrolled.
Additionally, both companies suggested that changing the cap on distributed generation in Michigan would be premature given that a Michigan Senate committee asked the Michigan Public Service Commission to study alternative rate design options. The commission plans to hold a stakeholder session for the Distributed Energy Resources Rate Design Workgroup on March 9.
