LANSING – The first votes on proposed changes to Michigan’s electric market could now come as early as next week. While the proposals have pitted the utilities and alternative electric suppliers against each other, both are seeking the same thing out of the final product: stability in the market.
House Energy and Technology Committee Chair Rep. Frank Accavitti Jr. (D-Eastpointe) told Gongwer News Service after the meeting Wednesday that he hopes to begin voting on the package (HB 5520 , HB 5521 , HB 5522 , HB 5523 , HB 5524 , HB 5548 , HB 5549 ) as early as next week, but does not expect full House action on anything until after the first of the new year.
“The bills still aren’t in a condition we can do that,” he said of reporting them from committee, which he had earlier planned to do this week. “A lot of people came to the party late, but we’re looking at things that will last 10 or 20 years, so we need to take into account their ideas.”
Among the key items of discussion are the triggers to role back renewable energy requirements and the extent to which customer choice will be allowed to continue.
While the goal of the legislation is to urge, or even push, a move toward renewable energy and conservation, Accavitti said the plan also has to protect customers if the cost of those programs is too expensive compared to traditional power. But he said it was still not settled where that line was between the need for green power and the public’s willingness to pay for it.
There could also be a little broader allowance for customer choice in the final package, Accavitti said. “We know that customer choice is going to continue,” he said. But competitors and customers have balked at the current proposal to allow a 90-day window to switch, after which the option would be closed.
Those developing the final language are also considering plans that would allow a percentage of a utility’s load to move to choice, he said. One plan would allow 5 percent of the customer base to move with additional choice opened if the utility is shown not to be operating efficiently. Another would cap customer choice at 10 percent of the load in a given territory.
“Where that 10 percent came from is what I’m groping with,” Accavitti said. He said he could potentially support it if there is some reasoning behind it but might be less receptive if it is a number pulled out of the air.
Whatever the final package looks like, both sides appear to be pushing for stability, though what that stability looks like is different.
The utilities, which support the House package, want to see stability in their customer base. The heads of the two largest utilities told the committee Wednesday that the current customer choice program leaves them unable to plan because customers, and often large customers, can move between utilities and competitors.
“Customer choice is the antithesis of certainty,” said DTE Energy CEO Anthony Earley. He said the utility had seen 3,000 megawatts of load switch to alternative providers and then switch back.
Both Earley and Consumers Energy CEO David Joos said the utilities cannot seek financing for new power plants, which both are currently planning and which both said more would be needed, without some stability in their customer base.
“We haven’t invested much money. We’re planning,” Joos said of a proposed power plant in Bay County. “But the large investment comes after. That won’t happen without certainty.”
Reminded of the alternative electric providers that are developing plants in the state, Earley said those plants are also still in the planning and permitting stages and not likely to be built under the current regulatory environment. “They are not going to spend any money until the choice issue is resolved,” he said.
Terry Harvill, vice president of regional government and regulatory affairs for Constellation New Energy, agreed that power plants would not be built in the state if there was not some stability. But he argued it was the utilities causing that instability, not choice.
He said his company was on hold with some plans to build in the state because the current regulatory climate was too unstable. And he said it was because the utilities kept pushing for repeal of customer choice rather than allowing it to work.
“If changes are needed, let’s talk about those,” he said. But the need for some adjustments does not equate to the need to repeal the plan, he said.
The two sides, at least based on some comments after the meeting, did appear to be open to some movement.
Earley and Joos both indicated they could be open to some level of customer choice, though they argued there had to be limits on that choice. “The problem of the current system is the flinging back and forth,” Earley said. “If you had some percentage cap so they couldn’t jump every month” the utilities could plan.
Harvill agreed there was room for some restriction on movement between utilities and competitors. “You could have to give notice in December if you want to move in the summer,” he said. But he rejected any limit on the number of customers that could move.
Earley said the utilities also need to be able to sell the excess capacity created by customers that leave for choice. He said the current law requires the utility to have enough power on tap to cover customers that may come back to regulated rates, limiting what the utility can do with its excess power.
But Harvill said choice can also be used to the utilities’ advantage. He noted that Joos said Consumers purchases some 1,000 MW annually to cover customer need, and he argued Consumers could instead let those customers out onto the choice market for another provider to come up with the power for them.
The two sides appear still miles apart on the utility rate filings. The bills as currently drafted would allow the utilities to implement a new rate 90 days after it is filed unless the Public Service Commission issues a final rate decision in that time for a different rate. But the utility would have to repay any overcharges, with interest, if the PSC eventually orders a lesser rate than the utility implemented.
Joos argued to the committee that the proposal would merely adopt for general rates what utilities already do for power cost recovery, the part of the bill that for electric covers the cost of fuel to generate power and for natural gas covers the cost of the commodity itself, and would put the state in line with 41 other states.
He said the current system adds risk, and so cost, to the utilities’ borrowing for infrastructure investments. “You can’t make that kind of investment and finance that and wait a couple of years to recover it,” he said.
Earley argued the PSC would adapt to the deadlines. “It will be an incentive for the Public Service Commission to be efficient,” he said.
But former Commissioner Robert Nelson, now a spokesperson for the Customer Choice Coalition, said at current staffing levels the PSC could not turn around rate cases any faster than it does. He said, as other opponents of the plan have, that instead the plan, combined with the allowance for the utilities to file a new rate plan nine months after implementing the last, would leave customers paying with the next filed rate increase for any refund ordered by the PSC on a prior rate filing.
But Earley and Joos both said the interest required on the repayment would deter any “pancaking” of rate increases. “There’s a risk if we over-implement,” Earley said. “So it’s in our best interest to get the most accurate rate filings possible.”
The committee also heard from renewable energy providers about the need for a renewable portfolio standard as part of the package, or as a stand-alone piece if the package bogs down.
Terry VanderVeen, representing wind power c
