LANSING – Sen. Mike Shirkey has long been known as a proponent of a “full competition” type of electric market, and he’s at it again this year with new legislation that moves in the opposite direction of one of his colleagues when it comes to electric choice.
Shirkey (R-Clarklake) has introduced legislation that would, among other things, allow the Public Service Commission to incrementally increase the current 10 percent cap on electric choice as demand increases for alternative electric suppliers governed by that cap.
The bill, SB 235 , stands in direct opposition to SB 247 , introduced by Shirkey’s fellow caucus member Sen. Ken Horn (R-Frankenmuth) that would largely phase out the ability of major utility customers to sign up with other electric suppliers.
“It’s a demand-driven model for allowing sensible expansion of competition in the electric markets,” Shirkey said of his bill. “Those who continue to advocate for reverting back to a strong, government-enabled monopoly are choosing to refuse to acknowledge the model they’re advocating for … has been made obsolete by regional markets across the nation.”
Last term, Shirkey introduced a bill that, among other things, would have moved the state from its current hybrid system of regulation to deregulation and required large utilities to submit plans to the PSC to either sell off or transfer their generation assets to an affiliate, separating generation from distribution. But that bill never made it out of committee.
His new bill (SB 235) has four key components, Shirkey said. In addition to the incremental increase, the PSC could also create an auction process on an annual basis to remove a complaint by utilities that they have to be the supplier or provider of last resort. Detailing that further, Shirkey said current law requires utilities to be the provider of last resort for those who are currently in the choice market.
“They have perpetually raised that up as one of their biggest complaints about energy markets in that they have a hard time planning for capacity because they never know if customers are going to go off choice or not,” he said. “This relieves them of that responsibility. That’s no longer a constraint for them.”
The new bill also directs the PSC to create what Shirkey called a “true market-driven process” for any new, long-term expansion of generation.
“Once the Public Service Commission determines Michigan needs more capacity investment, they’d create an RFP and allow anyone that qualifies to bid on being the winner to build that investment,” he said, noting that incumbent utilities could be among those bidders and might even have an upper hand because of their “footprint” in Michigan.
And finally, the bill allows aggregation of certain customers – a component that Shirkey kept from his bill from last term. In SB 235, a small city, for example, could aggregate its citizens and act as a unified buyer, Shirkey said. The provision would prove especially helpful for residential and small commercial customers, he said.
“They could act as a co-op buyer, enhancing the ability for alternative energy suppliers to compete in Michigan and expanding opportunities for residential customers to take advantage of the ever-expanding products and services being created,” he said.
Shirkey said his bill could be likened to the markets in places like Ohio, Illinois and most of the east coast. He admits that those markets had some hiccups and bumps in the road when they first transitioned but said that was more a result of the transition itself.
“Those who claim Michigan’s system hasn’t worked should really be asking the question of why hasn’t it worked,” he said. “We’ve never really allowed it to work in Michigan, and now is the time for us to do so.”
Maureen McNulty Saxton, spokesperson for Energy Choice Now, a coalition which supports expanding the choice market, agreed. In 2000, a law was passed to open Michigan up to competition, though Saxton said things didn’t get off the ground until about 2002. And even then, she said, “there were all kinds of things in that law that gave utilities an advantage.
“We had a not truly level playing field in the first place. You had a period of time from 2002 to 2008 to when the law was overturned,” she said. “During those years, competition went up to 18 percent of Michigan consumers were choosing a competitive supplier. Utilities got smarter and offered better rates, better customer service and performed the way markets are supposed to perform.
“As soon as they got the market back to 90 percent, Michigan rates skyrocketed and have been the highest in the Midwest ever since,” she said.
One thing that electric choice advocates and some opponents seem to agree on is that there are virtually no homeowners in the choice market. As soon as that queue opened up, Saxton said, big companies that closely follow such policy were quick to jump in. Now, she said, there are some 11,000 people in queue today, about 25 percent of consumers.
Shirkey’s bill has been referred to the Senate Energy and Technology Committee for further debate and discussion, sitting alongside another bill Mr. Horn’s bill that does the complete opposite by eliminating electric choice unless those using it decide to stay with it. It was not immediately clear what the plan might be for either bill as Sen. Mike Nofs (R-Battle Creek) did not return a call for comment, but Shirkey was optimistic.
“I’m confident Senator Nofs will not only allow a broad debate but I think he’s one of the best people suited for doing so because of his demeanor and his experience in this area,” Shirkey said.
Indeed, Nofs is said to be expected to introduce or present a flurry of legislation sometime after the legislative spring break on energy reform legislation. Rep. Aric Nesbitt (R-Lawton), chair of the House Energy and Technology Committee, had already done so in the beginning of March and his proposal eliminates the 10 percent set-aside for competition.
“Representative Nesbitt’s bill is truly the most shocking in that there are probably 90 percent of Michigan’s school districts on choice,” Saxton noted. “What we’re talking is hundreds of millions of dollars that would leave Michigan’s schools if his bill were to move. (That) bill goes so far beyond a business story, and that’s why Senator Shirkey’s bill is critical.”
Later in March, Governor Rick Snyder presented his special message on energy that kept the 10 percent cap but reforms the program such that electric providers in the choice market would have to provide five year plans showing they have enough capacity for consumers.
“If Michigan insists on having a government-enabled monopoly policy, we’ll likely find ourselves behind the energy curve,” Shirkey said, “and that negatively affects Michigan businesses’ ability to stay competitive in world markets.”
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