National Wind Watch: Wind Energy News » Michigan coalition calls energy surcharge a bad deal

A Michigan coalition is fighting a federal decision that it says would substantially raise electric rates for Michigan companies and consumers for years to come.

Last month, the Federal Energy Regulatory Commission rejected requests by the coalition and Michigan Public Service Commission to reconsider a surcharge it approved that sets rules for building new electric transmission lines in 12 states and the Canadian province of Manitoba.

The coalition, which includes Michigan’s major public utilities, Michigan Chamber of Commerce and the Michigan Environmental Council, wanted the federal agency to reconsider the cost-sharing surcharge, which finances construction costs for 17 projects in the Midwest based on the amount of electricity the areas use. Gov. Rick Snyder also opposed the plan.

Customers in Michigan’s lower peninsula will pay 20 percent of the costs to build $16 billion in electric transmission lines in the region, which could cost state customers $500 million a year over two decades, said a spokesman for the MISO Northeast Transmission Customer Coalition.

“Michigan is stuck with 20 percent of the cost to develop wind farms in Minnesota, Iowa and the Dakotas,” said coalition spokesman Steve Transeth, a former state public service commissioner. “We will receive virtually no benefits from the developments.”

The state’s Big Three automakers will pay $10 million more in electric costs a year, while the University of Michigan and Michigan State University will pay $2 million more a year, Transeth estimates. Some local governments could see their annual costs rise $250,000, he said.

“The manufacturing sector is a large user of electricity, so when you force additional and unnecessary costs on the manufacturing sector, it’s not good for the Michigan economy,” said Mike Johnston, vice president of government affairs for the Michigan Manufacturers Association, which is part of the coalition.

But the Midwest Independent Transmission System Operator Inc., a regional transmission group that operates the wholesale electricity market, says the $16 billion and $500 million Michigan figures are not accurate and were tied to another group of projects, said Jennifer Curran, MISO’s executive director of transmission infrastructure strategy.

MISO said it has proposed 17 projects, including one in Michigan, that total $5.2 billion. The nonprofit group says the projects will help states meet renewable energy standards and provide benefits across the region.

MISO’s board is expected to vote on the projects in December, Curran said. If states also approve them, construction could begin soon after, with customers seeing the impact in their bills when the projects go into service, Curran said.

The projects are estimated to give customers in the seven areas, including Michigan, between 1.8 and 3 times more benefits than it will cost them, MISO says. An average residential customer will pay about $11 a year in investment and receive $23 in lower energy costs per year, the group projects.

What customers pay for transmission of electricity is a small part of their bill, averaging 7 percent nationally and 4 percent in Michigan, according to Novi-based ITC Holdings Corp., the country’s largest independent electric transmission company.

ITC Holdings will own, operate and maintain transmission lines in the $510 million Thumb Loop project, a project MISO and the Michigan Public Service Commission already have approved.

Under MISO’s plan, customers in Michigan’s Lower Peninsula only will see its share of the Thumb Loop project in their bills compared with the entire cost of the project, Curran said.

Construction on the Thumb Loop, which includes 140 miles of lines and four substations across four counties, is scheduled to begin next year. ITC says more lines and facilities will be needed, as wind electric generation goes online as part of the state’s mandate requiring Michigan utilities by 2015 to generate at least 10 percent of electricity from renewable sources. Other states have similar mandates.

Gregory Ioanidis, president of ITC Michigan, said the federal commission’s decision is good for Michigan because it will add more high-voltage transmission lines.

“Consumers should see increased reliability, energy security and lower cost of energy,” he said

But the public service commission, which ensures rates charged to utility customers are reasonable, is concerned the costs to build transmission lines in other states is unfair to Michigan customers.

“We would no doubt benefit from two or three of the projects proposed, but we’re talking about (17) projects,” said Greg White, a state commissioner. “The question is, would Michigan’s customers benefit from paying the cost of all these other projects? Our view is no.”

The coalition expects to prevail in court.

“We believe FERC has violated its authority under the Federal Power Act by delegating too much authority to these regional planning authorities, which have zero responsibility or accountability to consumers,” Transeth said.