Lansing – A battle is brewing as Gov. Rick Snyder prepares this month to lay out a new energy plan for the state and appoint Michigan’s first czar to oversee it.
Michiganians see hints of it in television ads from an anonymous nonprofit, Citizens for Michigan’s Energy Future. Power plants serving a million residents will shut down soon, a narrator warns ominously while pointing to a utility company-funded study that says federal rules will close coal-fired generating plants.
Snyder’s plan takes on importance because the two biggest power companies met a 2015 deadline to obtain 10 percent of their power from renewable sources – a growing sector spurred by wind farms.
Democrats and environmentalists now want to mandate 20 percent by 2022, as businesses push to end the state’s utility monopoly.
House Energy Policy Committee Chairman Aric Nesbitt unveiled an eight-bill plan Thursday that retains the current renewable energy requirement and phases out competition – the first full-fledged legislative proposal for sweeping changes.
Nesbitt, R-Lawton, said he is aiming for “best-value” policies flexible enough to include all new energy technologies.
“Michigan is really at a crossroads in terms of our energy future,” he said. “Generating capacity and reliability of the network, I think, will be at issue in the coming years.”
Michigan gets 55 percent of its electricity from coal, 31 percent from nuclear reactors, 7 percent from natural gas and 5.8 percent from other renewable sources. Its utility rates are higher than the Midwest and national averages.
Interest groups are pushing to expand a program that allows 10 percent of DTE and Consumers customers to shop for lower rates elsewhere. Illinois and Ohio have used competition – allowing more firms into the energy market – to lower electricity rates, they say.
But the power companies say more competition would give them less incentive to build power plants they say are needed because of the threatened closing of the state’s coal-fired plants.
“It’s the big issue for this year, and it’s the governor’s No. 2 issue,” said Senate Energy and Technology Committee Chairman Mike Nofs, R-Battle Creek, who’s working on new energy legislation.
Snyder’s top priority is a looming May 5 ballot proposal to raise the sales tax to boost school and local government revenue as part of a $1.2 billion road repair funding plan, but he also wants to free Michigan from the uncertainties of federal energy policy.
Gov seeks ‘adaptable’ policy
The Republican governor said his guidelines are “affordability, reliability and environmental protection” and he’ll create a new state office to coordinate it. His deputy legal counsel, Valerie Brader, is helping formulate energy policy.
“It needs to be an adaptable policy because of the lack of federal policy and the challenges of a global marketplace,” Snyder said in his January State of the State message. “It needs to focus on important things such as eliminating energy waste and the conversion of coal to natural gas – an asset of the state of Michigan – and renewables.”
Beyond that, the governor hasn’t been more specific.
“I don’t know what he’s going to propose but we’re letting him know where we are headed,” Nofs said. “I’d like to have bills ready to go at about the time of his (energy policy) address.”
Nofs is considering a statewide “clean energy” standard that would replace the state 10 percent renewable energy mandate. He predicted federal rules will force Michigan to use cleaner-burning natural gas and renewables.
A September 2013 Michigan Public Service Commission said the state could get 30 percent of its energy from renewable sources by 2035. Nofs argues renewables can compete for a share of the state’s future energy market without a mandate.
But Rep. Jeff Irwin, D-Ann Arbor, said the renewable energy jobs and economic activity were “among the few bright spots” in Michigan’s nearly decade of recession. Compared with states such as Arizona and New York that produce much more wind and solar energy, he said, Michigan is scratching the surface.
“It really would be disappointing if we moved away from a standard that not only was a success for the environment but also fostered an industry that’s creating jobs and investment from out of state,” Irwin said.
Coal-fired plants could close
Consumers and DTE oppose an expansion of the renewable energy or competition requirements. They paid for the report cited in the TV ads that says the state will need new power plants in the next three to five years.
Up to nine coal-fired plants could close owing to age and new emissions standards from the federal Environmental Protection Agency, according to Lansing’s Public Sector Consultants, a policy think tank.
“Although greater reliance on energy efficiency and renewable energy generation can help bridge the supply gap, even aggressive efforts in those areas will not eliminate the need for new base load power plants in the next three to five years,” the group’s November 2014 report said.
Irene Dimitry, DTE vice president of business planning and development, testified this week in a committee hearing that the issues are “urgent.”
But the utilities’ claims are disputed by pro-competition groups representing Detroit’s Big Three automakers and other major Michigan companies.
The Association of Businesses Advocating Tariff Equity said the Public Sector Consultants report’s conclusions are “misleading, riddled with factual errors and confused about Michigan’s energy market.”
“If (Snyder) wants to create a Michigan where manufacturers can flourish, then we need an energy policy that gets back to competition,” added Wayne Kuipers, executive director of Energy Choice Now Michigan, representing businesses such as Zeeland furniture maker Herman Miller and Frankenmuth’s Bavarian Inn.
The former state senator accused Consumers and DTE of using scare tactics. He said Illinois and Ohio have met growing energy needs without building more power plants.
Public Sector Consultants senior policy fellow Ken Sikkema said those states met their needs by purchasing electricity from a regional power grid that had excess supply. It’s a window of opportunity that will close as the EPA’s proposed requirements shutter coal plants, he said.
Sikkema said his group’s study used data from a 15-state regional electricity transmission organization, Midcontinent Independent System Operator Inc., or MISO.
“The problem, as MISO is saying, is that the grid is getting tight,” said Sikkema, a former state Senate majority leader. “All of the Midwest is plagued with the same problem.”
Clark Hill attorney Roderick S. Coy, representing ABATE, said 11,000 Michigan companies are on a waiting list to shop for lower-cost energy, and 10 percent of former DTE and Consumers customers were allowed to buy at rates as much as 20 percent lower.
“Ninety percent of people have uncompetitively high rates. Ten percent of people have competitive rates,” Coy said. “Which is the best way to go?”