Tuscola County, MI – The sword of Damocles hanging over Unionville-Sebewing Area Schools has Consumers Energy written all over it.
The rural district of about 680 students in Tuscola County is facing down a financial abyss thanks to the state’s largest energy provider, which is attempting to claw back nearly $1.2 million in disputed tax revenues levied on wind power turbines.
Officials say the case threatens to wipe out district fund balances and toss them into deficit status with the state. Jobs and programming would be cut.
“It’s essentially like bankrupting a business,” said Josh Hahn, superintendent of Unionville-Sebewing schools. “It would devastate our district.”
“It’s a lot of lost funding for kids.”
The district isn’t alone in facing a daunting payout.
In the Michigan Tax Tribunal, Consumers is suing numerous taxing entities in Tuscola County as part of a wider effort to win back $8.5 million in taxes paid on its wind farms. The utility, which made $7 billion last year, says it has a duty to pursue the money for the benefit of ratepayers.
The fight has been waging for years in some form between renewable energy companies and local governments in four counties. But whereas DTE Energy and other companies settled this year for amounts that don’t threaten local budgets, Consumers is pressing forward.
Beyond schools, the case threatens to yank money from townships, libraries, the sheriff’s office and Tuscola County programs which fund veterans services and senior meals.
“This is a bunch of bull**** if you ask me,” said Steve Linzer, supervisor in Akron Township, which is also being sued by Consumers for about $1.2 million.
The dispute centers around taxes assessed on the Cross Winds turbine park in Akron and Columbia townships. The 114-turbine park began operating in 2014 and, after a three-phase build-out, produces about 231 megawatts today. They are among the roughly 830 turbines around Michigan’s Thumb, which features the state’s highest turbine concentration.
The Tuscola turbines are part of Consumers’ growing portfolio of wind and solar installations, which are key to its goal of reaching net-zero greenhouse gas emissions by 2050.
That goal, which is shared with DTE, is also crucial to Michigan’s Healthy Climate Plan, which calls for 60 percent of the state’s electricity to be from renewable sources by 2030.
But clean energy advocates are worried. Under state law, wind and solar energy development siting must be approved by local governments. Bankrupting schools and threatening to strip veterans and senior funding seems destined to fuel ill will among rural communities whose support energy developers must have to build new renewable projects.
Utilities will need rural Michiganders onboard to transition the energy market away from fossil fuels which are driving climate change, advocates say. Recent developments on that front are not encouraging. Referendum voters in Montcalm County just defeated plans for a 75-turbine wind park and recalled a slew of officials who supported the development.
Opposition is also mounting to a planned 300-megawatt project in Ingham County, where townships have passed turbine height restrictions and moratoriums. DTE dropped plans for a wind farm in Branch County a couple years ago when townships passed restrictive ordinances. Utility-scale solar farms in Washtenaw and Livingston counties are also facing organized opposition from rural residents.
“I don’t understand why they want to pick this fight,” said Charlotte Jameson, policy director at the Michigan Environmental Council. “It seems like a PR nightmare to me. I can’t understand the thought process.”
John Freeman, director of the nonprofit Great Lakes Renewable Energy Association, said that at a recent Washtenaw County meeting over a proposed solar development, a man in the crowd yelled how Consumers couldn’t be trusted because of the Tuscola tax dispute.
“Word gets around,” said Freeman. “The perception is that they are going back on their commitments to the local community when they try to claw back tax revenue.”
“I really hope DTE and Consumers are very careful,” he said. “We need them to succeed in getting more solar and wind, but to do that they’ve got to treat local people with respect. When they make a commitment, they’ve got to keep it.”
As with most wind projects, tax revenue for schools and local governments was part of the initial pitch to Thumb communities when the turbines were proposed. Under a formula established in 2007, the tax liability of each turbine was based on 100 percent of its value for the first operational year with a scheduled depreciation to 30 percent value in 15 years.
Then, in 2011, the State Tax Commission changed the tax tables and accelerated the depreciation schedule for turbines, dropping the initial tax liability to 80 percent for each turbine. That declined to 30 percent after six years.
What followed was a flurry of tax appeals across Gratiot, Huron, Tuscola and Sanilac counties by DTE, Next Era, Exelon, AEP, Consumers and other renewable companies. Local governments created a four-county group called the Michigan Renewable Energy Commission (MREC) to advocate for local governments and challenge the commission’s decision.
In the meantime, local governments assessed turbines using the original calculation and some escrowed the difference away. Last year, a Tax Tribunal decision favored DTE, which led to a settlement. Local officials assumed Consumers would follow suit and the battle was nearly over.
But the utility continues to fight.
From the layman’s perspective, local officials say the deprecation calculations seem hard to fathom. Tuscola officials say Consumers today is arguing the turbines are only worth about 40 percent of their initial value even though they’re generating the same amount of power.
“How can they be nearly useless?” said Eugene Pierce, superintendent of the Tuscola County Intermediate School District, which Consumers is suing for $1.6 million.
Others echoed that perspective.
“I think these wind turbines are even more valuable now than they were 10 years ago because they’re closing all the coal power plants,” said Carl Osentoski, MREC coordinator. “They are up, operating and if they’re well maintained, they have a service life of 30 years.”
In response to media inquiries, Consumers has issued statements this fall framing the tax dispute as an effort to reduce utility bills for ratepayers.
The utility acknowledged that it’s concerned the dispute may affect the siting of other renewable projects, but it pointed the blame finger at Tuscola County.
“We are concerned about the precedent this issue will establish for other renewable energy assets around the state,” said Consumers spokesman Brian Wheeler. “Tuscola County is the only county asserting values in excess of State Tax Commission guidance for Consumers Energy’s wind energy parks.”
Consumers struck a softer tone when asked by MLive whether it cares about the financial havoc facing schools and local governments, saying it “appreciates and shares the frustration from those affected by this issue.” The utility says the tax commission changes “put the community and Consumers Energy in a difficult situation.”
“Our goal is to reach a fair solution, one that still allows the community to prosper financially – while ensuring a balance in costs that all of our Michigan residential and business customers ultimately will pay,” said Wheeler. “We hope we can reach agreements as quickly as possible that provide certainty to community leaders and keep Michigan energy costs competitive.”
Consumers also claims “none” of the $8.5 million it seeks would go to shareholders. “We don’t view this as an opportunity for our shareholders,” Wheeler said. “We see this as an opportunity for all of our customers who support and expect competitively priced renewable energy.”
Clean energy advocates don’t buy it.
Amy Bandyk, director of the Citizens Utility Board of Michigan, says Consumers accounting rules treat tax refunds from renewable assets as a reduction in revenue collected from ratepayers in future rate cases. The utility’s current plan would not set those rates until 2029.
“Ratepayers will not see lower rates due to the tax revenue for several years, even though any tax that is clawed back helps Consumers Energy shareholders immediately because it essentially means more cash for the company,” said Bandyk. “If Consumers Energy wants to claim that its efforts here are for the benefit of ratepayers, it should at least first change its accounting methods so that ratepayers can actually benefit.”
In Tuscola County, Pierce said the DTE settlement dropped a potential $3 million claw back down to about $320,000; a cost which communities could absorb. Settlement talks occurred in person several times at a neutral site in Lansing and everybody eventually shook hands.
By contrast, Consumers has met once with Tuscola communities via Zoom.
“It’s really hard to stomach this when we know their profit margins are in the billions,” Pierce said. “In our world, it’s a classic bait-and-switch.”
At the Tax Tribunal, the Consumers case is expected to resume moving once an abeyance on turbine cases placed during DTE settlement talks is lifted. Osentoski said the administrative hearings proceed like a trial and discovery is the next step.
If no settlement is reached, a trial could come in late 2023.
Osentoski said there’s hope the DTE settlement can be a framework for reaching a deal with Consumers. He thinks something will have to give if Consumers or any other renewable developer hopes to build anymore turbines or solar panels in the Thumb.
“We’ve seen that pushback from local townships that are being approached with solar installations,” Osentoski said. “They’re pretty much point blank when we talk to them, saying, ‘unless we get the wind tax issue resolved, don’t expect us to do anything with solar.’”
At Unionville-Seabawing, Hahn echoed that.
“No one thought it was going to come to this,” said Hahn. “People wouldn’t have agreed to having wind farms if they knew this was going to happen.”
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