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Senate energy bills fail to protect Michigan ratepayers

Clean energy standards needed to rein in electric bills
May 4, 2016
A pair of Senate bills to eliminate Michigan's wildly successful renewable power and energy efficiency standards will lead to major rate increases for families and slam the brakes on economic development in the state, the Michigan Environmental Council told lawmakers today. 

Senate Bills 437 and 438 will cost Michigan ratepayers hundreds of millions of dollars a year, MEC Policy Director James Clift and Energy Program Director Sarah Mullkoff said in testimony before the Energy and Technology Committee. 

"This isn't even a case of choosing the economy over the environment, because we've seen very clearly that clean energy saves money, creates jobs and brings huge new investments to our state," Clift said. "Instead, this is about lawmakers siding with utilities instead of looking out for Michigan residents. Make no mistake, this legislation as currently written will lead to higher electric bills for Michigan families and businesses." 

Clean energy standards -- such as the existing renewable standard of 10 percent by 2015 -- are a proven and powerful policy tool that should be part of Michigan's energy policy moving forward, Clift and Mullkoff argued. In addition to saving money for residents and avoiding the health impacts of burning fossil fuels, the standards also provide certainty that utility companies will invest in affordable renewable power and efficiency projects. 

The existing renewable energy standard has attracted $3 billion in investment and supports 87,000 clean energy jobs in Michigan. Energy efficiency programs save ratepayers more than $4 for every dollar invested -- a total savings of more than $100 million every year.

Consumers Energy and DTE Energy have argued that clean energy standards are not necessary because the companies will invest in the most affordable energy sources available. However, while wind and solar are now the least expensive sources of electricity and provide stable long-term prices, the utilities -- having met the 10 percent requirement last year -- are not currently pursuing further renewable energy projects in a meaningful way. 

For instance, DTE has told shareholders it will develop 100 megawatts of wind power in 2019, but that will result in a minuscule .2 percent increase in renewable energy per year. Similarly, Consumers Energy's plans for three new, 100-megawatt wind farms over the next decade will only increase its renewable portfolio by .25 percent annually. 

"Our major utilities could save their customers tens of millions of dollars by investing in renewable energy, but there's no guarantee they'll do what's right for Michigan ratepayers without the accountability that a clear standard provides," Mullkoff said. "Our energy policy needs to set a clear expectation that, in exchange for a near monopoly in our state, utilities will act in the best interest of their customers." 

MEC's testimony noted that the bills would also put Michigan households at risk of significant rate increases in the future by encouraging utilities to build new power plants fueled by natural gas, which -- unlike renewable energy sources -- comes with volatile prices. 

The energy from those costly power plants is only needed a few days each year when hot summer weather triggers extremely high demand for electricity. Utilities could avoid building them by designing electric rates to reflect higher costs at peak demand times, but the bills instead create a financial incentive for the power companies to spend hundreds of millions of ratepayer dollars on risky investments in natural gas facilities.

While pointing out concerns with the current bills, Clift and Mullkoff also laid out the following broad recommendations to improve the bills and make Michigan's energy strategy one that protects public health and the environment, ensures affordability, maintains reliability and protects families and businesses from price spikes: 

  • Establish a clear renewable energy goal and set a clear expectation that utilities will meet that goal unless the price of renewable energy -- today at record lows -- increases more rapidly than expected, relative to other energy sources;
  • Continue, not repeal, energy efficiency programs, and remove arbitrary caps on how much utilities can spend on efficiency measures that save energy and money; 
  • Require utilities to demonstrate that they're using all cost-effective alternatives to meet energy demand before resorting to building costly new power plants; and 
  • Protect ratepayers from future rate increases by strengthening the integrated resource planning process through which utilities are required to pursue the most prudent and reasonable investments from the perspective of their customers. 
MEC's concerns with the bills and recommendations for improving them are explored in more detail in our full testimony, available at http://bit.ly/MECEnergyTestimony.
Contact
Andy McGlashen: (517) 420-1908
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