by Gongwer News Service
September 22, 2008

The biggest policy achievement of the year lurched to a conclusion last week as the legislature approved an energy plan that imposes requirements for using alternative/renewable energy and says goodbye to the experiment that was known as utility deregulation.

Passage of the bills came much later than had been hoped by Governor Jennifer Granholm, though just in time for her to use the new policy in the final day of her trade trip to Japan, where she was trying to make a case for Michigan’s appeal as an alternative energy center.

While nearly all of the opposition votes to the three bills came from Republicans, about half of the two GOP caucuses supported them, and both parties had a hand in setting the issue in motion. Ms. Granholm, with a call some 20 months ago for a renewable portfolio standard, as a majority of states now have, and Republicans, with the creation some four years ago of a subcommittee to study energy alternatives.

With increased costs now expected to be charged to consumers and the limit to 10 percent of the energy that may be provided by alternatives to the major utilities, investments in new power plants in Michigan are expected to proceed. DTE last Thursday filed papers for developing a new nuclear plant at its Monroe site.

The new plants and increased use of alternative energy such as wind were hailed by supporters as ways the state can reduce its reliance on imported energy sources and build excess capacity to help attract economic growth.

Mr. Granholm said the new structure will get Michigan “into the game” of attracting manufacturers and related companies into developing alternative energy, as well as help the Great Lakes region in that regard since all states but Indiana now have renewable energy portfolio standards. Michigan’s standard requires that 10 percent of energy come from alternative sources by 2015, far short of the 25 percent Ms. Granholm had first proposed to be in place by the 2020s.

“Together, we are sending a signal to the world that Michigan is ready to build a bright future for our citizens by creating jobs, diversifying our economy and ensuring that our 21st Century energy needs are met in a way that protects our pocketbooks and the planet,” she said.

In addition to the energy bills, which are expected to add 5 percent to customer bills, part of the package was a bill granting income tax credits to utility customers for purchasing more energy-efficient appliances.

Opponents faulted the package for driving up costs to consumers too high, with some saying those costs could double as provisions of the bills take effect over time.

Dave Waymire, spokesperson for the Customer Choice Coalition (a group of manufacturers, retailers, schools and other entities), said it was “pretty clear that the legislature wanted to hide the details of this until after the election.”

The bill which strips major portions of the deregulation law enacted eight years ago allows state regulators to certify the need for new power plants following contested hearings, but also enables the Public Service Commission to include relative costs and benefits of alternative forms of energy before approving any new plants. Utilities could charge customers for overruns that cost up to 10 percent above the approved costs of new plants.

Individuals will take on a larger share of utility costs under a “deskewing” provision that allows their rates to go up by 2.5 percent annually for the next five years. Industrial rates could drop by as much as 5 percent and commercial rates by as much as 6 percent. Industrial and commercial rates have subsidized residential rates for years.

Additionally, the development to meet the renewable energy portfolio standard will translate into residential rates at up to $3 more per month for residential customers, $16.58 for industrial customers and $187.50 for primary commercial entities. Customers will be able to sell any power they generate back to utilities.

Supporters argued consumers will be facing inevitable rate increases anyway as the price of fossil fuels continues to rise. But some opponents said the bill gives only weak authority to the PSC to limit increases, and the speeded-up rate approval process means that consumers will begin paying for new plants before they are built.

COMING UP: It’s the expected last week of legislative activity before members break until after the November election, with most attention focused on contests for the state House, where 44 seats are open due to term limits and several more are expected to be tightly-contested.

The major unfinished business remains the budget for the Department of Transportation, which is preparing to shut down its construction/maintenance projects by week’s end if the bill is not passed. Legislators and the Granholm administration remain at loggerheads over provisions for a new Detroit River crossing to Canada.

That dispute is also spilling over to a spending plan for university, college and state building and maintenance projects.

For nearly 50 years in Michigan, Gongwer News Service has provided independent, comprehensive, accurate and timely coverage of issues in and around Michigan’s government and political systems. For subscription information, including a free trial, visit Gongwer online.