Michigan’s energy overhaul: What’s in it and how we got here

After more than two years of negotiations, countless hours of committee hearings, numerous variations on several bills, untold column inches of news coverage and a dizzying series of false starts, dead ends and shifts of the political winds, the epic effort to overhaul Michigan’s energy policy finally drew to a close Thursday evening.

Folks, we have a deal.

Here are highlights of the final package, which Gov. Snyder has said he will sign into law.

• Requires utilities to ramp up their use of renewable energy from their current level of 10 percent to 12.5 percent by 2019, and 15 percent by 2021.  Once a utility achieves or exceeds 15 percent renewable energy, they cannot reduce that level of commitment unless they demonstrate it is in the best interest of ratepayers.
• Creates a new program for customers who want more—or all—of their electricity to come from renewable sources. The Public Service Commission is tasked with establishing a new rate under this program.
• Sets a goal of meeting 35 percent of Michigan’s energy needs through renewable power and energy efficiency by 2025.
• Maintains the requirement that utilities reduce energy waste by at least 1 percent each year, lifts a cap on how much they can invest in waste reduction programs and increases financial incentives available to utilities for going above and beyond the energy efficiency standard.
• Maintains, for now, the “net metering” program that allows customers to reduce their energy bills by generating power at home. The bills also abandon, for now, an earlier proposal for an arbitrary “grid access fee” on net metering customers, and instead tasks the Michigan Public Service Commission with designing a new rate structure for net metering customers in the future.  The new rate design will be crafted through a public process over the next year, and then be implemented in the spring of 2019 at the earliest.  A new rate design could combine net metering with time-of-use pricing—in which electricity is more expensive at times of higher demand—to better reflect the value of energy when it is generated and used.
• Requires utilities to undertake “Integrated Resource Planning” to guide their investments so they meet long-term energy demand at the least cost. These plans would go through extensive review and compare both generation and demand management options to meet future demand.

As MEC President Chris Kolb said in a statement to the media, “These bills are a vast improvement over earlier proposals and will keep Michigan’s energy policy moving in the right direction…This deal will save millions of dollars a year for Michigan residents by continuing to eliminate energy waste and increasing investments in wind and solar power, which are the cheapest ways to produce electricity.”

And while we would have loved a deal that accelerated Michigan’s transition to clean energy, a review of the negotiations that led us here makes it clear that things could have been much, much worse. This is an important victory.

What follows is a summary of the major milestones on the road to the energy deal. As you’ll see, MEC has been at the table from the very beginning—thanks to our generous supporters—and our policy pros have worked relentlessly to win the best possible deal for Michigan’s energy future.

How we got here

May, 2014 – Sen. Mike Nofs announces Energy Efficiency and Renewable Energy Workgroup.

MEC Policy Director James Clift is named to this panel charged with reviewing Michigan’s 2008 clean energy laws and recommending updates. Those laws required Michigan utilities to get 10 percent of their electricity from renewable sources by the end of 2015 and achieve annual energy savings through efficiency measures. The workgroup meets throughout the summer of 2014.

July, 2014 – “Energy Freedom” bill package drops.

Twelve Democrats and five Republicans team up to introduce this four-bill package while the Nofs work group is still preparing its recommendations. These bills focus on promoting distributed generation—onsite electricity production, as opposed to centralized, utility-owned generation. Clift says of the bill package, “Not only could it help small businesses, but it could also make the grid more resilient.” The legislative clock will wind down on these bills, and when reintroduced in 2015 they won’t make it out of committee.

March, 2015 – A flurry of energy proposals.

• March 4 – Dems call for doubling down on clean energy. Democrats in the House and Senate outline their energy plan, which includes increasing the state renewable energy standard from 10 percent to 20 percent by 2022 and ramping up the energy efficiency standard from 1 percent to 2 percent annually. MEC and other environmental groups praise the plan.
• March 5 – Rep. Nesbitt introduces bills. Rep. Aric Nesbitt, chair of the House Energy Policy Committee, introduces bills that would maintain but not increase the 10 percent renewable standard—which has brought investment of about $3 billion to Michigan—and eliminate the energy efficiency standard. The bills also would allow burning hazardous waste—such as scrap tires, coal waste, asphalt and treated railroad ties—to count as renewable energy, a measure that draws strong criticism from MEC and many others across the political spectrum.
• March 13 – Gov. Snyder weighs in. On March 13, Gov. Rick Snyder presents a fairly positive overall vision for Michigan’s energy future. Notable are calls for at least a 15 percent increase in energy efficiency over a decade, greater investment in renewable power, lifting an arbitrary cap on utility investments in efficiency and shifting away from coal as an energy source. In a statement to the media, MEC praises the governor’s emphasis on energy efficiency and reducing coal consumption but expresses concern about the plan’s emphasis on natural gas, urging the governor to focus on more predictably priced and environmentally friendly renewable power.

May, 2015 – MEC gives in-depth testimony before House committee.

Clift and MEC Energy Program Director Sarah Mullkoff are granted a rare 15-minute slot to provide testimony on Rep. Nesbitt’s bill package before the House Energy Policy Committee. Throughout their presentation, Clift and Mullkoff make a compelling, data-driven case that any credible energy plan should achieve five key goals: control costs, maintain electric reliability, minimize risks to ratepayers, promote economic development in Michigan and protect natural resources. Nesbitt’s plan would not achieve those goals. Clift and Mullkoff note that saving energy through efficiency measures, using time-of-day pricing to curb energy demand and investing in wind and solar—the cheapest sources of new electricity generation—are important strategies to meet those goals.

July, 2015 – Nofs introduces his bills.

With co-sponsor Sen. John Proos, Sen. Nofs drops legislation that would do away with the state renewable energy standard, replacing it with integrated resource planning, which requires utilities to make long-term plans to guide their investments. Senate bills 437 and 438 would also scrap the energy efficiency standard by 2019. MEC and several other groups push back, noting that efficiency programs have saved ratepayers about $1 billion a year, and argue that the planning process—while a worthwhile component of an energy plan—does not provide certainty that utilities will invest in affordable, renewable power unless it is paired with a clear standard.

August, 2015 – Mullkoff testifies before Senate panel.

MEC and allies pack the Senate Energy and Technology Committee as Sen. Nofs, its chair, holds a marathon three weeks of testimony. When it’s Mullkoff’s turn to testify, she provides strong arguments for maintaining energy efficiency programs, which save Michiganders more than $4 for every $1 invested. She also blasts plans to gut net metering, the program that allows property owners to sell the solar power they create at their home or business to utilities.

November 2015 – Dems win amendments to House package.

Following a seven-hour committee session during which Clift is instrumental in securing key improvements, the House legislation clears the energy committee with Democratic amendments, including scrapping hazardous waste as a “renewable” fuel and meeting 30 percent of the state’s energy needs with renewables and efficiency measures by 2025. MEC and other groups are generally supportive, but have concerns that the legislation has a vague “goal” of 30 percent clean energy, rather than a clear standard. These bills will stall out on the House floor.

April 2016 – Nofs and Proos drop updated bills.

SB 437 and 438 have run out of steam in committee, and the Senate energy leaders have spent half a year negotiating revised versions they think will gain approval.  The updates they introduce on April 26 would eliminate the renewable and energy efficiency standards, replacing them with integrated resource planning and a soft goal of 30 percent combined clean energy that mirrors the revised House legislation. Clift testifies in opposition to the legislation, calling it “a step backwards for energy policy in Michigan. We think it fails to protect ratepayers, fails to protect public health and impedes economic development in the state.” Clift emphasizes the role time-of-day pricing—coupled with millions of already-installed smart meters—can play in reducing peak energy demand, eliminating the need for new power plants and saving ratepayers millions. With much of the conversation around the bills turning to the “choice” market that makes up just 10 percent of Michigan’s energy load, MEC refocuses the debate on the other 90 percent.

June 2016 – Senate leaves for summer break with energy bills in limbo.

While the Senate bills have cleared committee, the full chamber declines to vote on them before the Legislature breaks for the summer. MEC welcomes the delay, as the bills still get failing grades and are in need of “summer school,” as we report on our blog just before lawmakers leave town.

November 2016 – Senate passes updated bills.

Senate Republicans earn enough Democratic votes to pass SB 437 and 438 by agreeing to ramp up the renewable energy standard to 12.5 percent by 2019 and 15 percent by 2021. MEC is generally supportive of the bills that pass the Senate, which make incremental steps in advancing clean energy and are far more positive than earlier versions. However, our policy experts express concern over an arbitrary “grid access” fee that could kill net metering; increased incentive payments to utilities—coming out of ratepayers’ pockets—to continue status quo efficiency programs; and loopholes that could lead, in effect, to only 13 percent renewables.

December 15, 2016 – The deal is done.

As the Legislature gathers Wednesday, Dec. 14, for its second-to-last day of the 2016-2017 session, the odds of them reaching an agreement look about even. But in late-night negotiations stretching until nearly 6 the next morning, a deal begins to take shape. Clift, Mullkoff and MEC Deputy Policy Director Sean Hammond are at the Capitol all night, meeting with lawmakers, reviewing proposed bill changes and holding the line to preserve net metering, close loopholes in the renewable standard and ensure that the legislation actually achieves energy efficiency rates above the status quo. The MEC team is back at the Capitol when the Legislature reconvenes Thursday afternoon and continues closely monitoring the proceedings until both chambers finally approve the bills—which address all of the concerns we had going into the session’s final hours—in the evening.

Moving forward.

Whew. As you can see, it has been a long, winding road to overhaul our energy policy.

It bears repeating that, without the consistent presence of MEC and allies at the Capitol, we could very well have ended up with bills that would have struck down our wildly successful renewable energy and energy efficiency programs. We could have ended up with bills that counted scrap tires and old railroad ties as renewable fuels.

We are so thankful to our generous supporters who made it possible for MEC’s policy pros to keep working on energy reform day-in, day-out for more than two years—the same folks who gave us the resources to get Michigan’s original clean energy laws passed in 2008.

This is a victory worth celebrating, but we’re not resting on our laurels. We are going to ramp up our efforts at the Michigan Public Service Commission to protect ratepayers by holding utilities accountable for making investments that benefit their customers and not just their shareholders—investments, that is, in affordable clean energy. We’re also working to drive renewable energy projects at the local level and helping improve energy efficiency in multi-family housing, among other efforts.

If you’d like to support this important work, please click here to make a contribution.

Thank you!

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Wind turbine photo courtesy Tina via Flickr.