MPSC Decision on DTE's Rate Case

Sierra Club leaders,

This morning the Michigan Public Service Commission issued their final order for DTE's electric rate case. See the MPSC's press release below and our coalition's response here. Also see the MIRS Capitol Newsletter for the Sierra Club's involvment is this case especially activist Theresa Landrum.

I'd classify this as a nuanced victory, similar to DTE's IRP. The order leaves a few things to be desired, especially not addressing the disproportionate rate budrden placed on residential ratepayers compared to industrial customers. But it delivers on many important priorities that we advocated for, in particular the River Rouge and Belle River coal plants.

Here are the top items for our interests from the Commission's order:

• Cut DTE’s requested $351 million rate increase to $188 million. The 4.7% rate increase will amount to $7.18 more per month for an average American household.
• Stopped investment in the River Rouge coal plant and required development of a community transition plan. DTE will no longer waste customers’ money on a dirty, uneconomic plant which is a source of significant air pollution emissions for the country’s third-most polluted community, the 48217 zip code. DTE sought to recover $11.4 million in capital costs for River Rouge, to extend the life of it until 2022 and burn gases at the facility.
• Required DTE to perform a revised cost-benefit analysis of the Belle River coal plant with earlier retirement dates. The plant is currently not scheduled to retire until 2030, even though cheaper and cleaner energy sources are available.
• Denied DTE’s request to increase the monthly fixed residential charge. Fixed charges negatively impact low-income customers and seniors on a fixed income. The Commission also rejected DTE’s proposed fixed monthly bill and low-income renewable energy pilots, encouraging the utility instead to work with stakeholders to develop stronger programs.
• Reduced DTE’s rate of profit to 9.9%. DTE originally sought to increase its rate of profit to 10.5%. 
• Cut 20% of its strategic capital fund due to misuse. DTE had been diverting the fund to storm response and not spending it fully on strategic investments in the distribution system. The Commission approved only that amount that DTE had previously demonstrated to spend on strategic investments. 

Thank you to the amazing legal team who handled our intervention in this rate case and made sure DTE was held accountable!

In solidarity,

Mike Berkowitz Michigan Campaign Representative Sierra Club Beyond Coal Campaign 248.345.9808 Mike.Berkowitz@sierraclub.org

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NEWS RELEASE Gretchen Whitmer, Governor Sally A. Talberg, Chairman Daniel C. Scripps, Commissioner Tremaine L. Phillips, Commissioner www.michigan.gov/mpsc FOR IMMEDIATE RELEASE   May 7, 2020  Media contact: Matt Helms 517-284-8300 Customer Assistance: 800-292-9555 MPSC approves DTE Electric rate increase as company works to modernize infrastructure, boost reliability   The Michigan Public Service Commission today approved a $188.3 million rate increase for DTE Electric Co. (Case No. U-20561), an increase authorized to include new investments in critical infrastructure, particularly the electric distribution system, to support electrical safety and reliability.  While there is significant need for the utility to replace and modernize aging infrastructure such as substations, poles, and wires to improve reliability, the increase approved was substantially lower than what DTE Electric had sought. The utility had requested a $351 million base rate increase. Instead, the Commission granted an increase of $188,285,000, 47 percent lower than requested. DTE Electric is authorized to implement the rate increase starting May 15.  DTE Electric said the key factors contributing to its projected shortfall are increased investments made in its critical infrastructure facilities to continue safe and reliable service to customers, and associated depreciation and property tax increases, in addition to an increase in operation and maintenance expense. The rate increase is based on the Commission’s review of DTE Electric’s investments, expenses and revenue projected for the 12-month period ending April 30, 2021.  Preliminary estimates are that a residential customer using 500 kilowatt hours of electricity per month would pay approximately $3.93 more per month, a 4.7% increase, starting with the June 2020 bill. The exact amount is still to be verified subject to a seven-day tariff review. The Commission notes that the impact of the increase on customer bills will be softened in the near term by DTE Electric’s recent announcement that it will pass along $30 million to $40 million in bill relief to its electric utility customers for the months of June and July, from savings realized through lower fuel prices spent on generating electricity.     Based on progress to date with tree trimming reducing power outages, the Commission authorized the extension of a multi-year tree trimming program through 2022. This extension will provide DTE Electric greater certainty for workplace attraction and retention in this critical area. Trees are a leading cause of power outages and can create safety hazards when trees come into contact with live electric wires. DTE Electric has more than doubled its tree trimming crews to support this safety and reliability work.    In other highlights from today’s order, the Commission:    Reduced DTE Electric’s authorized return on equity (ROE) from 10 percent to 9.9 percent, consistent with recent decisions in other cases, and maintained the electric utility’s 50-50 debt-to-equity ratio as a balanced capital structure for ratemaking purposes. The company’s overall authorized rate of return is 5.46 percent. DTE Electric had requested an ROE of 10.5 percent.  Disallowed $44 million in capitalized incentive compensation expense tied to the company’s financial performance indicators. This results in a one-time write off of $31 million to remove this amount from the rate base on a going forward basis. Consistent with past practice, the Commission authorized $3.6 million in incentive compensation tied to operational performance metrics as part of DTE’s operation and maintenance expense.  Disallowed over $160 million in capital expenditures at several of DTE Electric’s fossil-fueled plants based on insufficient support for the proposed funding level, potential changes to environmental rules, or uncertain project timing. The Department of Attorney General, Association of Businesses Advocating Tariff Equity (ABATE), Commission Staff and other parties raised concerns about a lack of specificity on project scope, funding and timing. For DTE Electric’s River Rouge plant, the Commission rejected the utility’s request to recover approximately $11.4 million in historical and new capital costs to convert the plant from burning coal to a combination of industrial waste and natural gases. The River Rouge plant is down to one unit, which was slated to close in 2020. The Commission called for a community transition plan to be filed as part of DTE Electric’s next rate case. The plan should address public input DTE Electric has received through public meetings in River Rouge or other outreach to communicate the utility’s plans with the community and receive input from community members.   Directed DTE to provide a revised cost-benefit analysis of its Belle River power plant using alternate retirement dates, consistent with the Commission’s recent decision in DTE Electric’s recent integrated resource plan (Case No. U-20471).  Disallowed funding for numerous information technology projects, $61 million in capital and $1.1 million in operations and maintenance expense, based on insufficient justification or detail on the costs, need, or timing. With a review of IT project-level detail and support being difficult to predict even two years into the future, and given the cost and operational impacts, they present significant risk to the company and customers. The Commission recommended DTE Electric develop a comprehensive information technology plan in coordination with the Commission, Staff, and stakeholders. The plan would strategically and holistically assess IT needs, solutions, risk management, security, and decision-making approaches to support the utility’s customer, business, and operational functions. * Directed DTE Electric to include performance metrics and timelines as part of its long-term electric distribution plan to be submitted to the Commission in 2021 given the pressing need to improve electric reliability, such as reducing the number and duration of outages.  Maintained its production cost allocation methodology based on 4 coincident peak 75-0-25 for allocating costs between different customer classes.  Approved continuation of special rates for eligible low-income customers, including the ability for DTE Electric to continue to enroll customers if enrollments exceed the amount included in rates.  Rejected DTE Electric’s proposed pilots for fixed bill and low-income renewable energy but suggested the utility continue to work with the Commission, the Staff and stakeholders on the development of programs.  Recommended reconsideration of the timing to roll out on-peak summer rates for residential customers given potential challenges with near-term implementation and delay in the initial pilot programs.  Maintained a monthly customer charge of $7.50 for residential customers. In addition to the Attorney General, ABATE and MPSC Staff, intervenors in the case were the Michigan Cable Telecommunications Association; Kroger Co.; Michigan Environmental Council; Natural Resources Defense Council; Sierra Club; Citizens Utility Board; Great Lakes Renewable Energy Association; Residential Customer Group; Environmental Law and Policy Center; Ecology Center; Solar Energy Industries Association; Vote Solar; Utility Workers Union of America Local 223; Energy Michigan; Foundry Association of Michigan; Soulardarity; Central Transport, LLC; Central Transport, Inc.; Crown Enterprises, Inc.; Detroit International Bridge Company; Universal Truckload Services, Inc., and Wal-Mart Inc.    MPSC Chairman Sally Talberg noted that rate cases are subject to a 10-month statutory deadline for the Commission to issue a final decision, and she expressed appreciation for the efforts by the administrative law judge, Staff, and parties to bring this case to a timely resolution, especially given the challenging circumstances with the COVID-19 pandemic.  “The Commission does not take lightly its decision to authorize DTE to raise its rates but we are bound by law to issue a decision now,” Talberg said. “There are pressing needs to upgrade aging infrastructure to ensure safe, reliable electric service.”    Talberg added, “The MPSC has worked closely with other state departments, social service agencies and utilities across the state to strengthen shutoff protections and assistance programs for vulnerable households, and we encourage anyone with financial challenges to not wait and to reach out now for help.”     Residential utility customers may contact their utilities, call 211 or go to www.mi211.org for help. Additional information on assistance is available on the MPSC’s website.      To look up cases from today’s meeting, access the E-Dockets filing system here.  To watch recordings of the MPSC’s meetings, click here.  For information about the MPSC, visit www.Michigan.gov/MPSC, sign up for one of its listservs, or follow the Commission on Twitter.  DISCLAIMER: This document was prepared to aid the public’s understanding of certain matters before the Commission and is not intended to modify, supplement, or be a substitute for the Commission’s orders. The Commission’s orders are the official action of the Commission.   # # # Update your subscriptions, modify your password or email address, or stop subscriptions at any time on your Subscriber Preferences Page. You will need to use your email address to log in. If you have questions or problems with the subscription service, please contact subscriberhelp.govdelivery.com. This service is provided to you at no charge by Michigan Department of Licensing and Regulatory Affairs.

Testing Finds Arsenic, Lead, Radium in Drinking Water Near Consumers Coal Plant

Testing Finds Arsenic, Lead, Radium in Drinking Water Near Consumers Coal Plant

Coal is dead. A Michigan town is at center of battle over what’s next.

Coal power dims in Michigan

Coal once dominated Michigan, but now it’s fading fast. Since 2010, Michigan utilities have retired at least 26 coal generators at 15 power plants, while 17 generators at six plants are set to retire by 2025. Three other old coal plants converted to burning natural gas. This map shows that changing energy landscape. Click on the coal plant icons for details.

Source: U.S. Energy Information Agency data, public announcements and media reports.

More ...

Shutdown of coal-fired power plant results in significant fetal health improvement in downwind areas

Science News

from research organizations

---

Date:

December 21, 2017

Source:

Lehigh University

Summary:

First study to show fetal health improvement as a result of a coal-fired power plant shutdown due to direct federal level regulation on single pollution source finds 15 percent reduction in likelihood of having a low birth weight baby and 28 percent reduction in likelihood of a preterm birth in areas downwind of the power plant.

     

As the U.S. Environmental Protection Agency (EPA) moves to dismantle the Clean Power Plan touting a return to "cooperative federalism," the results of a new study focused on the downwind impact on fetal health of emissions from a coal-fired power plant, which is located on the border between two states, highlight policy gaps engendered by state-level regulation of air pollution.

More ...

How advocates helped lead Michigan’s capital city to a future without coal

Midwest Energy News

The impending closure of the Otto E. Eckert coal plant is one factor guiding Lansing, Michigan's utility planning process.

WRITTEN BY Andy Balaskovitz

PHOTO BY

Jeff B. / Creative Commons

Nearly 10 years ago, the municipally owned Lansing Board of Water & Light floated plans for a new $1 billion coal-fired power plant to replace an aging coal plant just south of the capital city’s downtown.

While utility planning for the future looked quite different then, the proposal was met with swift backlash from many in the greater Lansing community who saw coal as a step backward. The BWL also wasn’t alone among Michigan utilities at the time planning a future with more coal.

Based on public pressure and years-long community engagement, the BWL ended up building a 100 megawatt (MW) gas-powered cogeneration plant to effectively replace the 375 MW Eckert Plant.

But less than 10 miles west of Eckert, the BWL owns another coal plant, the 160 MW Erickson Plant. Over the years, Erickson — completed in 1973 — had a less defined future with vague, moving targets of when it might be closed down.

By early 2014, though, the Michigan chapter of the Sierra Club had been looking into the two plants, finding a long history of self-reported air pollution violations. This provided an in-road for action, according to the group, which issued a notice of intent to sue the BWL in March 2015 over more than 3,500 self-reported violations at the two plants between 2009 and 2013.

Read more ...

MPSC Approves Consumers Energy Rate Hike, Seeks Justification for Keeping Uneconomic Coal Plants Running

FOR IMMEDIATE RELEASE

February 28, 2017

Contact:

Ricky Junquera, ricky.junquera@sierraclub.org, (617) 599-7048

MPSC Approves Consumers Energy Rate Hike, Seeks Justification for Keeping Uneconomic Coal Plants Running

Lansing, MI - Today, the Michigan Public Utilities Service Commission issued a decision allowing Consumers Energy to increase their customer's electricity bills. In approving that rate hike, the Commission required that Consumers Energy run a benefit/cost analysis on its aging coal fleet and provide that detailed analysis on their next general rate case filing. EarthJustice and Olson, Bzdok, & Howard represented the Sierra Club in this case.

In response, Regina Strong, Director for the Sierra Club's Beyond Coal Campaign in Michigan, released the following statement: 

“We do not agree with the Commission’s decision to approve a rate hike, part of which will pay for Consumers’ investments in dirty, uneconomic coal plants. But, we are glad to see the Commission require Consumers Energy to undertake a detailed benefit/cost study of potentially retiring the D.E. Karn 1 and 2 and J.H. Campbell 1 and 2 coal plant units in the relatively near future. Given the escalating cost of maintaining coal-fired power generation units, that are already between 49 and 55 years old, the company should not commit to capital spending on these plants before  that analysis is completed. Ratepayers should not be on the hook for avoidable costs that are no longer economically justifiable.

“Today's decision also initiates a separate proceeding to address electric vehicle issues, to be led by Staff. Its goal is to convene stakeholders from the EV marketplace and develop a statewide master plan for EV charging infrastructure, including the role for Michigan's utilities. Our electric utilities have a critical role to play in shaping the future of the EV market, from infrastructure to education. Today's decision marks a critical step toward realizing that future in Michigan, the birthplace of the modern auto industry."

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About the Sierra Club

The Sierra Club is America’s largest and most influential grassroots environmental organization, with more than 2.7 million members and supporters. In addition to helping people from all backgrounds explore nature and our outdoor heritage, the Sierra Club works to promote clean energy, safeguard the health of our communities, protect wildlife, and preserve our remaining wild places through grassroots activism, public education, lobbying, and legal action. For more information, visit www.sierraclub.org.

Michigan Chapter Update - June 19, 2016

Michigan Chapter Update - June 5, 2016

Michigan Chapter Update - May 15, 2016

BWL’s View of Lansing’s Energy Future Is Not Very Bright

FOR IMMEDIATE RELEASE

May 10, 2016

Media Contacts:

Ricky Junquera, 617.599.7048, ricky.junquera@sierraclub.org  

BWL’s View of Lansing’s Energy Future Is Not Very Bright

“Could cost customers millions of dollars, while over committing the BWL to fossil fuels.”

Lansing, MI -- Tonight, the Lansing Board of Water and Light (BWL) held its Committee of the Whole meeting. There are several serious problems with the BWL’s IRP analysis presented to the Board tonight by the Citizens Advisory Committee. If approved by the BWL Board of Commissioners, the recommended plan would put BWL ratepayers on the path to incurring millions of dollars of unneeded capital investment, and would burden BWL customers with paying unnecessarily high utility bills.

In response Brad van Guilder, Organizing Representative of the Michigan Beyond Coal Campaign for the Sierra Club, released the following statement:

“Our experts have identified several serious problems with the BWL’s IRP analysis. These flaws lead to misleading results. If approved by the BWL Board of Commissioners, the recommended plan would put BWL ratepayers on the path of incurring many millions of dollars of unneeded capital investment, and would burden BWL customers with paying unnecessarily high utility bills.

“It is imperative that the Board instruct BWL staff to fix these problems in their planning process before approving any plan so it can avoid going down a path that could be wasteful, expensive, and unnecessarily risky. I would suggest the board look to complete a third party review of any plan before implementation.

“While the IRP does rightly include commitments to invest in clean wind and solar energy, it neglects to set a retirement plan for the Erickson coal plant, and may create more than $100 million in debt for the City of Lansing as early as 2020 in unnecessary new natural gas plants. It also misses the opportunity to include more of the cleanest and cheapest resource: energy efficiency. We could be a community on the cutting edge of renewable energy production, growing clean energy jobs right here in Lansing, but right now look more like a community continuing to depend on fossil fuels for our future. That future does not look bright to me.”

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About the Sierra Club

The Sierra Club is America’s largest and most influential grassroots environmental organization, with more than 2.4 million members and supporters. In addition to helping people from all backgrounds explore nature and our outdoor heritage, the Sierra Club works to promote clean energy, safeguard the health of our communities, protect wildlife, and preserve our remaining wild places through grassroots activism, public education, lobbying, and legal action. For more information, visit www.sierraclub.org.

Michigan Chapter Update - January 3, 2016

Sierra Club signs off on controversial AEP coal plant plan

Position Statement on Energy Policy

Sierra Club Michigan Chapter Position Statement 

Energy Policy

Sierra Club encourages lawmakers to expand Michigan’s renewable energy and efficiency programs, and more specifically:
- Increase Michigan's renewable energy standard to 30% by 2030.
- Increase Michigan's energy efficiency/optimization standard from 1% to 2% annually.
- Remove the existing spending cap on Michigan's energy efficiency program.
- Ensure that "clean" or "renewable" energy is not redefined to include any fossil fuels, nuclear energy, or energy from incinerating wastes.
- Ensure that customers are able to produce their own energy and are allowed to either use that energy themselves or sell it back to a utility company at full price, not a wholesale price.
- Enable everyone to participate in community renewable energy projects.



Issue Background
In 2008, the Michigan Legislature passed the Clean, Renewable, and Efficient Energy Act (PA 295). The law put in place a Renewable Energy Standard (RES) that requires Michigan’s utility companies to obtain 10% of their electricity from clean and renewable sources by 2015. The law also created an energy efficiency program, which is funded through a small fee on all ratepayers’ energy bills to help homeowners and businesses make their homes and offices more energy efficient.

PA295 has been an unparalleled success. All major utilities have met the 10% renewable energy standard and have reduced/eliminated surcharges to pay for it. While the costs of coal and nuclear energy range from $108-133 per megawatt/hour, wind contracts cost between $43-59 per megawatt/hour, which is cheaper than natural gas at $67 per MWh. The Michigan Public Service Commission’s 2013 report on renewables states that Michigan can achieve a 30% renewable energy standard (RES) without technical difficulties or increased costs. PA 295 defined renewable energy to include solar, wind, hydroelectric, biomass, geothermal, and landfill gas.

Michigan’s energy efficiency standard of 1% annual savings has also been successful. For every $1 invested in our energy efficiency program, ratepayers have saved $4.38. Energy efficiency is the most cost-effective way to reduce spending on electricity, costing $11 per MWh, cheaper than any form of new generation. The 2008 law also set a cap on how much utilities could spend on energy efficiency.


Sierra Club Perspective
Fossil fuels create $523 billion of domestic public health and environmental costs annually and receive over $500 billion in annual subsidies from our government. The Legislature should increase Michigan’s RES to 30% by 2030 and increase its efficiency standard to 2% annually. This would combat subsidies/costs and promote meaningful progress in climate disaster mitigation. The legislature should also ensure that customers are able to produce their own energy and sell it at full price.

Michigan currently spends $24 billion per year importing fuel into the state. 100% of our fuel for coal and nuclear power comes from out-of-state, 99% of our petroleum and 80% of our natural gas as well. Solar, wind and energy efficiency have no fuel costs and don’t send our money out of state.

The Sierra Club opposes proposals to gut the definition of renewable/clean energy. Fossil fuels, nuclear energy, waste incineration, and pumped storage are not renewable energy sources. Energy sources that emit air pollution (including the greenhouse gases carbon dioxide and methane), water pollution, and produce radioactive waste should not be considered “clean energy” in Michigan’s laws.




Current Legislation on Clean Energy in Michigan
There is currently no legislation introduced to establish a 30% Renewable Energy Standard annual increase.

Sierra Club Supports the Following Bills
Powering Michigan’s Future legislation SB 295-297 and HB 4518-4519, HB 4055: increase Michigan’s renewable energy standard to 20% by 2022, gradually increase the energy optimization standard until reaching 2% annually in 2019 for electricity and 1.5% for natural gas, and eliminate the renewable energy surcharge.
Bill sponsors: Hoon-Yung Hopgood, David Knezek, Sam Singh, Marcia Hovey-Wright, Julie Plawecki.

Bipartisan Energy Freedom legislation HB 4878-4881: remove barriers for businesses and individuals to generate their own energy and receive fair-value pricing. Enable community energy projects.
Bill sponsors: Gary Glenn, Ed McBroom, Scott Dianda, Jeff Irwin

HB 4304 (Jason Sheppard): prevent natural gas utilities from raising rates to pay for fines and penalties. This bill is a positive step toward establishing stricter accountability for utility companies when they fail to comply with the law.

HB 4683 (Scott Dianda): require the Michigan Public Service Commission to adopt integrated resource plans for regions of the state. This is designed to make energy distribution in the Upper Peninsula cheaper, cleaner and more reliable.


Sierra Club Opposes the Following Bills
SB 437-438 (Mike Nofs, John Proos): sunset Michigan’s Energy Optimization standard in 2019, repeal Michigan’s Renewable Energy Standard, establish a definition for “clean energy” that includes polluting fossil fuels, implement a voluntary green pricing program, eliminate net metering, destroy the distributed energy market, and replace standards with an Integrated Resource Planning process.

HB 4297-4298 (Aric Nesbitt): replace renewable energy/efficiency mandates with an Integrated Resource Planning process, establish an unenforceable 30% renewable/efficiency goal, and remove sustainability criteria for wood/tree biomass.

SB 465 (Mike Shirkey): require the legislature to review Michigan’s State Implementation Plan (SIP) for the federal Clean Power Plan and give them the power to disapprove it. It would also prevent a SIP from being submitted if there is pending litigation against the Clean Power Plan. This will handcuff our ability to comply with the Clean Power Plan, slow down our implementation, and lessen our ability to mitigate climate change.

HB 4303 (Brett Roberts): allow natural gas utilities to expand their infrastructure with Michigan Public Service Commission oversight/review and use ratepayer money to pay for it. This ratepayer money should instead be spent on repairing/replacing old natural gas pipelines, distributed generation, community renewable projects, or energy efficiency.

HB 4066 (Ray Franz): completely ban offshore wind deeds, leases, or permits in the Great Lakes.

HB 4308 (Ray Franz): repeal Michigan’s current Renewable Energy Standard.

"DTE makes us sick!" Take the next step in our fight for justice

Sierra Club Submits Testimony Opposing SB 437: Destructive Energy Legislation

The Sierra Club Michigan Chapter submitted the following testimony to the Senate Energy and Technology Committee in response to Senate Bill 437 on Wednesday, September 30.

Comments on SB 437

September 30, 2015

To: Chairman Nofs and members of the Senate Energy and Technology Committee

RE: Senate Bill 437

On behalf of our 60,000 members and supporters in Michigan, the Sierra Club expresses our opposition to SB 437 (Nofs) and urges substantial amendments to the bill language to address its significant flaws. SB 437 would establish a revised integrated resource planning (IRP) process as a substitute for Michigan’s current renewable energy and efficiency standards. The IRP process created by SB 437 is intended to fill in the gaps in its companion bill, SB 438, which would eliminate Michigan’s renewable energy portfolio requirement and sunset its energy optimization program. IRP processes, and in particular the utility-driven approach contemplated by SB 437, are not effective replacements for clean energy standards. Instead, to achieve clean energy goals, integrated resource planning needs to be conducted in conjunction with clear standards and incentives.

In Michigan, residents have realized many benefits of mandated clean energy standards since the passage of Public Act 295 in 2008. Those enforceable standards  created jobs, saved ratepayers money, and enhanced economic development, while simultaneously protecting the health of Michigan’s citizens by reducing the use of dirty and costly fossil fuels in our energy sector. Now is the time to increase Michigan’s clean energy standards, not to gut them. Our own state agencies, as well as nationally acclaimed energy experts, have demonstrated that our state can dramatically increase its renewable energy and efficiency capacity while boosting our economy and protecting our environment.

Even if Michigan’s current standards remained intact, or were improved as recommended in Sierra Club’s August 15^th letter to this Committee regarding SB 438, the IRP process in SB 437 suffers from several flaws. To more fully maximize the benefits of integrated resource planning, and to ensure a clean energy future, the IRP process must, at a minimum: engage stakeholders early and in meaningful ways; provide for the fullest possible consideration of clean energy and energy efficiency technologies; require utilities to engage in robust modeling; and assess compliance costs with all reasonably expected future regulations, in addition to applicable laws. In SB 437, the process falls short on many of these issues. Michigan legislators should amend or reject SB 437 because it would undermine Michigan’s progress to date and put our future at risk.

An IRP process alone will not drive energy efficiency

An IRP process can be a strong complement to a robust energy efficiency program, but it is not an effective replacement for one. In December 2014, the American Council for an Energy-Efficient Economy (ACEEE) reported a striking difference in efficiency spending and savings between states with standards and those without, regardless of whether the state had an IRP requirement in place[1]. The researchers found no statistically significant difference between efficiency spending or savings between IRP and non-IRP states without standards, while states with efficiency standards had three times the amount of spending and savings as those without. This analysis has been borne out in Michigan, where the MSPC estimates that customers save close to $4 for each $1 invested by the utilities.[2] Moreover, Michigan’s energy efficiency industry employs more than 46,000 Michiganders, and contributes 2.3 billion to our economy[3], all while reducing greenhouse gas emissions.

Sun-setting our successful energy optimization standard puts these savings and this economic sector at risk. At present, utilities have a strong disincentive to engage in customer energy efficiency programs, as higher sales of energy lead to higher utiltity revenues. While SB 437 provides for decoupling of utility profits from sales, which can neutralize the disincentive for efficiency, decoupling does not create a financial incentive to save energy that is comparable to the incentives that exist for investment in new capital assets like powerplants. Neither will the IRP process create such an incentive.

As written, SB 437 requires that utilities only show that their submitted IRPs are “least-cost,” without regard to the benefits offered by new clean energy or energy-efficient technologies. Moreover, under SB 437, the Michigan Public Service Commission (PSC) would only be tasked with evaluating energy savings that are “technologically” and “economically” feasible at a fixed moment in time[4]. It does not appear to be required to model higher levels of efficiency investment, nor, with the elimination of the EO program, would it consider any minimum level of energy efficiency. This contravenes several best practices that have been identified for the integration and encouragment of cost-effective energy efficiency measures[5]. With essential improvements, and the preservation of our energy optimization program, an IRP process could be step in the right direction. In its current form, however, SB 437 and its companion legislation will negatively impact a cost-effective measure that has decreased customer rates and reduced energy waste.

Creating “flexibility” does not require the repeal of renewable energy standard

Some supporters of SB 437 and SB 438 justify their proposal with an ideological opposition to mandates, and view this legislative package as restorative of market forces. These bills place Michigan’s energy future solely in the hands of the IRP process by invoking a need for flexibility. It is worth noting that utilities are not players in a free market; they are government-granted monopolies that enjoy guaranteed profits. It is not unreasonable to require them to reduce waste and invest in clean power.

The current renewable energy standard – which requires utilities to generate at least 10 percent of their electricity from renewable sources – can hardly be said to limit flexibility. Moreover, it has been a boon for our economy and residents. Since it was enacted in 2008, it has driven down the cost of generating power and delivered $2.9 billion[6] in new investments in Michigan. It’s also been a big job creator; our state added 3,600 clean-energy jobs in 2014 alone.[7]

The fossil fuel industry, on the other hand, received $502 billion in overall subsidies from U.S. taxpayers in 2012, according to a report from the International Monetary Fund. In comparison, the renewable energy industry (excluding biomass) received $24 billion in federal support in 2012, less than five percent the subsidization of fossil fuels. In addition, the International Monetary Fund recently reported that fossil fuel pollution costs the world $5 trillion annually in public health and environmental problems. Pollution costs are externalized from the market and are another form of fossil fuel subsidization, balanced out by costs to people’s health and degradation to our natural resources. For example, right here in Michigan a 2011 report from Environmental Health and Engineering, Inc. showed that particulate matter pollution (PM2.5) from Michigan’s nine oldest coal plants are costing $5.4 billion a year in public health costs.

Under SB 437 and SB 438, the renewable portfolio standard (RPS) would be replaced with an IRP which does nothing to correct the over-subsidization of fossil fuels or to internalize pollution and public health costs into electric generation costs. The IRP should be complemented by an RPS, especially since renewables are cheaper^[8] than new conventional power generation. An IRP alone will not result in substantial progress toward renewable energy development.

SB 437 and SB 438 fail to appreciate the dangers of climate change

Combined, SB 437 and SB 438 make for a dangerous proposal that takes Michigan in the wrong direction when it comes to protecting our state from climate disaster. Climate disruption caused by greenhouse gases from human sources is an urgent threat to our everyday lives and our future, and its impact is already being felt in Michigan. Climate disruption is about more than warmer temperatures – it’s about disrupting the basic weather patterns that affect almost everything in our lives - our water supplies, how we grow our food, the kinds of diseases we deal with, and the ability to keep our families safe.

We can already see the effects of climate disruption all across America: unprecedented droughts and wildfires in Western states, record-breaking heat in the Southwest and Midwest, Hurricane Katrina and Superstorm Sandy, extreme winter weather in traditionally warm states, and melting glaciers in Alaska and Montana. Extreme weather events are becoming more frequent, harming people, their economic well-being, their health, their homes, and their futures. Right here in Michigan, we’ve seen cherry and apple crops completely devastated due to abnormal and extreme weather patterns exacerbated by climate disruption. The time to fight climate disruption is now, but enacting SB 437 and SB 438 would contribute to more climate disasters.

Sierra Club members call on our elected leaders to combat climate disruption by moving Michigan beyond fossil fuels and towards true clean energy sources like wind, solar, and energy efficiency. According to a Yale study from last year, 61% of Michiganders believe climate change is happening, 76% believe we should regulate carbon pollution, and 60% support increasing our state’s renewable energy standard.  The message is clear: Michiganders oppose the legislative package of SB 437 and SB 438 and want clear metrics for renewable energy and efficiency instead.

Sierra Club’s Policy Recommendations

The IRP process established by SB 437 cannot, on its own, provide for a clean energy future in Michigan. It is not a sufficient substitute for Michigan’s current renewable energy standards or energy optimization program. We reiterate our recommendations for those mandates from our August 15^th letter regarding SB 438 here because they relate to SB 437 as well:

·         Increase Michigan's renewable energy standard to 30% by 2030, as the Public Service Commission and Energy Office have reported is readily achievable.

·         Increase Michigan's energy optimization standard from 1% to 2% annually.

·         Remove the existing spending cap on Michigan's energy efficiency program.

·         Ensure that "clean" or "renewable" energy is not redefined to include anything that emits greenhouse gasses or creates radioactive waste such as fossil fuels, nuclear energy, or energy from incinerating wastes.

·         Ensure that electric ratepayers are able to produce their own energy, either to use for themselves or sell back to a utility company at full retail price, not a wholesale or lowered price.

·         Remove the existing cap on net metering and all other regulatory barriers to distributed generation.

In addition, we offer the following specific recommendations on SB 437:

·         The Public Service Commission should evaluate IRPs based on the reasonableness of costs and rate impacts in consideration of the benefits offered by new clean energy and energy-efficient technologies and give its fullest consideration to those technologies, rather than evaluating utility IRPs simply on the basis of “least-cost.”[9]

·         The Public Service Commission and utilities should consider environmental compliance costs with all reasonably expected future regulations, not only those formally proposed or published in the Michigan Register or Federal Register.[10]

·         The IRP process should provide for early and meaningful stakeholder engagement, both in the Public Service Commission’s development of statewide parameters for IRPs and the utilities’ planning process, rather than providing only for responsive comments and contested case hearings (respectively).[11]

·         Require use of levelized cost-curves for demand-side resources, including energy efficiency, that are comparable to the levelized cost curves for supply side resources.

·         Utilize credible load forecasts by requiring load modeling to address a range of possible load forecasts, not just the most likely forecast (e.g. a high-growth and low-growth forecast as alternatives to the reference case).

·         The IRP should be constructed in a way that internalizes environmental pollution and public health costs. These costs are currently externalized from the energy market and get passed onto individuals, health institutions, and others impacted by environmental pollution.

·         Require utilities to use and document simulation models that evaluate the cost and risk of multiple possible resource portfolios under numerous future scenarios before arriving at a plan.

For these reasons, we urge you to vote NO on SB 437, or if it goes forward, to amend the bill to strengthen the IRP process in the ways enumerated in this letter. Votes pertaining to this bill will be included in the Sierra Club’s legislative scorecard.

Sincerely,

Mike Berkowitz

Legislative and Political Director

Sierra Club Michigan Chapter

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[1] http://aceee.org/blog/2014/12/irp-vs-eers-there%E2%80%99s-one-clear-winner-

[2] Michigan Public Service Commission, 2014 Report on the Implementation of P.A. 295 Utility Energy Optimization Programs, November 2014.

[3] Michigan Energy Innovation Business Council and 2013 Michigan Workforce Agency Energy Cluster Analysis

[4] SB 437, page 26, ll. 23-25.

[5] State and Local Energy Efficiency Action Network, Using Integrated Resource Planning to Encourage Investment in Cost-Effective Energy Efficiency Measures, September 2011.

[6] http://awea.files.cms-plus.com/FileDownloads/pdfs/Michigan.pdf

[7] http://cleanenergyworksforus.org/wp-content/uploads/2015/03/2014_Q4_Report_FINAL.pdf

[8] http://cleantechnica.com/2015/06/09/cheap-michigan-wind-energy-set-save-consumers-15-million-annually/

[9] See SB 437, p. 28, ll. 11-13.

[10] Id. at 26-27, ll. 26-27, 1-5.