Michigan Energy Legislation Finally Passes: Important Step Forward for Clean Energy

Michigan Energy Legislation Finally Passes: Important Step Forward for Clean Energy

After almost two years of continued perseverance and hard work, and possibly a bit of luck, the Michigan Legislature was finally able to pass new energy legislation. A deal was reached in the last hours of the legislative session with the passing of Senate Bills 473 and 438, the state’s first comprehensive energy package since 2008.

The new energy plan, signed by Governor Snyder a week after being passed, includes an increased Renewable Portfolio Standard (RPS) and retains and improves the state’s Energy Optimization Standard (EOS).  This is particularly notable since the original legislation introduced in the Senate would have eliminated these standards, leaving it up to utilities to propose within a new integrated resource planning (IRP) process. The updated standards now set a minimum floor that they will have to reach. 

In addition, the final legislation removed proposed grid changes for solar net-metering customers, directing the Michigan Public Service Commission to create a fair tariff after considering both costs and benefits to the grid. This was one of the agreements reached in the last hours of negotiation, resolving one of remaining hurdles that could have prevented passage of the bills.  

When energy legislation was first introduced almost two years ago, the state’s RPS requirement of 10% by 2015 had already been reached, and new commitments by utilities had started to slow down.  The new RPS extends the requirements to 15% renewables by 2021 with an interim goal of 12.5% by 2019. In addition, proposed changes to the definition of renewable energy were defeated that would have allowed a broad range of waste materials-- including petroleum coke, coal waste, scrap tires, and hazardous waste--to count as “renewable.”

The state’s energy optimization standard (EOS) was also in jeopardy when the original legislation was introduced. However, the final energy package maintained and improves our highly successful energy efficiency program that has saved customers more than $4 for every $1 invested and reduce energy waste. The new energy package retains the energy efficiency standard of 1% per year but removes the cost caps on utility spending that had previously constrained efforts to exceed the standard.  The legislation also creates additional incentives for utility companies to achieve annual energy savings greater than 1%.  

The new energy package provides a strong path forward for residential and other distributed solar power producers by warding off the one-sided “grid charges” proposed to the net-metering program. The Michigan Public Service Commission (MPSC) will be in charge of setting a fair and balanced tariff after considering and studying both the costs and benefits to the grid. Solar customers can continue to sign-up under the existing net metering until that time, and will then be grand-fathered under those terms for at least 10 years.  The earliest a new tariff is likely to be in place is in 2019, as part of a utility rate revision.  

Regulated utilities will also be required to submit (and update every 5 years) Integrated Resource Plans (IRP) for their entire electric portfolio.  These plans must project their generation capacity and resource needs for the next 20 years, and consider all prudent and reasonable opportunities to reduce waste and improve efficiency. The Commission will set guidelines for this process in 2017, with initial IRP plans due by the end of 2018.

There is a range of other provisions in the energy package, addressing capacity assurance, competitive bidding and the like.  Overall, the legislation also includes a goal that 35% of electricity in 2025 be provided by either energy efficiency or renewable energy, cumulatively.  All-in-all, it was a comprehensive update to the state’s policies and moves us forward in a number of important ways.

It’s important to recognize that these improvements did not just happen on their own. It took the dedication of a broad coalition of environmental, health, faith, and business groups, who by working together were able to strengthen our state’s commitment to clean, renewable, and efficient energy. Thank you to everyone who took action over the past few years, making phone calls, writing letters, sending emails, and meeting with legislators to ensure that Michigan’s energy policies would move us toward a clean energy future. And thanks also to our champions in the legislature who heard our pleas and refused to back down. Lastly, we must also extend thanks to Governor Snyder and his administration for kicking off the Michigan Energy Future effort several years ago and for stepping in to help broker a compromise during the recent overnight legislative session in lame duck. The passage of these bills shows that when enough of us come together with a common vision and a focused strategy for success, we can indeed accomplish great things.

Published on December 28, 2016

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