Michigan Passes New Energy Policy Legislation

Last week, Michigan legislators approved a plan to change state energy policy. This policy reflects an agreement supported by Gov. Rick Snyder in the final hours of the legislative session.  

The plan, which won bipartisan support, will:

• Create a new approval process for utilities that plan to replace power plants.
• Increase renewable energy production standards.
• Maintain the state’s 10 percent retail electric choice program.

A diverse coalition of stakeholders – including Constellation – worked with Gov. Snyder over the past week to finalize the deal.

Highlights of the New Legislation

• The new plan provides guidelines for the Michigan Public Service Commission (MPSC) in setting a capacity fee paid by alternative energy suppliers (AESs) on all retail load.
• The plan defines a process to decide how capacity fees will be set. The two options are:
  1. A three-year forward MISO market-based capacity auction, or
  2. The Prevailing State Compensation Mechanism (PSCM).
• The PSCM construct is a general capacity charge that can be applied to all AES retail load and utility default service load. It is published four years out and trued-up every year based on the actual revenues of each utility. AESs can be fully or partially exempted from paying the capacity charge if they arrange for capacity directly.
• The MPSC can cap electric choice at a number under 10 percent for six years if they see that choice involvement falls below 10 percent in the previous year. For this to occur, the 11,000 customers waiting in the queue now to join electric choice would have to change their minds and stay with the utility. Customers who are with an AES now would also have to leave the program.
• The proposal would require utilities to buy or produce at least 15 percent of their energy from renewable sources by 2022. This builds on the 10 percent by 2015 standard already met. Although, the bill removes the requirement that 50 percent of the renewable generation come from sources owned by generators other than the incumbent utilities. The bill expands the definition of renewables to include geothermal, steam, wood biomass and more.

We will continue to keep you informed about updates as they occur in Michigan.  If you have any questions about the new legislation, please reach out to your Constellation representative.