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Michigan energy bill awaits governor's signature

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Michigan energy bill awaits governor's signature

Comprehensive energy legislation that passed the Michigan House on Dec. 15 awaits the governor's signature.

A spokesman for Gov. Rick Snyder on Dec. 19 confirmed that his office has not yet received the pair of bills, which overhaul the state's energy policy. Upon receipt, state law says the governor has 14 days to approve. In a statement, Snyder said the bills will help the environment by "making it easier for Michigan to develop its own energy sources, instead of buying coal from various states."

Snyder, in a video posted by MLive on Dec. 15, said it is a "safe bet" that he will sign the legislation.

S.B. 437 requires rate-based utilities to file an integrated resource plan with the Public Service Commission within two years of the bill taking effect. In addition, the bill includes provisions related to capacity resource adequacy and amends the state's electric choice market, which allows 10% of a utility's load to be served by alternative suppliers. The Clean, Renewable, and Efficient Energy Act, or S.B. 438, boosts Michigan's renewable portfolio standard, or RPS, mandating that electric providers obtain 12.5% of electrical sales from qualified renewables by 2019 and 15% by 2021. The state already achieved its prior target of generating 10% of power sales from renewables by 2015.

Eversource ISI analysts Greg Gordon and Phil Covello said the uptick in the state's RPS, the establishment of capacity charges and limits on customer switching to competitive suppliers are "unequivocally positive changes, which provide more levers for utility infrastructure growth not baked into current plans," according to their Dec. 18 report, "Long-awaited MI Legislation Finally Passes."

The new legislation also eliminates a limit placed on utilities that no more than half of the annual renewable target can be met with their own generation. This removal provides Consumers Energy Co., a subsidiary of CMS Energy Corp., and DTE Energy Co. "with an opportunity to self-build a large portion of their renewables supply need through 2021 and do so on a more expedited basis," Gordon and Covello said in the report. New renewable investments could partially offset retiring capacity from DTE and the planned retirement of Entergy Corp.'s Palisades nuclear plant in 2018, the analysts said.

DTE and CMS Energy could also benefit from customers returning to utility service instead of buying power from competitive suppliers, known as retail open access, or ROA, suppliers, Gordon and Covello said. Under the new legislation, competitive suppliers would have to demonstrate that they have procured adequate capacity to meet local reliability requirements or pay a demand charge to cover the costs of new supply. The new legislation also requires that customers switching back to a utility default service program must stay with the utility for six years before they can return to a competitive supplier.

The Michigan Energy Innovation Business Council, in a joint statement with Advanced Energy Economy, backed the higher RPS targets, but still had concerns with the new law. The addition of a grid charge on distributed solar customers is "unnecessary" and "causes real concern," Council President Liesl Eichler Clark said. Clark also said the failure of the bill to interconnect Michigan's Upper and Lower Peninsula is a "missed opportunity." State Rep. Ed McBroom had proposed an amendment, which failed to pass the House, to require a transmission study of interconnecting the two peninsulas.