State Energy Policy Reform

The Issue: 

Developing fair and balanced state energy policy is an important and complex task. During a legislative process lasting more than one year, the Michigan Chamber, in November 2016, was successful in securing numerous amendments to legislation -- Senate Bill 437 -- that ensure retail open access is sustained for all Chamber members that currently utilize electric choice service; secure the creation of a meaningful competitive bidding process for the procurement of electric generation; and strengthen reliability of the entire electric system for all of Michigan’s customers.  

It is important to note that, while the Chamber was negotiating language on SB 437 in the legislature, the Michigan Agency for Energy and the Michigan Public Service Commission (MPSC) were working separately to develop a new tariff that would guide how the Midcontinent Independent System Operator (MISO) will regulate electric market resources. The agreement with the Snyder Administration calls for Michigan to opt out of the currently used market resource auction, utilized by some electric choice providers, and adopt a new process that creates what is called a “Prevailing State Compensation Mechanism” (PSCM). The PSCM will allow the MPSC to assess a capacity charge on any Alternative Electric Supplier who is unable to prove that they have the resources necessary to serve their customers. This mechanism is not new and is currently utilized in other markets across the country. This background is critical because, regardless of passage of SB 437, electric choice customers are facing major changes next year due to the new tariff. 

Where We Stand:

The Michigan Chamber of Commerce supports Senate Bill 437 because it achieves important goals set forth by the Board of Directors. SB 437 is not a perfect bill, but it will sustain choice; protect reliability; and provide for meaningful competitive bidding of new generation. As initially drafted, SB 437 was not acceptable. However, through long and challenging negotiations, Chamber staff won numerous amendments that resulted in dramatic improvements from the version initially introduced and later voted out of Senate committee.  

Specifically, the Chamber amendments for competitive bidding will ensure that any new asset built to serve ratepayers will be the most reasonable prudent way of meeting that need and should help to lower costs for all customers. Specifically, the competitive bidding amendments: 

  • Formalize a process for submission and review of alternative generation proposals.
  • Provide qualified current electric generators automatic rights to offer alternatives.
  • Grants the MPSC the ability to allow any interveners the ability to offer an alternative proposal.
  • The Michigan Public Service Commission can only approve a utility proposal if it is the most reasonable and prudent project.  

To ensure reliability and sustain choice, the Michigan Chamber asked for and obtained the following positive changes: 

  • Require the Prevailing State Compensation Mechanism (PSCM) be utilized – if it is an option in the federal tariff – to ensure federal oversight and consumer protections remain in place for choice customers.
  • If the PSCM is not offered, any other tariff option can be utilized if it meets Michigan’s reliability needs. 
  • Limit the state plan to a last resort and render it inoperative if federal tariff is in place.
  • If the state plan is implemented, require it allows any resource approved by the Independent System Operator to count towards state requirements.
  • Allow for a capacity charge to be utilized to meet state requirements to prevent a customer from being removed from choice service.  

With these changes in place, electric choice customers will have several options for complying with the new regulatory requirements and maintaining access to a choice provider that can demonstrate an ability to serve them. We believe that good energy policy will plan for the future needs of the state and the agreement for a new tariff was motivated by studies that indicate Michigan may have electric reliability issues as soon as 2018 if nothing changes.

Staff Contact: 
Jason Geer
Director of Energy & Environmental Policy
(517) 371-7673
Legislative Proposals: 
In the News: 

Editorial: Last call for energy billsThe Detroit News, Nov. 26, 2016