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Q&A: Sen. Mike Nofs Outlines Michigan’s Energy Policy Overhaul

In the new year, the Michigan Legislature will consider a major rewrite package (House Bills 4297-4298 and Senate Bills 437-438) of the state’s current energy policy, written in 2008, in an effort to address an evolving marketplace, plan for future capacity needs, maintain competitive pricing, and update clean energy standards.

The Detroit Regional Chamber recently sat down with Sen. Mike Nofs (R-Battle Creek), a chief architect of the legislation and chair of the Senate Energy Committee, to discuss the proposed legislation.

Q: What does this legislation hope to accomplish? Why is this so important?

A: Well, in the 2008 legislation, there were some commitments we made and some mandates that were in the bill, like the renewable portfolio standard, 10 percent by 2015. Obviously it’s the end of 2015 and we’re going to meet that standard it looks like, and we’ve seen some energy efficiencies, making sure we’re doing a better job of using less energy so we don’t have to build more power plants, wind farms, solar farms, etc.

So we want to look at energy policy — it’s been eight years — and set out a new plan. The best part about this new plan is we don’t want to pick this time; legislators don’t want to pick what form of energy or what fuel source or what type of energy we’re going to use. We want them all to compete in the process. In the current statute there is an integrated resource planning process, but we’re really beefing that up, we’re going to use that a lot more and make it more robust.

My real intention and goal is to have clean, affordable, reliable energy, but then I also want to put together a plan that you don’t have to run back to the Legislature all the time to tweak to be able to do something new. So this is going to allow the growth of any idea that has merit to it that makes sense. I’m a big picture guy. Let’s put a process in place that you can use for a long time.

Q: Certain groups have tried to create some sense of urgency around this legislation. How real is this urgency?

A: You know, I think a lot of this has to do with the Clean Power Plan that the federal government is trying to put on all states, so we have to deal with that. We’ve got nine plants closing in Michigan and you need to replace them, so there is some urgency there, and it takes some time to build a new power plant.

We’re going to go a little bit into next year, hopefully we’ll have it done by either the first or second month of 2016. We need to get going so that we’re actually building a new plant and we can have one online to replace some of the ones that were closed. Otherwise, we’re going have some difficulties in providing the energy and consistency and reliability we need to be providing in the next two or three years.

Q: How aligned are the two chambers at this point?

A: They’re a lot closer than they were. The House originally eliminated the choice program (the ability to purchase energy from an alternative provider), and my plan didn’t. They’ve made changes and now it’s a lot closer to my plan. We’re not going to kill choice. In my bill, if Detroit’s choice customers come back to utilities voluntarily, and if everybody does, then the choice market would go away. But if they don’t, they can stay out there forever and no one will touch them. It’s up to them, and that’s the way it should be.

Q: You mentioned the pending plant closures next year. Looking at this choice market, does resource adequacy become an issue that needs to be considered?

A: It’s been a huge part of the discussion. The utilities are required to maintain a reserve margin, which is about 15 percent. A lot of times you don’t use that reserve margin because you’re generating enough with your current plants, so you’re going to sell it.
You can’t store electricity, so you sell it on the open market. But capacity is going to become constrained a little more as we shut down these plants, so this adequacy requirement is a part of this bill. You have to take care of your portion, and you’re going to have the same requirements regardless of whether you’re a utility or a choice provider or anybody else. That’s fair.

Q: Are there any specific sticking points that have emerged that still need to be worked out?

A: Competitive bidding is one of the last big ones. As this issue has come up – it wasn’t a big issue a year ago – it has gotten some legs, some merit. So we’re pursuing that with some language to keep some pressure on the utilities as they’re building. I think it’s a responsible thing to do to get that cost down a little bit further and help keep our rates low.

Q: What do you expect to see happen in the next month or two?

A: I think we can expect to see a House plan sent over to the Senate, and then we will take a look at both plans and move forward from there. The Governor is pleased with the direction we’re going. I think he’s stated that publicly, and that’s reassuring that we have his general support. He’s been a good participant in helping us towards good policy for the next 10 years, and by the end of January I hope to have something on the Governor’s desk that he can sign.

Editor’s note: This interview was conducted at the Chamber on Dec. 7. It has been shortened for publication length and clarity. For more information on this issue and the Chamber’s advocacy work, contact Jason Puscas at jpuscas@detroitchamber.com.