Oct. 25, 2023
Dramatically amended legislation that would create a state clean energy mandate cleared a Senate panel Wednesday with at least one of the state’s major utilities moving from opposed to neutral on the legislation.
The bills are slated for passage Thursday in the Senate, less than 24 hours after substitutes were provided to Senate Energy and Environment Committee members shortly before the panel gaveled in. The committee quickly adopted and reported them to the Senate floor after hearing a brief description of the sweeping changes.
The scale of the changes to the bills since their introduction was in part evidenced by the length of the bills in their current form.
As introduced, SB 271 was 27 pages. It now stands at 57 pages. For SB 273, the bill was nine pages when introduced but is now 32 pages. SB 502 , at 45 pages, is still the same length as when introduced.
While changes were announced last month and then subjected to committee testimony, the first round of substitutes for the bills were never adopted, making the S-2 substitutes adopted Wednesday for SB 271 and SB 273 and the S-4 substitute adopted for SB 502 the first publicly available versions of changes to the legislation.
All three bills were reported along party lines.
“What this will do is, I believe, move Michigan in a very responsible way towards a stronger clean energy investment in our state,” Sen. Sam Singh (D-East Lansing), sponsor of SB 273, said. “We did get a lot of good input … about how to do this, do this in a way that is responsible, that can fully pull down all the federal dollars that are available to make sure that this is a cost-effective way of moving forward a clean energy standard.”
Under the changes in SB 271, electric providers would need to achieve a 50% renewable energy standard – now 15 percent – during 2030-34 and 60% beginning in 2035. In the previous version of the bill, the proposed standard was 60% by 2032 and 100% by 2035.
A new clean energy – non-carbon energy – standard would be established. Utilities would have to reach 80 percent clean energy by 2035 and, as before, 100% by 2040. Nuclear energy would count toward the clean energy portfolio.
Another major change is an increase in the distributed generation cap from 1% to 10%. However, a community solar pilot in the previous version of the bill was eliminated from the new version. The utilities have adamantly opposed community solar.
Changes to energy waste reduction highlight SB 273.
Energy waste reduction, currently at 1%, would be moved to 1.5% on the electric side, with a goal of 2%. Existing incentives would apply to these new percentages based on the level of waste reduction achieved beyond 1.5%.
The natural gas target was again changed within Wednesday’s substitute, with an increase from 0.75% to 0.875% with incentives for exceeding 1%. In the previous version of the bill the proposed increase was from 0.75% to 1%.
Another provision in SB 273 involves what was called an investment in low-income communities to ensure energy waste reduction is being pursued in areas with high energy costs.
For the Integrated Resource Plan process, the priorities become one item that must be balanced in plan approval.
Changes to SB 502, bill sponsor Sen. Sue Shink (D-Northfield Township) said, were relatively minor. The proportional share utilities would have to provide yearly to the Utility Consumer Representation Fund would also be increased.
Another provision requires the prevailing union wage for workers building new energy facilities.
Also, the Department of Environment, Great Lakes and Energy would provide an expanded advisory opinion to the PSC for its decision making, but it would not be binding.
Under the bills as they stand utilities could, if they show good cause, apply for and receive an extension from the Public Service Commission of up to two years to meet renewable energy deadlines. The utilities would have to provide plans to regulators for resolving issues that prevent them from reaching renewable goals.
Reasons for obtaining an extension would include if feasibility was not possible or if compliance were to cause reliability issues or was cost prohibitive.
The House and Senate leaders and the chairs of the energy committees in each chamber would be notified of the granting of extensions to producers beyond the first two extensions and the reasons for further delays being granted.
Consumers Energy now is neutral on SB 271 and SB 273, spokesperson Katie Carey said. It had previously opposed both bills. It still opposes SB 502.
Speaking to reporters following the hearing, Sen. Dan Lauwers (R-Brockway) ripped the proposal, saying the copies of substitutes given to members were still warm from coming off a copy machine as the hearing began.
Reliability and cost are the two main concerns with the bills, he said. He used the example of large manufacturers, saying they spend billions of dollars in overhead costs.
“The states we compete against for these automobile factories or battery factories, they have a lower cost of electricity than we do today and we’re offering a package that brings uncertainty to the cost and uncertainty to reliability,” Lauwers said. “Capital goes where there’s the least risk. By doing this, we’re creating uncertainty. Uncertainty creates risk.”
He said the extensions, or “off-ramps” as they have been referred to for utilities to gain extra time to meet renewable goals, are generally capped at four years. He said that is not a long period of time for what the Legislature is asking the industry to do.
“I just think what we should be doing is incentivizing with goals and not mandating results,” Lauwers said.
Lauwers also questioned the ability of lawmakers to legislate a renewable energy mandate based in part on technologies that may not yet be ready or even exist. He added that he believed the bills could put smaller utilities including municipal ones out of business.
Organizations that traditionally have voiced their stance on energy legislation were largely silent Wednesday after the committee reported the bills. The legislation is on Thursday’s Senate agenda for final passage.
Laura Sherman, president of the Michigan Energy Innovation Business Council, praised the new versions of the bills. The new renewable portfolio standard would make Michigan a clean energy leader in the Midwest, she said.
The statewide energy storage mandate of 2,500 megawatts by 2030 will be key to a reliable grid. Increasing the distributed generation cap from 1 percent to 10 percent is huge for rooftop solar as well as larger customers through a larger megawatt limit, she said.
“I would definitely characterize these (bills) are a very large step forward,” Sherman said.
When asked by reporters about the brief hearing and people including stakeholders and lawmakers not seeing the changes prior to the hearing, committee chair Sen. Sean McCann (D-Kalamazoo) pointed to the short timetable to move legislation ahead of the expected early sine die adjournment for the year.
He added he felt the negotiations had reached a point where legislation could begin to move forward.
“There have been extensive stakeholder conversations over many weeks, if not months, with evolving substitutes and evolving language in an attempt to … listen in good faith to all the stakeholders and try to craft that compromise,” he said.
McCann said the proposed bills would put Michigan in the top 10 nationally on renewable energy standards.
Officials with the coalition Great Lakes Growth, which opposes the bill package, outlined their concerns prior to the hearing with reporters about putting a mandate in place. Their key concerns were also on cost and electric grid reliability.
Mike Johnston, director of regulatory affairs for the Michigan Manufacturers Association, outlined the decisions companies make when faced with cost and reliability concerns over mandates.
“If we can’t compete from a Michigan location, we’re going to have two choices: you either close, or you move to another state,” Johnston said.
He used the example of one member considering relocating operations to another state over the possibility of being able to save hundreds of thousands per year on energy costs.
Mike Alaimo, director of environmental and energy affairs for the Michigan Chamber of Commerce, agreed.
“What we’re looking at is a package of bills that takes a restrictive approach utilizing unachievable mandates to move our energy policy forward,” Alaimo said. “The folks that are left holding the bag are going to be energy rate customers in the state, whether you’re a business paying a commercial or industrial rate or you’re a household.”
Brad Williams, vice president of government relations with the Detroit Regional Chamber, said there should also be a more deliberative process in crafting the energy legislation. He said over recent decades it has often taken multiple years, not several months, to complete major energy policy.
The Legislature spent two years on the 2016 energy law rewrite.
“It seems a bit quick to vote on bills that key stakeholders haven’t even seen yet today,” Williams said. “I think all of us would encourage stakeholders and policymakers to take the time to get this right as opposed to getting it done quickly.”
Marcus Keech, director of government affairs with the Grand Rapids Chamber of Commerce, agreed with other opponents on the potential effect of the proposal.
“These costs don’t just impact our member businesses, but it impacts their employees as well and at the residential side of things,” Keech said.
Johnston pointed to the argument of renewable energy sources being cheaper, countering that the cost of transition is expensive. He used the example of the planned coal-fired Monroe Power Plant retirement, which he said will pass billions in costs down to ratepayers.
“Any proposition that this is going to be a low-cost future is really just not true,” Johnston said.
He also pointed to the ongoing shift toward electric vehicles as being another reason to have concerns about the legislation under consideration.
“We’re at a critical time in the transition of our economy. If we aren’t competitive with other states, it won’t go well for Michigan,” Johnston said.