Genesee Regional Chamber of Commerce
urges review of pending energy legislation

(Flint, Michigan, May 30, 2008) The Genesee Regional Chamber of Commerce Public Policy Committee has reviewed pending State of Michigan energy legislation and issued an opinion regarding the proposed laws. While supportive, the Regional Chamber Public Policy group urges legislators to consider making several changes.

“We continue to speak out on critical legislative issues that impact the business community and the citizens of Genesee County,” said Time Herman, Regional Chamber CEO. “It is our responsibility to inform the community of these matters and to lend our voice to creating good public policy.”

The Public Policy position paper is provided in its entirety below.

Energy Legislation Review

A series of bills dealing with energy legislation have been introduced and acted upon in both the Senate and the House. This document will look at three pieces of proposed legislation: House Bill (HB) 5524 (repeal PA 141, known as the Customer Choice and Electric Reliability Act) and HB’s 5548 and 5549 (creation of the Renewable Energy Portfolio Act). While both the House and Senate have taken action on these bills, the Genesee Regional Chamber of Commerce believes the legislation needs additional review.

Repeal of PA 141

The Regional Chamber has looked at the proposed repeal of PA 141. Michigan Attorney General Mike Cox and the Association of Businesses Advocating Tariff Equity (ABATE) believe that repeal of PA 141 would cost electric customers (those of Detroit Edison and Consumers Energy) $2.0 to $2.8 billion dollars. This is in addition to current electric rate charges.

PA 141 was passed with the intention of bringing competition and ultimately lower electrical prices for Michigan consumers. PA 141 was successful in holding electrical prices in Michigan at a slower rate of increase when compared to the U.S. and our region (Illinois, Indiana, Ohio and Wisconsin). However, prices for residential, commercial and industrial users went up 15.8%, 12.6% and 26.5% respectively from May 2000 through November 2007. To date, no residential customers have received electricity from any alternative energy supplier. Customers have had to pay more and Detroit Edison and Consumers Energy claim they have been hurt as well. 

In addition, PA 141 has been credited with creating an unpredictable, high-risk market that discourages potential investors from offering reasonable financing terms for the billions of dollars required to construct new power generation plants.

Detroit Edison and Consumers Energy claim that repeal or a major modification of PA 141 is necessary in order to provide Michigan electric customers with reliable and sustainable sources of electricity into the future. 

Based on HB 5524, Michigan electric consumers would still be able to choose an alternative energy supplier with certain stipulations.

• Modify electricity choice program. The bill would amend the section of the act formally called the "Customer Choice and Electricity Reliability Act," and informally referred to as the electricity choice program or simply, the "choice program."
• Returning choice customers. A customer who elects to receive electricity from an AES may later notify the electric utility that it wants to receive standard tariff service from the utility. The bill would ratify each electric utility's procedures in effect on January 1, 2008 that set the terms under which a customer receiving service from an AES may return to full service from the electric utility. If no procedures were in place, the PSC would provide them.

Overall, the Genesee Regional Chamber of Commerce is supportive of repeal or modification of PA 141. However there are two issues that we believe need careful consideration before passage of HB 5524 and its Senate counterpart. 

The first issue deals with establishing a 10 percent cap on the amount of electricity alternative energy suppliers can provide in a utility’s area. Detroit Edison and Consumers energy claim that a cap at this level will provide them with certainty regarding their respective customer bases, and subsequently allow them to get financing for their proposed energy generation facilities.  The Regional Chamber questions why Detroit Edison and Consumers Energy would settle for a 10 percent cap when less than 3 percent of Michigan’s electric customers are served by alternative energy suppliers. It would seem that a cap of 5-7 percent would provide Detroit Edison and Consumers Energy with a larger guaranteed customer base and potentially better future financing options.

The second issue has to do with “deskewing” of electric rates among the various classes of customers. Under HB 5524, the PSC would be required to shift $365 million of costs to residential customers on a cost of service basis previously disapproved by the PSC. While we are cognizant of the fact that this “deskewing” will take place over five years, the Regional Chamber is in favor of a rate structure that is equitable among all customer classes. Any proposed rate restructuring should not favor one class of customer over another.

Renewable Portfolio Standard

HB’s 5548 and 5549 will create a renewable portfolio standard (RPS) in Michigan. If passed, the bills would create the "Renewable Energy Portfolio Act" to require all electric service providers (e.g. regulated utilities, municipal utilities, electricity cooperatives, and alternative energy suppliers) to produce or purchase a specified percentage of the electricity they sell to retail customers in Michigan from renewable energy resources, as defined in the bill. Each provider would have to achieve a renewable portfolio standard (RPS) of four percent by the end of 2012 and ten percent by the end of 2015.

Proponents of a Michigan RPS claim that having an RPS will lead to significant investment and employment in this state. Governor Granholm states “industry experts tell us that if we attract alternative energy manufacturers, researchers, and producers to Michigan and give them the tools they need to grow, our state can create as many as 70,000 new jobs. Jim Croce (outgoing CEO – NextEnergy) has stated that Michigan has the potential to create up to 19,000 jobs and $5.3 billion in manufacturing investment by 2020 through alternative energy. 

Proponents also claim in order for Michigan to remain competitive and attract any jobs and/or investment in alternative energy, we must join the other 31 states that have already passed renewable portfolio standard legislation.

While the Regional Chamber is supportive of the adoption of a Michigan renewable portfolio standard, we are concerned that there is little discussion on what impact this will have on the overall electrical rates that consumers will ultimately have to pay.

A bill proposed in the Senate, Senate Bill (SB) 1000, would require the Michigan Department of Management and Budget to purchase 3 percent of renewable electrical energy by Jan. 1, 2009, 10 percent by 2010, 20 percent by 2020 and 25 percent by 2025. The purchase requirement will exist as long as renewable energy costs stay within 5 percent of non-renewable energy. The Regional Chamber believes this is not good public policy. Why should Michigan taxpayers be forced to pay a 5 percent premium for the state to purchase energy from renewable energy providers? Chances are that most consumers, given a personal choice, would not opt to pay this 5 percent premium.

Another concern of the Regional Chamber is who will bear the cost of getting renewable energy onto the grid system in Michigan? Traditional electrical energy production is city/urban centered with a transmission system already in place. Many of the proposed renewable energy providers (by virtue of the raw material needed to produce the renewable power) will more than likely be located in more rural settings. The Regional Chamber would like to know more about how this additional electrical transmission issue will be addressed and at what additional cost to Michigan consumers.

As stated above, the Genesee Regional Chamber of Commerce is supportive of a repeal or modification to PA 141, as well as adoption of a Michigan renewable portfolio standard. However, we would like to recommend that action on either piece of legislation not be tie-barred to the other. We are not convinced that adoption of a renewable portfolio standard is dependent on the repeal or modification of PA 141. Tie-barring these two pieces of legislation only serves to confuse Michigan consumers.

The Public Policy Committee gave approval of this position paper on Monday, May 19, 2008 and was approved by the Operating Board of Directors on Tuesday, May 27, 2008.

The Genesee Regional Chamber of Commerce Public Policy committee regularly reviews legislation pending in the Michigan legislature in order to provide feedback to the legislative community on matters of concern. As position papers are developed the Regional Chamber will disseminate the material to our members via email and place the papers on our web site (www.thegrcc.org). We will also disseminate the information to local media and publish the material in Inside Business, the Regional Chamber’s monthly newsletter distributed through The Flint Journal.

For further information contact:

Stan Blood 810-600-1418
sblood@thegrcc.org

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