Michigan needs electric choice, cleaner power
In the aftermath of Proposal 1’s landslide defeat, Michigan has plenty of tough decisions ahead about fixing the state’s roads. But an even bumpier path beckons in another debate that has national implications — energy policy.
Lawmakers in Lansing are being pulled every which way by a half-dozen plans for reorganizing the state’s electricity markets. In addition to four Republican proposals and one Democratic plan, the federal government has proposed rules that would put pressure on Michigan and other states to cut emissions, close many coal plants and use lower-carbon power sources.
Energy also has been one of the signature issues of Gov. Rick Snyder. After losing big on Proposal 1, Snyder has an opportunity to burnish his image as a problem solver by delivering a deal on energy.
To do so, Snyder and the Legislature might take inspiration from conservatives nationally who are helping Americans reclaim control of their energy choices. Nationally, there is broad support for more market competition to deliver lower electricity costs and a cleaner mix of power, including more wind and solar.
Building on these efforts, Michigan should consider expanding electric choice.
Under electric choice, end users contract directly with independent power producers for low-cost electricity, including renewables. But under a 2008 law, the program is capped at 10 percent of the state’s power market, with 90 percent still monopolized by DTE, Consumers Energy and other utilities.
Some big power users are lucky enough to already be in the choice program. For example, scores of school districts around the state use choice to buy more affordable power. So do leading Michigan brands such as Herman Miller, Dow Chemical and Amway, which contract directly for Michigan wind power.
But others are stuck with whatever power the utilities provide — high-priced, often coal-generated, with only the legal minimum of renewables.
About 11,000 utility customers are languishing on the wait list to switch to choice.
Unfortunately, choice has been misunderstood as a plan for cheap fossil-fuel power and full-scale deregulation. As a result, Michigan’s big utilities are running alarmist television ads warning that any new choice program could cause a chaotic market meltdown like the California power crisis of 2000-01.
Instead, a more targeted version of choice could help nearly all political players in Michigan get something they want — from conservative Republicans to pro-Obama Democrats, from big manufacturers to school districts. Here are a few elements in a possible multi-stakeholder compromise:
■Expand choice for any business, university or school that wishes to purchase low-cost power from sources that are primarily renewable and/or meet a clean energy standard.
■Require the provider-of-last-resort obligation, under which large utilities must take back any choice customers that wish to return, to be competitively bid. Currently, Consumers Energy and DTE must recoup from their ratepayers the cost of accommodating these customers, and they complain it provides a hidden subsidy to choice participants.
■Provide support for upgraded transmission facilities to integrate new renewables generation and to link the Upper and Lower Peninsula. This would help Michigan buy and sell power more efficiently.
■ Incentivize electricity storage. Michigan has big advantages that are underused: It has one of the nation’s largest pumped hydro storage facilities, is home to leading battery producers and has more underground gas storage capacity than any other state.
Electric choice is a tool that can let markets do what they do best — let suppliers compete to provide Michiganians the cleanest and most economical electricity possible.
Gregory Staple and Robert Collier are the CEO and senior research analyst, respectively, of American Clean Skies Foundation.