Consumers lashes out at Michigan bill to aid out-of-state power suppliers

The Consumers Energy unit of CMS Energy (NYSE:CMS) spoke out March 20 against a bill in the Michigan legislature that it said would essentially undercut its efforts to pay for things like new wind generation capacity.

The utility said it opposes legislation that would amend 2008 state energy law to benefit a handful of business customers and force the rest of the utility’s electric customers to pay up to $405m more per year by 2016. The utility’s residential customers would be the biggest losers under the bill proposed by Rep. Mike Shirkey, R-Clarklake, Consumers said. They would pay up to $218m more per year by 2016. That would be about a 14% increase in their electric bills.

Statewide, Shirkey’s bill could mean nearly $900m in bill increases by 2016 for the vast majority of Michigan’s electric customers, primarily families and small businesses

“We are extremely disappointed that Rep. Shirkey wants to gut the part of the 2008 energy law that protects our 1.8 million electric customers from the large-scale cost shifting that would take place under his legislation,” said David Mengebier, the senior vice president of governmental and public affairs for Consumers Energy.

Shirkey’s bill would change the provision in the 2008 energy law that sets aside 10% of the state’s electric market to be served by out-of-state power marketers. The Shirkey bill would phase out the cap and start that process by increasing the cap to about 20% immediately.

Under the existing market conditions, the Shirkey bill would allow the out-of-state power brokers to take about 38% of the state’s energy market by 2016 and then continue to phase out the cap. Phasing out the cap to favor the out-of-state power marketers would shift more fixed costs to the remaining utility customers.

The fixed costs reflect the long-term investments that Consumers Energy has made in its Michigan power plants and the long-term contracts it has to buy electricity from Michigan power plants owned by other companies, Mengebier said. He pointed out that Consumers Energy’s electric rates are about at the national average and the utility has the lowest overhead costs in the industry.

Consumers said it plans to invest $6.6bn in its utility operations over the next five years. For example, Consumers Energy is creating about 2,000 jobs with a $1.6bn environmental program to further reduce emissions from its five major coal-fired units.

Mengebier noted the state Senate Energy and Technology Committee conducted hearings last fall on the performance of the 2008 energy laws. After hearing testimony from more than 60 witnesses, the committee chairman, Sen. Mike Nofs, stated publicly that the 2008 energy law was performing well and there was no need to set aside more of Michigan’s market for out-of-state power brokers.

As it exists today, the 2008 energy law provides the financial certainty that Michigan’s hometown energy providers, such as Consumers Energy, need to make substantial investments to serve customers and improve the environment, the utility said.

Consumers customers saved $67m in the first two years of the energy efficiency program the utility launched to help it meet standards set in the 2008 law. The law’s 10% renewable energy standard has encouraged job-creating investments and the development of a variety of new renewable energy sources, primarily wind. Consumers also plans to invest $500m to build two wind farms.

Construction began last fall on the company’s first wind farm, the 100-MW Lake Winds Energy Park, and it is scheduled to begin serving customers later this year. The 150-MW Cross Winds Energy Park is expected to begin serving customers in 2015.

The utility said it also has signed contracts with other companies that will make major job-creating investments in Michigan to build another 300 MW of renewable energy sources.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.