April 28, Ms. Kavita Kale Michigan Public Service Commission 7109 W. Saginaw Hwy. P. O. Box Lansing, MI RE: MPSC Case No.

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1 April 28, 2017 Ms. Kavita Kale Michigan Public Service Commission 7109 W. Saginaw Hwy. P. O. Box Lansing, MI RE: MPSC Case No. U Dear Ms. Kale: Please find attached Comments of the Environmental Law & Policy Center and the Michigan Environmental Council concerning the development of green pricing programs under Section 61 of Public Act 342 of Please contact me if you have any questions. Sincerely, Margrethe Kearney Environmental Law & Policy Center

2 STATE OF MICHIGAN MICHIGAN PUBLIC SERVICE COMMISSION necessary for regulated electric providers to comply with Section 61 of 2016 PA 342. necessary for ALPENA POWER COMPANY to comply with Section 61 of 2016 PA 342 necessary for CONSUMERS ENERGY COMPANY to comply with Section 61 of 2016 PA 342. necessary for DTE ELECTRIC COMPANY to comply with Section 61 of 2016 PA 342. necessary for INDIANA MICHIGAN POWER COMPANY to comply with Section 61 of 2016 PA 342. Case No. U Case No. U Case No. U Case No. U Case No. U-18353

3 necessary for NORTHERN STATES POWER COMPANY - WISCONSIN to comply with Section 61 of 2016 PA 342. necessary for UPPER PENINSULA POWER COMPANY to comply with Section 61 of 2016 PA 342. necessary for UPPER MICHIGAN ENERGY RESOURCES CORPORATION to comply with Section 61 of 2016 PA 342. necessary for WISCONSIN ELECTRIC POWER COMPANY to comply with Section 61 of 2016 PA 342. Case No. U Case No. U Case No. U Case No. U COMMENTS ON BEHALF OF ENVIRONMENTAL LAW & POLICY CENTER AND MICHIGAN ENVIRONMENTAL COUNCIL April 28, 2017

4 I. INTRODUCTION The Environmental Law & Policy Center ( ELPC and Michigan Environmental Council ( MEC hereby submit the following comments in response to the Commission s order in Case No. U regarding implementation of the Customer-Requested Renewable Energy ( CRRE subpart of Public Act 342 of MCL This subpart requires electric providers to offer to their customers the opportunity to participate in a voluntary green pricing program under which the customer may specify, from the options made available by the electric provider, the amount of electricity attributable to the customer that will be renewable energy. Id. In Case No. U-18349, the Commission directed the above-captioned electric providers to: provide comments on what voluntary green pricing programs and tariffs should contain, including what discrete options (if any should be made available to different customer classes, how program costs will be recovered, and the associated accounting of those costs. In addition, the Commission requires comments by these electric provers on the following: What the minimum requirements of the green pricing programs offered by electric providers should comprise; How rates for the green pricing program(s should be calculated; Factors that should be considered in evaluating the merits of the proposed programs; How often the green pricing programs and rates should be updated; Whether previously-approved green pricing programs are in compliance with Section 61 of Act 342. (See, e.g., April 3, 2007 order in Case No. U-14569, May 3, 2016 order in Case No. U-18047, and October 11, 2016 order in Case No. U March 28, 2017 Order, U While the Commission required comment from the abovecaptioned electric utilities, it also invited comments from any interested person. ELPC and MEC 1

5 appreciate the opportunity to submit comments and provide the below in response to the questions raised by the Commission. II. COMMENTS ON GREEN PRICING PROGRAMS Green pricing programs are increasingly common across the United States and have been in existence in some form in Michigan since The legislative requirement for electric utilities to provide green pricing programs to all customers offers an opportunity for the Commission to revisit the fundamental principles of green pricing programs and ensure that they most effectively serve customers. It is important to recognize that customers are interested in these programs for a number of different reasons. Those reasons include promoting economic development, reducing the level of air pollution from power plants, reducing greenhouse gases, lower rates, and/or greater rate stability due to the availability of long-term fixed costs contracts. Because of these different reasons, Michigan s green pricing programs must be clear, transparent, and provide the information necessary for customers to determine whether they are paying a fair and reasonable price and receiving the benefits that are driving their decision. Electric utilities must provide the basis for all costs and benefits used in pricing, technology type, size, and location of the generating assets. Michigan electric utilities are required to meet a Renewable Portfolio Standard, and the Commission must ensure that programs do not allow renewable energy credits ( RECs to be double counted, or that utilities are simply selling existing renewable generation to customers under a price premium. Local generation should be available under green pricing programs, and competitive bidding for projects will provide useful information and keep pricing in line. Furthermore, electric utilities should make a tangible effort 2

6 to make green pricing programs available to low-income customers. Existing green pricing programs must be revised to reflect these characteristics. A. Green pricing programs must be clear, fair and transparent for customers. Green pricing programs must provide detailed information on the basis for utility calculations of costs of the programs. MCL explicitly states: The customer is responsible for any additional costs incurred and shall accrue any additional savings realized by the electric provider as a result of the customer s participation in the program. The most fundamental requirement of a green pricing program is that customers have an opportunity to understand whether the price they re being asked to pay accurately reflects the additional costs and savings they are responsible for under Michigan law, and, depending on the asset or assets used as the basis for their rate, assess the possibility of realizing additional savings or the risk of incurring additional costs. Any subscription fees or credits that are applied to customers must be clearly articulated, and the basis for the amount of the fee or credit must be clearly established with all underlying information accessible to customers. For example, proposals for wind projects have in the past offered utilities the ability to pay one fixed price throughout the life of a contract. This price stability as a hedge against additional costs might be very attractive to some participants. Any and all costs avoided through the customer s purchase, such as fuel costs or environmental compliance costs, should be considered savings realized by the electric provider and netted out of any additional costs charged to customers. Regardless of how this netting process is accomplished, it should be clear to customers what additional costs they are paying for and what additional savings by the electric provider should accrue to them. Current programs fail to provide this transparency. For example, the DTE program is based on a subscription cost 3

7 of $0.072/Kwh, but fails to explain the relationship between that cost and the standard residential rate of $ /KWh. Green pricing programs should also provide information on technology type, size, and location of the assets that are generating green energy for program subscribers. In weighing the value of their participation in green pricing programs, customers are likely to consider aspects of the program such as the technology that is providing the renewable energy, the size of the project, whether the project is utility or third-party operated, and the location of the project. The location of the project, for example, might be important to customers who place a high premium on increasing renewable generation in proximity to where they live, work, or recreate. Customers may value this information differently, but it is important for each customer to make an educated decision about whether to participate in a green pricing program. B. Renewable energy credits must not be double counted. Green pricing programs should offer renewable energy bundled with the RECs created by that generation. RECs generated through renewable energy provided under green pricing programs should be retired on the customer s behalf. RECs should be retired so that another energy user cannot claim the renewable energy benefits and so the electric utility cannot use the RECs to meet its obligations under Michigan s Renewable Portfolio Standard ( RPS. To ensure that RECs are not double counted, the Commission should require the electric utility to use a third-party certification program, such as Green-e. C. The Commission should consider economic development potential. Often overlooked in this debate is how CRRE programs can provide significant economic development benefits if designed right. Corporations already located in Michigan and those exploring where to locate new facilities are increasingly interested in the availability of 4

8 renewable energy to provide their needs. Utilities that use CRRE programs to protect their nearmonopoly on power generation undermine economic development possibilities in Michigan in a number of ways, including the following: Failure to offer renewable energy programs that are attractive to corporate purchasers will result in Michigan being screened out as a potential location for a new business, or will result in lost business expansion opportunities by Michigan companies who may locate new facilities in other states. Independent power production in Michigan has been good for ratepayers and good for business. Public Acts 295 and 296 of 2008 resulted in a significant expansion of independent power producer activity in Michigan. Those companies have built in-state relationships and have learned how to navigate through Michigan-specific laws and regulations. Public Acts 341 and 342 of 2016 may not offer the same opportunities for these businesses, and it is possible that some will move their focus to more renewablefriendly states. Independent power producers have been good for Michigan utility customers by providing pricing restraint and inserting an element of competition into the Michigan utility market. Independent power producers have also been good for Michigan business. A large number of Michigan businesses have become suppliers for these independent power producers. Future growth for these businesses will be undermined if these independent power producers move operations elsewhere. One idea that is consistent with the Corporate Renewable Energy Buyers Principles (buyersprinciples.org, is allowing purchasers to directly negotiate with utilities or independent 5

9 power producers for a supply of renewable energy that matches their need. A two-way (utility and buyer or three-way agreement (utility, producer and buyer could then be entered into, allowing the producer to feed energy into a utilities system with the costs of the project guaranteed by the buyer. The utility contract could then allow for a true-up mechanism to ensure capacity requirements or other costs were being covered. This would be similar to a design used by Dominion Virginia Power. The added benefit for this program would be in the area of renewable energy facility siting. Resistance to siting a facility might be significantly different if the community knew that a local manufacturer was requesting the project and planned to use the energy produced by it. In addition, it would demonstrate some commitment by the manufacturer to stay within a community for the long term, thus helping with business retention in Michigan. D. Generation should be additional to existing, approved projects. Michigan customers will participate in green pricing programs because they want to see an increase in clean, renewable energy in the state. Customers will expect that the renewable energy they are purchasing (and under current pilot programs, are purchasing at a premium is additional, new generation built by electric utilities specifically for their green pricing programs. Customers shouldn t be asked to pay, again, for costs of existing projects that are already being financed through rates and surcharges. Rather, customers should be offered the opportunity through their participation in green pricing programs to increase the amount of renewable energy generated and consumed in Michigan. The Commission should require that any renewable generation provided under green pricing programs be additional to existing renewable generation. 6

10 E. Generation should be geographically proximate to the customers. Preferably, the renewable generation provided under a green pricing program should be generated within the footprint of the electric utilities service territory. While generation from green pricing renewable energy projects cannot be siphoned off and provided to specific customers, customers generally expect that their purchase of renewable energy through such programs has an impact on the generation mix in their service territory. The Commission could retain the discretion to approve generation outside of the electric utilities service territory, but only upon a showing that generation within the service territory is not reasonable, and only provided that the generation meets the locational requirements included in MCLA As discussed above, electric utilities should be required to provide clear and understandable information to customers regarding the location of the assets providing renewable generation under a green pricing program. F. Generation should be competitively bid. The Commission should require that projects providing renewable energy under green pricing programs are competitively bid at least once every two years and provide oversight to the bidding process. Competitive bidding will provide improved information regarding the reasonableness of the utility s pricing structure and ensure the reductions in market prices are being adequately captured by the program. Utilities projects would be eligible, but would be required to bid against other independent power producers to ensure customers are not being asked to pay costs higher than those available on the open market. G. Utilities should be required to make strategic siting decisions. Strategic location of distributed resources can bring down the overall costs of the program to subscribers by enhancing the system benefits and can reduce environmental impacts 7

11 in Michigan s most polluted areas. In considering whether a proposed program should be approved, the Commission should consider whether the program requires the electric utility to consider strategic siting of these distributed resources and affirmatively explain and quantify how location impacts benefits to the system. The Commission should also consider whether the program has located projects in the most impacted and disadvantaged communities in Michigan. Electric utilities should be required to specifically consider siting projects in areas that are disproportionately affected by environmental pollution. As discussed above, information on project siting considerations and impacts should be made available to customers H. Green pricing programs should be accessible to low-income customers. Low-income residents of the state tend to be disproportionately impacted by the negative health and environmental impacts of fossil fuel generation. Low-income families also pay more as a percentage of their income for energy use than the average Michigan customer. The Commission should require utilities to propose mechanisms by which low-income residents can reasonably access green pricing programs. I. Existing green pricing programs must be revised. While each of the existing green pricing programs are a start towards a compliant and effective green pricing program, and ELPC and MEC support efforts to make renewable energy more widely available, each program needs to be re-evaluated and revised in light of the comments above. In particular, none of the programs adequately explain the additional costs incurred and additional savings realized as required by MCL For example, while Consumers Green Generation Program, approved in Case No. U-14569, identifies a variety of pricing options, it nowhere provides the underlying basis for that pricing. Customers do not have the opportunity to determine whether the price they are paying for renewable energy is fair and 8

12 reasonable and actually captures additional costs and savings. Furthermore, the Green Generation Program allows Consumers to purchase RECs from outside of Michigan and even outside of the Midwest Region in order to satisfy renewable energy demand. DTE s pilot program, approved in Case No. U-18076, similarly does not provide sufficient information on the basis for program pricing or other program aspects that are relevant to customer participation. Indeed, the purpose of the pilot program was limited to making a preliminary assessment of the proposal, including pricing and contract length, and to gauge customer interest. U-18076, October 11, 2016 Order, at 8. Unlike the green pricing programs required in MCL for all customers, DTE s pilot program was focused on commercial and industrial customers, who the Commission anticipated will be able to adequately evaluate the benefits and costs of the program. Id. at 9. Nor does DTE s GreenCurrents program, approved in Case No. U-14569, provide information necessary for customers to understand whether DTE properly calculated additional costs and savings as required under MCL Nor does GreenCurrents include the important siting, low-income and other characteristics described above. The Commission should recognize that a wide variety of customers will likely be interested in this program and require utilities to identify those program characteristics that best reflect the true cost of service of switching those customers to a greater proportion of renewable energy use. It should then require utilities to design offerings that take into consideration the length of commitment a customer is willing to make, quantity of renewable energy requested, and the type of renewable energy requested to design rates that best reflect the true cost of serving those customers. The current programs fail to provide options that reflect the different reasons customers will be interested in these programs. 9

13 J. Type of Proceeding We do not think the current Ex Parte proceeding will give interested parties an adequate opportunity to explore the underlying costs and savings potentially related to participation in this program. Either a collaborative process or contested case that reviewed program parameters, costs, and offerings every two years would balance the desire for the program to reflect current costs with programs costs related to changing the program over time. The new process could be used by Consumers and DTE to revise their existing programs to comply with Section 61, taking into account the principles articulated above. III. CONCLUSION Michigan law requires green pricing program customers to be responsible for any additional costs incurred and mandates that any additional savings realized as a result of the customer s participation in the program accrue to the customer (not the utility. As a result, an essential aspect of any green pricing program is clarity, transparency, and full disclosure of relevant information regarding costs and savings. Electric utilities must at minimum provide the basis for all costs and savings used in pricing, and information on technology type, size, and location of the generating assets. RECs must not be double counted, and generation for green pricing programs must be additional to existing renewable generation. Generation should also be geographically proximate to customers, competitively bid, and strategically sited. Electric utilities should provide some mechanism to make green pricing programs reasonably available to low-income customers. Existing green pricing programs must be revised to reflect these characteristics. 10

14 Respectfully submitted, Margrethe Kearney Environmental Law & Policy Center 1514 Wealthy St. SE, Ste. 256 Grand Rapids, MI T: ( F: ( /s/ James Clift James Clift Michigan Environmental Council 602 W. Ionia Street Lansing, MI T: ( F: (