State Approves Consumers Renewable Energy Plan, Cuts Cost to Customers

Utility Begins Construction on Wind Towers in Tuscola, Mason Counties

June 1, 2009
By: Dave Rogers

The Michigan Public Service Commission (MPSC) has approved a modified version of Consumers Energy Company's proposed renewable energy plan (REP).

Consumers Energy's Growing Forward strategy calls for investing more than $6 billion in Michigan, including investments in energy efficiency, renewable energy, environmental and customer service enhancements, and new power generation.

Consumers 21st Century Energy Plan, released a year ago, calls for a balanced approach for meeting growing customer demand for electricity through energy efficiency, demand management, renewable energy (mainly wind) and building 9,000 megawatts of new baseload generating capacity between 2015 and 2025.

The plan is projected to save $4 billion over two decades through the balanced portfolio approach.

Modifications by the PSC in the Consumers REP include a cut in the proposed monthly REP surcharge to residential customers from $3 to $2.50. The utility is authorized to implement its REP surcharge beginning Sept. 1.

The average residential electric customer using 500 kilowatt-hours will receive a monthly EO (energy optimization) surcharge of 71 cents. The average residential natural gas customer using 100 hundred cubic feet (ccf) will see a monthly surcharge of $1.72.

The six-year goal of the energy-optimization plan is to reduce electric usage by 6 percent and gas usage by 4 percent.

Meanwhile, Consumers has secured more than 28,000 acres of easements in Tuscola and Mason counties for potential wind generation development and is starting the process of testing sites.

Construction has started on four meteorological towers in Mason County and three towers in Tuscola County. Construction of the towers, which are about 180 feet tall, is expected to be completed by the end of the year. In addition to the seven towers being constructed, Consumers also will be refurbishing two existing Mason County towers it has purchased.

"The purpose of the meteorological towers is to collect wind data over a two-year period. We'll be measuring wind speed, wind direction and air temperature to determine if the sites are suitable for wind turbine generators and the best location for them," said George Hass, executive director of new generation for Consumers Energy.

Comprehensive energy reform legislation signed into law Oct. 6, 2008 by Gov. Jennifer Granholm includes a renewable portfolio standard. That standard requires Consumers Energy and other utilities to provide 10 percent of their electric supplies from renewable energy by 2015. Approximately five percent of Consumers Energy's electric supply is from renewable energy sources.

Consumers Energy, the principal subsidiary of CMS Energy, provides natural gas and electricity to nearly 6.5 million of Michigan's 10 million residents in all 68 Lower Peninsula counties.

The PSC said it will approve the Consumers clean energy plan, but only if the utility agrees to modifications sought by other parties, including numerous environmental groups who have argued against what they consider costly aspects of the plan.

The PSC cautioned Consumers that it may not ultimately approve recovery of projected cost for wind energy - a figure some analysts consider inflated.

"The changes proposed by the Commission improve the plan submitted by Consumers Energy, but continued oversight will be essential to realizing the full potential of clean energy," said James Clift, Policy Director at the Michigan Environmental Council.

Renewable energy and efficiency programs will reduce Michigan's dependence on imported fuels like coal, diversify and help spark the economy, and create in-state jobs, officials said. It also will be a hedge against increasing costs of conventional power sources like coal.

Expert witnesses assert that if Consumers Energy's costs for renewable energy matched those projected by Detroit Edison, the surcharge could be lowered by an additional $1 to $2. Consumers projects a per megawatt hour cost of more than $170. Detroit Edison, in contrast, says its costs will be $108. In other states, wind power costs have come in at less than $100.

Those rates are lower than comparable electricity generated from a new coal plant, critics said.

"The Commission did make a specific finding that the cost of the renewable energy and energy efficiency plans proposed by Consumers is cheaper than building a new coal-fired power plant to meet energy demand," said Clift.

The utility's energy efficiency plan, also required by a 2008 state law, will save Michigan residents and businesses money by reducing power use and diminishing the need for expensive new electric generation systems.

"Michigan rate payers want lower energy costs - investment in energy efficiency from the utilities will get us there while also creating jobs and cutting pollution," said Rebecca Stanfield, Senior Energy Advocate for the Natural Resources Defense Council (NRDC). "All around the country, energy efficiency programs translate into cost savings and cheaper monthly energy bills," said Ms. Stanfield. "But they only work when the utilities implement them with transparency and in partnership with the community. The Michigan Public Service Commission decision should help to make sure this project is done right. If they follow through, ratepayers and the environment will reap the benefits."

Among the other changes required by the PSC are the following:

Renewable Energy Plan:

Consumers is to work with PSC staff in developing and designing its future bidding process to meet concerns raised by a number of parties regarding a badly designed current bid process.

Depreciation rates will be revised in a future proceeding, further reducing the cost to ratepayers.

The fee for a new solar program will be revised based on the size of the system.

Energy Efficiency Plan:

The incentive payment program that rewards Consumers for exceeding benchmarks in the energy efficiency plan will be revised in a future proceeding.

A collaborative process will support the program and future plan updates, as well as evaluation of performance.

Rule making will focus on ensuring that anticipated energy savings are realized.

The MPSC is an agency within the Department of Energy, Labor & Economic Growth.