Part IV – A Right Plan of Action

So how should average middle class Michiganders engage in this electricity debate? What should they demand in the 2015 legislation on electricity? Can they prevent the titans from looting their family budgets?

First and foremost, Michiganders should demand an end to hybrid deregulation. All electricity consumers should be under the same regulatory scheme, with equal options to escape. No favoritism. This aligns the interests of politically potent, large electricity consumers with those of the average Michigander. This creates an effective counterbalance to the political power of the utilities; political power purchased with your electricity payments. Even full regulation is preferable to our current hybrid deregulation scheme.

Michiganders should further demand full deregulation of our electricity market. As regulated entities, utilities have a ‘cost plus’ mindset which relentlessly drives prices higher. Regulatory bodies limit themselves to dampening this drive for higher prices, but do not drive efficiencies which would genuinely control energy costs. Competition-driven efficiencies are very important to Michigan’s economy, which still has a significant, energy-intensive industrial base. Also Michigan’s utilities have not demonstrated any special competence operating their electrical power stations, so competition in the supply of electricity will promote best practices there and lower costs as well. Ultimately, a deregulated grid properly managed is more tolerant of supply shocks because more actors will be supplying the electricity.

The RPS should not be renewed at any level. Renewables should not be forcibly subsidized by any ratepayers, overtly or covertly. The current PA 295 regulatory scheme has residential electricity consumers subsidizing renewables through skyrocketing rates, while large consumers escape this burden.  As renewable energy sources become cost effective, they will be welcomed by all parties.

If environmental wackos want their own electricity to come from RPS renewables, let them pay the full cost including base load backup costs. Most renewable sources are intermittent and require expensive base load backup capacity for periods where they cannot generate electricity. The Midwest Independent Transmission System Operator (MISO) historical record shows that Michigan wind power, by far the most significant current RPS component (883 turbines, about 58% of RPS power), was only available 31.5% of the time (termed ‘capacity factor’) during 2011 and 2012. During two months, July and August of 2011, wind was available only available 16% of the time. Most evaluations of the cost effectiveness of wind and solar generation pointedly neglect the costs of base load backup capacity to keep the lights on.  Essentially, wind power capacity has to be backed up by 100% of its rated capacity with fossil-fueled base load capacity to prevent blackouts during zero wind periods, so why bother install wind power (or solar, for that matter) in the first place?  Ratepayers subjected to RPS get to pay the capital costs for twice the generating capacity they actually need.

Michigan’s electricity transmission network should be continuously evaluated for adequacy as deregulation unfolds. Governor Snyder is correct that a link from the Lower Peninsula to the Upper Peninsula is sorely needed. The WE Presque Isle power station closure should not have created the commotion it did. As deregulation takes effect other transmission deficiencies will undoubtedly be discovered, but these can be addressed promptly with ongoing stochastic analysis. Transmission lines can be erected in a fraction of the time it takes to lay natural gas pipelines. An important point to remember as the ‘reliability’ of Michigan’s future electric grid is debated.

Natural gas pipeline capacity needs to be expanded rapidly throughout Michigan if the EPA ‘War on Coal’ cannot be stopped, and it probably cannot be stopped until President Obama is out of office. Unless the ‘War on Coal’ ends, Michigan’s power stations will all be natural gas-fired within a decade. Michigan’s Thumb suffered serious natural gas starvation in November 2014 because CMS Energy could not ship in enough natural gas through existing pipelines to meet the demand. Now imagine what will happen if Michigan’s coal-fired power station fleet is abruptly converted to natural gas to comply with the EPA’s NSPS and CPP rules. Pipelines take much more time to install than transmission lines and aren’t very popular with Michigan’s public since the Enbridge fiasco in Marshall. When natural gas pipelines and storage vessels leak, ensuing explosions cost lives and cause massive property damage. A point not often considered in the head long rush to natural gas. Coal is a much safer fuel to transport and store, even if it is not an environmental darling.

Michigan’s Congressional Delegation in Washington should be urgently tasked with defunding and derailing EPA’s ‘War on Coal’. This devious abuse of Federal power is no longer directed just at forlorn coal states like West Virginia, Kentucky, and Wyoming. Indeed, coal miners have been redirecting their output overseas since Obama took office and launched his attack upon domestic coal-fired power stations. so the ‘War on Coal’ is not reducing ‘greenhouse gas’ emissions from U.S. sourced coal one iota. The ‘War on Coal’ has morphed into a war on America’s middle class via their electricity bills; those families who pay their own bills without subsidies or the resources of the rich. At the very least, EPA’s proposed NSPS and CPP rules should be stopped dead in their tracks. These two baseless rules will result in catastrophic electricity price increases and brownouts. It is a shame that Michigan’s Senators are superfluous in this struggle. A lot of middle class liberals will rue the day they voted for slick Democratic talking points when their new, Obama-sized electricity bills start arriving in 2016.

Michigan has engaged the EPA over its refusal to consider costs when developing the MATs rules in the Federal Courts [Michigan, et al v. EPA, U.S. Court of Appeals for the D.C. Circuit, No. 14-46]. This case was argued in front of the U.S. Supreme Court on March 25th, but its outcome is in doubt. Thirteen other states – but not Michigan – have joined Murray Coal in a Federal lawsuit against the CPP rules, asserting that they are duplicative. This suit is being argued in front of the D.C. Court of Appeals level today [Docket: 14-1112; 14-1151], but will take some time to reach a conclusion. Should the EPA prevail in these suits, Michigan’s Congressional Delegation should be urged support all efforts to clarify and restrict EPA rulemaking authority. President Obama will present an almost insurmountable challenge to such efforts until he leaves office, but the effort should be made nonetheless.

The Proposal 1 fight and its aftermath is far from over, but it is clear now that the next big issue for Michiganders will be electricity rates. DTE and CMS Energy are spending a lot of money deploying a campaign to completely reregulate the electricity market in Michigan. Costs to Michigan residential consumers will be in the vicinity of an additional billion dollars per annum if they succeed. Commercial and industrial consumers will pony up another billion dollars per annum or more if the utilities are victorious, but they will likely curtail their energy consuming operations if they lose. This would further darken Michigan’s economic outlook.

Watch the replacement of PA 295 of 2008 closely. It will be a battle of titans, pitting DTE and CMS Energy against large electrical consumers, with a lot of other interests injecting themselves from the sidelines. One very likely outcome is the small Michigan residential electricity consumer subsidizing both. Senator Mike Shirky has been long involved in this issue a strong proponent of genuine deregulation in his previous incarnation as a State Representative. Senators Mike Nofs, and Aric Nesbitt seem to be content with our disastrous hybrid regulation model, but at least do not want to expand the RPS mandate. . Probably time they hear from you, otherwise your monthly electricity payments will continue to rise at a 5% annual clip.

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