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Michigan Legislative Update

Week of December 23, 2015

by Judy Augenstein

Michigan is well on its way to compliance with the U.S. Environmental Protection Agency's Clean Power Plan on reducing emissions, says a preliminary review by the Michigan Agency for Energy and Department of Environmental Quality, and could continue maintaining business as usual for at least another decade.

The two agencies announced Tuesday they completed preliminary baseline modeling showing that if Michigan maintains the status quo with 1 percent annual energy waste reduction per year - less than the amount utilities are actually achieving at around 1.4 percent - and the state's electric demand doesn't exceed 1.2 percent growth per year,it is set to be in compliance with the EPA rule through at least 2025, and in one scenario, 2028.

The announcement was the first step in a series of actions the two agencies will take before finally submitting a draft proposal to the U.S. EPA in September 2016. At that time, it will also request a two-year extension on compliance. The deadline for a fully enforceable plan is September 6, 2018.

If the request is denied, DEQ Director Dan Wyant said Michigan would be unable to comply with the federal rule, but he and Ms. Brader, Director MAE, are cautiously optimistic about their chances given the provision was something that was added after extensive input from all the states on the Clean Power Plan.

"We think they understand that is required," he said. "That's a decision they'll have to make at that time but the construction of the rule recognized that giving any less than three years would make it difficult for states, including Michigan, to comply."

And some investments would need to be made prior to 2025 in order to continue compliance for the federal rule, Ms. Brader said. The federal rule hopes to achieve 32 percent less carbon pollution than industries had contributed in 2005 by 2030 when the Clean Power Plan is fully implemented.

Michigan specifically is expected to reduce its emissions 31 percent by 2030. Ms. Brader said the initial outlook considered previously announced coal plant retirements, and in fact that is one of the reasons Michigan can rest easy for a little while. Between 2013 and 2020, 25 different coal units will retire in Michigan, Ms. Brader noted.

"In addition, the continuation of our energy waste reduction is helpful," she said, as is the fact that Michigan already has some renewable energy units to help adapt to demand.

DTE Energy on Monday announced it would break ground in the spring of 2016 on 45 megawatts of new solar generating capacity at two projects sites in Lapeer - enough to generate power for 9,000 average-sized homes.

The only potential downside of the announcement by the MAE and DEQ is that it assumed natural gas prices would remain relatively low, and some did not agree with that assumption.

"We urge Governor Snyder and his team not to rely too heavily on natural gas at the expense of clean, renewable energy like wind and solar when it comes to meeting Michigan's energy needs," said Liesl Clark, president of the Michigan Energy Innovation Business Council. "The initial Clean Power Plan modeling released this week by the state of Michigan assumes the lowest-cost scenario for natural gas, which also poses the greatest risk for residential and business ratepayers. Clean energy will reduce that risk should the 'best-case' scenario for energy prices fail to materialize."

But the announcement is indeed only the first step in a longer process. Ms. Brader said the state will launch its carbon rule website in mid-January, which will include information on how to be involved in the stakeholder process and offer opportunity to comment on plan development. It will also have the compliance process time-line, results of state modeling efforts, news, documents and more.

She expects to take the first round of public input between January and March, and a summary of reports should be available by late April. The DEQ will submit a draft proposal September 6, 2016.

Ms. Brader said they will continue looking at different modeling to see what Michigan will have to do after this decade of basic compliance as well as how Michigan could fare if it had more renewable energy units that emit far fewer carbon emissions. But she said she would expect that given how cheap renewable energy projects are coming for incumbent utilities that they would continue moving in that direction with or without a mandate from the state.

Some legislators have introduced legislation to allow the Legislature to review whatever greenhouse gas emissions plan the administration comes up with before it sends it to the federal government (SB 439* and SB 465*). That legislation came on the heels of Ms. Brader and Mr. Wyant saying the state would develop its own plan on greenhouse gas emissions, and a plan that would not need legislative approval.

Some helpful points in legislation currently before the House and still being debated in a Senate committee are the provisions for allowing for a greater planning process. The House proposal also allows the state to look at reliability, affordability, adaptability and other variables in that planning process, she said.

Sen. Mike Shirkey (R-Clarklake) is the sponsor of one of those bills to require legislative input on the plan, though he notes that input is different from approval. He said he and Sen. Tom Casperson (R-Escanaba) still view their legislation as a high priority.

"We ran out of bandwidth (in 2015) and it's a high priority in 2016 because of things like this," he said. "We're going to be faced more and more with federal requirements and states having to respond."

He said there is a tendency for the state or bureaucrats to fix an issue themselves and that's the reason for the legislation, so the Legislature has a chance for a real review of a major issue.

He also questioned the true level of urgency to address Michigan's energy policy if what the two departments said is true in terms of the state's ability to maintain the status quo.

"If that's the case, then we've been fed some interesting information from incumbent utilities when they claim all the problems we've got to address. It just adds further skepticism to what urgency there is to us having to upgrade our energy policy," Mr. Shirkey said. "That's not to say it's not time for us to do it, it's just I'm not convinced it's the emergency (some would have us believe)."

The Legislature will return on January 13 to resume their agenda of work

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