December 5, 2007, Introduced by Senator PATTERSON and referred to the Committee on Energy Policy and Public Utilities.
A bill to amend 1939 PA 3, entitled
"An act to provide for the regulation and control of public and
certain private utilities and other services affected with a public
interest within this state; to provide for alternative energy
suppliers; to provide for licensing; to include municipally owned
utilities and other providers of energy under certain provisions of
this act; to create a public service commission and to prescribe
and define its powers and duties; to abolish the Michigan public
utilities commission and to confer the powers and duties vested by
law on the public service commission; to provide for the
continuance, transfer, and completion of certain matters and
proceedings; to abolish automatic adjustment clauses; to prohibit
certain rate increases without notice and hearing; to qualify
residential energy conservation programs permitted under state law
for certain federal exemption; to create a fund; to provide for a
restructuring of the manner in which energy is provided in this
state; to encourage the utilization of resource recovery
facilities; to prohibit certain acts and practices of providers of
energy; to allow for the securitization of stranded costs; to
reduce rates; to provide for appeals; to provide appropriations; to
declare the effect and purpose of this act; to prescribe remedies
and penalties; and to repeal acts and parts of acts,"
by amending section 10q (MCL 460.10q), as added by 2000 PA 141, and
by adding sections 10dd, 10ee, 10ff, and 11; and to repeal acts and
parts of acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 10q. (1) A person shall not engage in the business of an
alternative electric supplier in this state unless the person
obtains and maintains a license issued under section 10a.
(2) In addition to any other information required by the
commission in connection with a licensing application, the
applicant shall be required to do both of the following:
(a) Provide information, including information as to the
applicant's safety record and its history of service quality and
reliability, as to the applicant's technical ability, as defined
under regulations of the commission, to safely and reliably
generate or otherwise obtain and deliver electricity and provide
any other proposed services.
(b) Demonstrate that the employees of the applicant that will
be installing, operating, and maintaining generation or
transmission facilities within this state, or any entity with which
the applicant has contracted to perform those functions within this
state, have the requisite knowledge, skills, and competence to
perform those functions in a safe and responsible manner in order
to provide safe and reliable service.
(3) The commission shall order the applicant to post a bond or
provide a letter of credit or other financial guarantee in a
reasonable amount established by the commission of not less than
$40,000.00, if the commission finds after an investigation and
review that the requirement of a bond would be in the public
interest.
(4) Only investor-owned, cooperative, or municipal electric
utilities shall own, construct, or operate electric distribution
facilities or electric meter equipment used in the distribution of
electricity in this state. This subsection does not prohibit a
self-service power provider from owning, constructing, or operating
electric distribution facilities or electric metering equipment for
the sole purpose of providing or utilizing self-service power. This
act does not affect the current rights, if any, of a nonutility to
construct or operate a private distribution system on private
property or private easements. This does not preclude crossing of
public rights-of-way.
(5) The commission shall not prohibit an electric utility from
metering and billing its customers for services provided by the
electric utility.
(6) Within 90 days after the effective date of the amendatory
act that added this subsection, the commission shall establish
electric supply reliability standards that are applicable to all
electric utilities and alternative electric suppliers who provide
electric supply to retail customers in this state. The commission
shall require each electric utility and alternative electric
supplier to file annually with the commission an electric supply
plan to demonstrate that it is in compliance with the electric
supply reliability standards. The commission shall annually verify
the adequacy of the electric supply plan of each electric utility
and alternative electric supplier to assure that each plan meets
the minimum electric supply reliability standards. The electric
supply reliability standards shall be uniformly applied to electric
utilities and alternative electric suppliers, and shall include,
but not be limited to, all of the following:
(a) That the electric utility or alternative electric supplier
maintain a minimum 15% planning reserve margin over and above its
forecasted peak load demand.
(b) That the planning reserve margin requirement be for a
minimum of 5 years.
(c) That each electric utility and alternative electric
supplier meet its total electric supply resource requirements
through self-supply and contracts to purchase generation supply.
Until the commission determines that a proper electric capacity
market exists in this state or region, electric supply resources
shall be tied to physical generating assets, whether through
ownership or contracts. If the electric supply resources are tied
to physical generating assets by contract, the contracted output of
the assets shall be solely dedicated to the load serving entity and
meet the standards of subdivision (d).
(d) That the electric supply resources of the electric utility
or alternative electric supplier shall be required to satisfy
deliverability standards established by the commission to ensure
that the supply resources are capable of being delivered to the
load serving entity's retail customers without jeopardizing supply
reliability.
(e) That the electric utility or alternative electric supplier
may utilize direct load control options as a means of satisfying
the minimum planning reserve margin requirements to the extent that
the direct load control options meet applicable regional electric
utility reserve standards.
(f) That the electric utility or alternative electric supplier
shall have entered into all electric supply resource commitments
before January 1 for that year's peak load period. As used in this
subparagraph, "peak load period" means the months of June, July,
and August.
Sec. 10dd. (1) As used in this section:
(a) "Biomass" means any organic matter that can be converted
to usable fuel for the production of energy and is available on a
renewable basis, including, but not limited to, all of the
following:
(i) Agricultural crops and crop wastes.
(ii) Wood and wood wastes, including wood and wood waste from
wood product and paper processing.
(iii) Animal wastes.
(iv) Municipal wastewater sludge.
(v) Aquatic plants.
(vi) Food production and processing waste.
(vii) Municipal solid waste.
(b) "Installed capacity" means the total amount of electricity
a renewable energy system can generate in 1 hour at full load.
(c) "Portfolio standard" is the required minimum percentage of
a provider's total annual retail kilowatt hour electricity sales in
this state that is composed of electricity produced from a
renewable energy system.
(d) "Provider" means any person that is in the business of
selling electricity to retail customers in this state. For the
purposes of this section, provider means any of the following:
(i) Any person or entity that is regulated by the commission
for the purpose of selling electricity to retail customers.
(ii) A municipal electric provider.
(iii) A cooperative electric provider.
(iv) An alternative electric supplier.
(v) An independent investor-owned electric utility.
(e) "Renewable energy contract" means a contract to acquire
electricity and the associated renewable energy credits from 1 or
more renewable energy systems.
(f) "Renewable energy credit" means a certified credit under
this section equal to 1 megawatt hour of generated renewable
energy.
(g) "Renewable energy fuel" means any of the following:
(i) Biomass.
(ii) Geothermal.
(iii) Solar.
(iv) Wind.
(v) Hydroelectric, except for pump storage systems.
(vi) Gas captured from the decomposition of waste.
(vii) That portion of a fuel mixture that is a biomass fuel.
(h) "Renewable energy system" means a facility, electricity
generation system, or integrated set of electricity generation
systems that use renewable energy fuel.
(i) "Terms and conditions" includes the price that a provider
of electric service is to pay to acquire electricity and the
associated renewable energy credits under a renewable energy
contract along with other contract provisions.
(2) Each provider shall on an annual basis establish a
portfolio standard for renewable energy. The provider shall
annually file a report with the commission regarding the status of
the provider in meeting the portfolio standard established under
this section. The portfolio standard shall require the provider to
generate or acquire electricity from renewable energy systems, for
sale to retail customers in this state, or acquire equivalent
renewable energy credits, in the following amounts:
(a) For the period of January 1, 2008 to December 31, 2008,
not less than 3% of the total amount of kilowatt hours of
electricity sold by the provider to its retail customers in this
state during the calendar year.
(b) For the period of January 1, 2009 to December 31, 2010,
not less than 5% of the total amount of kilowatt hours of
electricity sold by the provider to its retail customers in this
state during the calendar year.
(c) For the period of January 1, 2011 to December 31, 2012,
not less than 6% of the total amount of kilowatt hours of
electricity sold by the provider to its retail customers in this
state during the calendar year.
(d) For the period of January 1, 2013 to December 31, 2015,
not less than 7% of the total amount of kilowatt hours of
electricity sold by the provider to its retail customers in this
state during the calendar year.
(e) After December 31, 2015, not less than 10% of the total
amount of kilowatt hours of electricity sold by the provider to its
retail customers in this state during each calendar year.
(3) The commission may require that not less than 20% of the
total amount of kilowatt hours of electricity sold by a provider to
its retail customers in this state by 2025 be generated or acquired
from renewable energy systems.
(4) A provider may comply with the renewable energy portfolio
standard required in this section by producing electric energy from
renewable energy systems, by purchasing power through a contract
with another entity that produces electric energy from a renewable
energy system, by purchasing renewable energy credits, or through
payment of alternate compliance payments.
(5) If the provider acquires electricity and the associated
renewable energy credits from a renewable energy system under a
renewable energy contract, entered into after the effective date of
the amendatory act that added this section, the commission shall
determine whether the contract provides reasonable terms and
conditions.
(6) The commission shall consider all costs reasonably and
prudently incurred by a regulated utility in meeting the
requirements of this act to be a cost of service. The commission
shall determine the mechanism for the recovery of those costs.
(7) The commission shall establish a system of renewable
energy credits that can be used by a provider to comply with its
portfolio standard. The renewable energy credit program shall
include the following:
(a) Renewable energy systems eligible to receive renewable
energy credits are renewable energy systems within this state.
(b) A process to certify all existing and new renewable energy
systems operating on the effective date of this act as eligible to
receive renewable energy credits.
(c) A method for the transferability of credits.
(d) For power purchase agreements that exist on the effective
date of this act, ownership of any renewable energy credits resides
with the generator of the renewable energy unless the ownership of
the renewable energy credits is otherwise stated in contract.
(8) The commission shall establish a credit certification and
tracking program. The certification and tracking program may be
contracted to and performed by a third party through a system of
competitive bidding. The credit certification and tracking program
shall include all of the following:
(a) Certification that the renewable energy system is a
qualified renewable energy system under this act.
(b) Certification that the operator of a renewable energy
system is in compliance with state and federal law applicable to
the operation of a renewable energy system at the time
certification is granted.
(c) Affixing the date that the renewable energy credit is
valid for transfer under this act.
(d) A method for ensuring that renewable energy credits traded
and sold under this act are properly accounted under this act.
(9) If a provider is unable to comply with its portfolio
standard through the generation of renewable energy credits derived
from its own renewable energy systems, from alternative compliance
payments under subsection (13), or from the purchase of certified
renewable energy credits, the provider shall comply by entering
into 1 or more renewable energy contracts.
(10) Renewable energy credits used by a provider to comply
with its portfolio standard are extinguished upon use.
(11) Renewable energy credits shall automatically expire upon
the date 3 years after the original certification of the renewable
energy credit.
(12) If the commission determines that there is not or will
not be a sufficient supply of electricity made available to a
provider under renewable energy contracts with just and reasonable
terms and conditions, the commission shall exempt the provider, for
that calendar year, from the remaining requirements of its
portfolio standard or from any appropriate portion of the standard.
(13) Through 2012, providers may make alternative compliance
payments to the fund created in subsection (24) to satisfy the
requirements under subsection (2). After 2012, providers with
100,000 or fewer retail customers may make alternative compliance
payments into the fund created in subsection (24) to satisfy the
requirements under subsection (2).
(14) The commission shall establish biennially the rate of
alternative compliance payments based on the costs of purchasing
renewable energy credits, generating renewable energy, or other
factors that the commission considers appropriate.
(15) The commission may treat alternative compliance payments
as recoverable costs that may be included in a regulated provider's
retail electric rates.
(16) The commission may establish a solar pilot program for 1
or more electric utilities. The solar program shall be designed to
determine the value of solar energy in meeting Michigan's electric
energy needs, including peak demand needs, and shall be limited to
50 megawatts of electric capacity. The commission shall allow
recovery of prudent and reasonable costs incurred by participating
electric utilities.
(17) Each provider of electric service shall submit to the
commission an annual report that provides information relating to
the actions taken by the provider to comply with its portfolio
standard.
(18) Each provider shall submit the annual report to the
commission after the end of each calendar year and within the time
prescribed by the commission. The report shall be submitted in a
format approved by the commission.
(19) Each annual report shall include all of the following
information:
(a) The amount of electricity and renewable energy credits
that the provider generated or acquired from renewable energy
systems during the reporting period and the amount of renewable
energy credits that the provider acquired, sold, or traded during
the reporting period to comply with its portfolio standard.
(b) The capacity of each renewable energy system owned,
operated, or controlled by the provider, the total amount of
electricity generated by each system during the reporting period,
and the percentage of that total amount that was generated directly
from renewable energy.
(c) Whether, during the reporting period, the provider began
construction on, acquired, or placed into operation any renewable
energy system.
(d) Any other information that the commission determines
necessary.
(20) The commission shall file an annual report with the
legislature that summarizes data collected under this section.
(21) If a provider does not comply with its portfolio standard
as required under section 2 and the commission has not exempted
that provider under subsection (12), the commission shall impose on
the provider a fine of no more than $50.00 for each megawatt hour
of electricity that the provider does not generate or acquire from
a renewable energy system during a calendar year in violation of
its portfolio standard.
(22) The commission shall annually adjust the fines that will
be imposed for each calendar year using the prevailing consumer
price index for the Detroit region.
(23) If the commission imposes a fine under subsection (21)
against a regulated rate provider, then all of the following apply:
(a) The fine is not a cost of service of the provider.
(b) The provider shall not include any portion of the fine in
any application for a rate adjustment or rate increase.
(c) The commission shall not allow the provider to recover any
portion of the fine from its retail customers.
(d) Money resulting from any fines imposed on a provider under
this section shall be deposited into the renewable energy fund
created in subsection (24).
(24) The renewable energy fund is hereby created within the
state treasury. Money in the fund at the close of the fiscal year
shall remain in the fund and shall not lapse to the general fund.
The commission shall expend money from the fund, upon
appropriation, to promote and grow renewable energy projects in
this state.
Sec. 10ee. (1) As used in this section:
(a) "Certificate" means a certificate of need issued for an
electric generation facility under this section.
(b) "Construction" means any substantial action taken on an
electric generation facility constituting placement or erection of
the foundations or structures supporting an electric generation
facility. Construction does not include preconstruction activity or
routine maintenance of an existing electric generation facility.
(c) "Electric utility" means a person, partnership,
corporation, association, or other legal entity whose generation or
transmission of electricity the commission regulates under 1939 PA
3, MCL 460.1 to 460.10cc. Electric utility does not include a
municipal utility.
(d) "Municipality" means a city, township, or village.
(e) "Preconstruction activity" means any activity on a
proposed electric generation facility conducted before construction
begins. Preconstruction activity includes surveys, measurements,
examinations, soundings, borings, sample-taking, or other testing
procedures, photography, appraisal, or tests of soil, groundwater,
structures, or other materials in or on the real property for
contamination.
(2) An electric utility that seeks to construct an electric
generation facility to serve its customers may apply to the
commission for a certificate. The commission shall not issue a
certificate unless a requesting electric utility files an
integrated resource plan and demonstrates a need for the generation
facility. If the commission issues a certificate to an electric
utility, the need for the generation facility shall not be used as
the basis for challenging the cost recovery of the electric
generation facility in subsequent rate proceedings.
(3) Before applying for a certificate, a utility shall
schedule and hold a public meeting in the municipality in which the
generation facility has been proposed. A public meeting held in a
township satisfies the requirement that a public meeting be held in
each affected village located within the township.
(4) Upon applying for a certificate, an electric utility shall
give public notice in the manner and form the commission prescribes
of an opportunity to comment on the application. Notice shall be
published in a newspaper of general circulation in the utility's
service area within a reasonable time period after an application
is provided to the commission and shall be sent to each affected
municipality and each affected landowner within 1,000 feet of the
proposed generation facility. The notice shall be written in plain,
nontechnical, and easily understood terms and shall contain a title
that includes the name of the electric utility and the words
"NOTICE OF INTENT TO CONSTRUCT AN ELECTRIC GENERATION FACILITY".
(5) The commission shall conduct a proceeding on the
application as a contested case under chapter 4 of the
administrative procedures act of 1969, 1969 PA 306, MCL 24.271 to
24.287. Upon receiving an application for a certificate, each
affected municipality and each affected landowner shall be granted
full intervenor status as of right in commission proceedings
concerning the proposed generation facility.
(6) The commission shall grant or deny the application for a
certificate not later than 270 days after the application's filing
date. The commission may condition its approval upon the
applicant's taking additional action to ensure the public
convenience, health, and safety and reliability of the proposed
electric generation facility.
(7) The commission shall grant the application and issue a
certificate if it determines all of the following:
(a) The electric utility has demonstrated a need for the
generation facility through its integrated resource plan filing.
(b) The proposed location is feasible and reasonable.
(c) The proposed generation facility does not present an
unreasonable threat to public health or safety.
(d) The electric utility can finance the generation facility
on reasonable terms.
(8) A certificate issued under this section shall identify the
generation facility's proposed location and shall contain an
estimated cost for the generation facility.
(9) If construction of a proposed generation facility is not
begun within 5 years of the date that a certificate is granted, the
certificate is invalid and a new certificate shall be required for
the proposed generation facility.
(10) A utility that receives a certificate for an electric
generation facility shall competitively bid the engineering,
procurement, and construction portion of the generation facility.
(11) If the commission grants a certificate under this
section, that certificate shall take precedence over a conflicting
local ordinance, law, rule, regulation, policy, or practice that
prohibits or regulates the location or construction of a generation
facility for which the commission has issued a certificate.
(12) The commission shall establish standards for an
integrated resource plan that shall be filed by an electric utility
requesting a certificate. An integrated resource plan shall include
all of the following:
(a) A long-term forecast of the electric utility's load
growth.
(b) The type of generation technology proposed for the
generation facility and the proposed capacity of the generation
facility.
(c) Energy purchased or produced by the electric utility
pursuant to any renewable portfolio standard.
(d) Energy efficiency savings, load management savings, and
demand response savings for the electric utility.
(e) Electric transmission options for the electric utility.
(13) Customers who receive electric generation service from an
electric utility when a certificate is issued but subsequently
receive electric generation service from an alternative electric
supplier shall be assessed a prorated share of the fixed cost of
the new plant through a distribution charge established by the
commission.
(14) Customers who receive electric generation service from an
alternative electric supplier when a certificate is issued but
subsequently receive electric generation service from an electric
utility that receives a certificate will be assessed the cost of
the new plant in their base rates. If that customer subsequently
receives service from an alternative electric supplier, that
customer shall be assessed a prorated share of the fixed cost of
the new plant through a distribution charge established by the
commission.
(15) Customers who receive electric generation service from an
alternative electric supplier when a certificate is issued shall
not be assessed the cost of the generation facility that receives a
certificate as long as they do not receive electric generation
service from an electric utility that receives a certificate.
(16) Except as otherwise provided in this section, information
obtained by the commission under this section is a public record as
provided in the freedom of information act, 1976 PA 442, MCL 15.231
to 15.246.
(17) An electric utility may designate information received by
a third party that the electric utility submits to the commission
in an application for a certificate or in other documents required
by the commission for purposes of certification as being only for
the confidential use of the commission. The commission shall notify
the electric utility of a request for public records under section
5 of the freedom of information act, 1976 PA 442, MCL 15.235, if
the scope of the request includes information designated as
confidential. The electric utility has 10 days after the receipt of
the notice to demonstrate to the commission that the information
designated as confidential should not be disclosed because the
information is a trade secret or secret process or is production,
commercial, or financial information the disclosure of which would
jeopardize the competitive position of the electric utility or the
person from whom the information was obtained. The commission shall
not grant the request for the information if the electric utility
demonstrates to the satisfaction of the commission that the
information should not be disclosed for a reason authorized in this
section. If the commission makes a decision to grant a request, the
information requested shall not be released until 3 days have
elapsed after notice of the decision is provided to the electric
utility.
(18) The commission may promulgate rules to implement this act
pursuant to the administrative procedures act of 1969, 1969 PA 306,
MCL 24.201 to 24.328. The rules may contain standards to determine
a proposed electric generation facility's health and safety
aspects.
(19) Until rules are promulgated as provided in subsection
(18), the commission shall consider and determine any health or
safety issue a party raises in a proceeding concerning a
certificate application.
Sec. 10ff. (1) The Michigan energy efficiency program is
created within the commission and shall be funded by the fund
created in subsection (2).
(2) The Michigan energy efficiency fund is created in the
state treasury and shall be administered by the commission as
provided under this section. The money collected through the
surcharge authorized under subsection (3) shall be deposited with
the state treasurer and credited to the fund. The state treasurer
may receive money or other assets from any source for deposit into
the fund. No money shall be expended from the fund except as
specifically authorized by this section. Money in the fund at the
close of the fiscal year shall remain in the fund and shall not
lapse to the general fund.
(3) The commission shall, after notice and hearing, every 3
years approve an energy efficiency factor that shall be a
nonbypassable surcharge payable by every customer of an alternative
electric supplier, cooperative electric utility, electric utility,
or municipal utility. The commission may impose a surcharge of up
to 1 mill per kilowatt-hour of electricity used. The surcharge
shall be payable by all customer classes. Money collected by a
particular utility shall be used, to the extent practicable, to
fund energy efficiency programs for that utility's customers. In
setting the surcharge under this subsection, the commission shall
factor in any excess money in the fund at the end of the 3-year
period.
(4) The chairperson of the commission shall establish a
screening committee to make recommendations on the selection of a
program administrator. The committee shall consist of the
chairperson, the director of the department of management and
budget, the director of the department of treasury, and 2 energy
efficiency experts appointed by the chairperson.
(5) The commission shall every 3 years prepare a request for
proposal to select a program administrator. The program
administrator selected shall have no affiliation with any utility.
A public announcement shall be released to the trade press and
likely bidders and posted on the commission's website. All bids
shall be received by the commission. The commission shall evaluate
the bids under established evaluation criteria adopted by the
commission after input from interested parties in a contested case
process.
(6) The commission shall enter into a contract with the
program administrator to administer the program. The contract shall
not exceed 3 years in length. Money from the fund shall be used to
administer the program, including, but not limited to, paying the
salary of the program administrator, the costs of the program, and
any incentives for energy savings designated in the program
administrator's contract. The program administrator may conduct
energy efficiency programs or subcontract with another entity to
perform the tasks outlined in the contract.
(7) The chairperson shall establish an advisory committee to
provide advice to the program administrator on the type of energy
efficiency programs the program administrator should implement. The
committee shall consist of 10 individuals appointed by the
commissioner as follows:
(a) Two individuals chosen from commission staff.
(b) Two individuals chosen from a list submitted by regulated
utilities.
(c) One individual chosen from a list submitted by electric
cooperatives.
(d) One individual chosen from a list submitted by municipal
utilities.
(e) Two individuals chosen from a list submitted by customer
groups.
(f) Two individuals chosen from a list submitted by consumer
advocates.
(8) Every 3 years the commission shall issue a report to the
legislature and the governor on or before February 1 regarding the
effectiveness and use of the program.
(9) An industrial customer with a peak load of over 1 megawatt
may choose not to participate in the program if that customer
demonstrates to the commission that it has already undertaken
sufficient energy efficiency measures.
(10) As used in this section, "fund" means the energy
efficiency fund created under subsection (2).
Sec. 11. (1) Not later than 270 days after the effective date
of the amendatory act that added this section, the commission shall
review the net metering program provided for in the commission's
March 29, 2005 order in case no. U-14346. The commission may modify
the net metering program based on its review. The commission may
establish any rates, terms, and conditions for the net metering
program that the commission considers necessary and appropriate.
The net metering program shall apply to all electric utilities and
alternative electric suppliers in this state.
(2) As used in this section:
(a) "Alternative electric supplier" means a person, other than
an electric utility, selling electric generation service to retail
customers in this state. Alternative electric supplier does not
include a person who physically delivers electricity directly to
retail customers in this state.
(b) "Electric cooperative" means an energy utility organized
as a cooperative corporation under sections 98 to 109 of the
Michigan general corporation act, 1931 PA 327, MCL 450.98 to
450.109.
(c) "Electric utility" means an investor owned electric
utility or electric cooperative subject to rate regulation by the
commission.
(d) "Net metering" means an arrangement whereby a customer of
an electric utility or alternative electric supplier may do both of
the following:
(i) Purchase electricity from the regulated electric utility or
alternative electric supplier.
(ii) Sell electricity to the regulated electric utility or
alternative electric supplier if the electricity is generated by a
facility on the premises of the customer, the capacity of which is
designed to serve the annual electric generation needs of the
customer at the facility’s location, and the electricity is in
excess of the customer's consumption needs.
(3) This section is repealed effective 2 years after the
effective date of the amendatory act that added this section.