Monopolies in Michigan fear solar, deliver some of nation’s most expensive electricity

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We’ll go at it this way today:

Researchers at Michigan Technological University have found that the state’s utilities are hindering the proliferation of distributed generation through rate cases, legal maneuvers, shifting control from regulators, and selective modeling in the cost of service studies. Utilities can propose little compensation as well as added fees on DG customers, making these customers’ investment in renewable energy technologies unattractive.

The researchers show that consumers of the state’s Upper Peninsula Power Company pay some of the highest base electricity rates in the nation, sometimes amounting to more than 25¢/kWh. They suggest that by installing solar power, these consumers could save more than 7¢/kWh.

The analysis, Policies to Overcome Barriers for Renewable Energy Distributed Generation: A Case Study of Utility Structure and Regulatory Regimes in Michigan, breaks down the various policies that utilities have been able to manipulate, as well as making suggestions towards policies that can improve the situation.

A breakdown of the policy interpretation and implementation as utility-driven manipulation:

  • Rate Cases and the New Inflow/Outflow Methodology
    • This model allows the utility to credit customers with the locational marginal pricing, in which power from DG sources is less valued and it does not reflect DG’s contribution to reducing overall DTE operations costs, capacity, and other factors that would be considered in a Cost of Service Study, such as avoided transmission, distribution and voltage control costs. Accepting an outflow credit at this rate would create a great deterrent in the development of grid-connected DG systems.
  • Legal Maneuvers
    • Local utility states that DG “customers are not supporting the costs of the infrastructure required for their  service”. The researchers show this isn’t true, as pv magazine USA has also shown in other states.
    • Electric utilities fund organizations and committees to elect  governors, state legislators, and attorneys general, who can enact laws and implement rules to support utility positions. The electric utility industry has the third largest lobbying contribution, spending roughly $2.4 billion. Utilities have contributed some of the highest amounts of campaign money  this current election cycle as compared to the election cycles from 2010 onward.
  • Shifting control from regulatory bodies
    • Demand charges – Michigan utilities are shifting costs over to demand charges for smaller customers, which Public Service Commissions have little influence over.
    • Utility discretion with net metering “Caps”
    • Utility shifting from rate to monthly charges – in our current market, electricity demand has plateaued since around 2007, with that a state utility proposed two pilot programs, the Weekend Flex Pilot and the Fixed Bill Pilot. These  pilots propose two different types of fixed charges on a weekend and monthly basis for electricity consumption. Customers pay a fixed charge, regardless of their actual electricity consumption. This can provide incentive for customers to use more electricity and dissuade DG installation.
  • Modeling in Cost of Service Studies
    • State utility chose to include factors and assumptions in their methodology that resulted in increased costs associated with more RE generation. This allows for them to implement  demand response programs, conservation voltage reduction, and additional demand charges without considering options to help in demand reduction that actually decrease the total or peak load.
    • As a result of the declining costs of RE, a state utility plans to focus on RE generation through Power Purchase Agreements (PPAs), alongside energy efficiency measures and demand response strategies. These strategies allow Consumers Energy to maintain all control over generation resources.

The hard truth is that power corrupts even the best of us, as we all want to do the best we can for those who depend on us, including our families. As such, it is no surprise that utilities have pushed hard for regulatory capture that extends their profit margins. We know explicitly that electric utilities will even use a little bit of “political jiu-jitsu” to manipulate the voting public and keep those margins.

As such, it is the job of voters, researchers, and professionals to push back where our regulators and politicians have failed us.