Michigan’s solar industry awaits order in Consumers Energy’s rate case

The Michigan’s Public Service Commission’s (PSC) position on the Consumers Energy rate case is expected in mid-December, and solar officials and advocates in Michigan are cautiously optimistic that the PSC will recommend that Consumers Energy, Michigan’s largest utility, conduct a Value of Solar study as part of the rate case.

Solar advocates say that a Value of Solar report would be a win for the industry because it would conclusively show that that, under the current distributed generation incentive programs, residential and small commercial solar customers are being accurately compensated for contributing excess electricity to the grid. Some such advocates hope that the VOS study is conducted by a third party.

Rooftop and small commercial solar has grown exponentially in Michigan since 2008, when state law capped net metering at one percent of a utility’s peak load, and since 2016, when the legislature reaffirmed this law.

As it stands now, under Michigan law, a utility can remove or voluntarily lift its distributed generation cap, which the state legislature set at 1% of peak load. Aside from ending net metering, if a utility doesn’t voluntarily raise its distributed generation cap, it isn’t clear what happens next – once a cap is reached.

Michigan utilities, like Consumers Energy and Upper Peninsula Power Company (UPPCO), have been bumping up against the cap because solar prices are reasonable and interest in installing on-site solar is high.

“People want to get in before the program ends… That has created a bit of a land rush,” Laura Sherman, president of the Michigan Energy Innovation Business Council (EIBC), said. Several other factors, including the environmental case for solar and the investment tax credit phaseout, have also helped fuel the customer “land rush”.

Raising the cap, with a caveat 

In late November, Consumers Energy announced that it would voluntarily raise its distributed generation cap to 2%. But it said that it would only lift its cap to 2% if the PSC agrees with its proposed distributed generation tariffs.

Solar advocates say that Consumers Energy did the right thing by expanding its cap and the wrong thing by using that as a bargaining chip to get its desired outcome on a largely unrelated decision.

The PSC’s distributed generation tariff framework, which was set up over the last few years, requires that customers pay for the power that they use – their inflow – at the full retail rate and that customers get paid some other rate for the power that they send back to the grid from a solar system. Consumers Energy has proposed compensating customers for power sent back to the grid from a solar system at a rate lower than the retail rate; it has proposed the power supply cost minus the cost of transmission, a solar official explained.

According to Sherman, Consumers Energy’s decision to lift its cap will protect Michigan small businesses and jobs in the solar industry, but it also shows that the current solar cap is arbitrary, unnecessary and an impediment to job growth.

“We call upon the Legislature to permanently eliminate the restrictive solar cap across Michigan,” she said in a statement, adding that doing so would create jobs, spark new businesses and generate tax revenues for local communities.

Like Consumers Energy, UPPCO, as part of a settlement agreement last year, lifted its distributed generation to 2%. One year on, UPPCO is already closing in on this 2% cap.

“We absolutely, desperately need legislative action,” John Delurey, Midwest campaign director for Vote Solar said. If nothing else, these piecemeal actions draw further attention to how these caps are arbitrary, he added. A bill that Michigan’s Senate is considering now, SB597, calls for lifting these caps.

It’s what you value

In the absence of legislative action or a recommendation that Consumers Energy conduct a Value of Solar study, PSC might decide to form a stakeholder working group focused on the Value of Solar, one official said. Although this would likely delay action, this group’s work could support the case for better compensating customers for power sent back to the grid from a solar system, the official noted.

Distributed generation provides significant value to the energy system through deferred investments in grid upgrades. “It’s essentially each customer paying out of pocket for a mini power plant that helps support their small corner of the grid,” Delurey said. Distributed generation can also help Michigan and Consumers Energy achieve their respective net-zero targets, other officials added. Distributed generation makes the grid more reliable and more efficient at the neighborhood level because it distributes generation throughout the grid, thus reducing load on the wires, reducing transmission and distribution costs.

Michigan has an older power infrastructure and huge upgrade needs on the distribution side. Also, because urban and rural areas within the state are sometimes covered by the same utility, the upgrades that are needed are expensive.

Already, Michigan has high energy prices compared with other Midwestern states, and the state’s electric utilities perform well below average compared with utilities in the rest of the country. According to the Citizens Utility Board of Michigan’s most recent report, on “major event” days, Michigan ranked 4th worst in the nation in terms of the average power restoration time following a customer outage. Excluding major event days, Michigan’s performance was 2nd worst in the U.S.