Michigan Issues Guidelines on Program Options

To facilitate compliance with recent state legislation, the Michigan Public Service Commission has provided guidance to jurisdictional electric utilities as they begin to develop the discretionary green power programs required by the statute. The commission explained that the new law, passed in December of 2016, calls on electric service providers to offer voluntary green pricing (VGP) programs to their customers. Upon reviewing numerous comments filed by a wide array of interested parties, the commission identified several issues that it asserted are key to VGP plans. 

Among the matters set forth by the commission were the following: 

1. The components and terms the VGP programs and associated tariffs should contain, including which discrete options should be made available to which customer classes; 
2. The manner of recovery of program costs and associated accounting methods to be used thereto; 
3. How rates for the programs should be calculated; and 
4. How often VGP programs should be updated. 

The commission found that some utilities may have fewer resources available to develop the programs and will require more flexibility and time to implement more effective VGP tariffs. The commission also ruled that different location options for VGP generation should be made available. It elaborated that while some customers may wish to support renewable energy generally and thus may not have a preference with respect to where the renewable energy or associated renewable energy credits (RECs) are sourced, others may prefer options that lead to greater development of renewable energy within Michigan, or even in their own communities. 

The commission also indicated that VGP proposals must provide a clear explanation of how all costs and cost savings associated with renewable energy projects are derived. It stated that simply providing renewable energy using a set mark-up, which purportedly reflects the additional cost of renewable energy, would be insufficient for offering enough information to customers to enable them to make a reasoned judgment about the offer. 

In addition, the commission accepted the idea that VGP programs should provide an option that allows large commercial and industrial customers to negotiate directly with renewable energy providers to obtain a renewable energy power purchase agreement (PPA). As an example, the commission pointed to "virtual" PPAs, under which a financially based arrangement is reached between a renewable energy generator and a customer, with the customer owning the RECs. 

Despite being open to virtual PPAs, the commission stopped short of requiring utilities to allow individual contracting. Still, the commission encouraged utilities to work in cooperation with larger customers to source and contract for renewable energy that meets corporate sustainability goals at a competitive price. According to the commission, all of the commenters had recommended that green pricing programs be premised on actual costs of service and structured to avoid any subsidization by nonparticipants. In agreeing with them, the commission stated that the process for acquiring additional renewable energy for the VGP program should mirror the competitive bidding processes for procurement of renewable energy under other state laws. 

That is, the commission concurred that costs to VGP participants should include all administration and marketing costs specific to the voluntary programs. Re Regulatory Reviews, Revisions, Determination and/or Approvals Necessary for Regulated Electric Providers to Comply with Section 61 of 2016 PA 342, Case Nos. U-18349 et al., July 12, 2017 (Mich.P.S.C.).