A bipartisan group of state lawmakers has again proposed legislation backed by clean energy advocates to expand utility programs for customers who generate their own solar power.
Sponsored by state Rep. Greg Markkanen, R-Hancock, House Bill 4236 seeks to lift the cap on utility distributed generation programs that set prices for excess customer-generated power sent back to the grid. The bill is cosponsored by nine Republicans and three Democrats.
The programs are currently capped at 1 percent of a utility’s average in-state peak load for the past five years, as outlined in sweeping energy legislation signed into law in 2016. Jackson-based Consumers Energy and Upper Peninsula Power Co. (UPPCO) were the first two utilities to reach the 1 percent cap and have voluntarily agreed to double program capacity to 2 percent. UPPCO has nearly reached its 2 percent cap.
The distributed generation programs — based on an inflow-outflow formula — were created to replace net metering, which compensated power-generating customers at the retail rate of power. The inflow-outflow-based programs require customers to purchase electricity from the grid at retail prices while crediting them at the power supply component of retail rates minus transmission costs. The new compensation rates are roughly half of retail power prices.
The House Energy Committee held a hearing and took testimony on the legislation on Feb. 17. Supporters have called the distributed generation program caps an “existential threat” to the state’s solar installers by effectively allowing utilities — once they hit the 1 percent cap — to prohibit customers from participating.
Michigan Public Service Commission Chairman Dan Scripps testified last week that while the MPSC is not taking a formal position on H.B. 4236, “we are supportive in taking steps to ensure solar developers in Michigan are able to continue operating and thus support in concept the idea of lifting or eliminating the cap.”
“We know these developers provide good paying jobs to our residents and we would really hate to see them forced out of business through no fault of their own,” he added.
While net metering programs date back to 2004 and were initially created to incentivize rooftop solar development, the state’s interconnection process and the new inflow-outflow tariff means there is no engineering or economic reason to maintain the program cap, Scripps said.
“We’ve addressed the cross subsidization issues” with net metering, Scripps said, referring to the tariff study as required under the 2016 energy laws.
As in years past, the legislation would have to overcome opposition from utilities including Consumers and DTE Energy, which argue that the outflow compensation rates are still too high despite previous and ongoing cost of solar studies by the MPSC. The Michigan Manufacturers Association is also opposed to the bill, citing grid reliability concerns.
“More work is needed to establish a rate design that assures all of our customers with and without their own solar systems will pay their fair share of the grid and the compensation for rooftop solar participants for the energy they provide better reflects the market price,” Cathy Wilson, Consumers’ executive director of state governmental affairs, said in written testimony.
“While we doubled the eligibility of our distributed generation program, we continue to support an approach where all customers who rely on the electric grid pay their fair share of the costs to maintain a reliable, sustainable energy system,” Wilson added.
“Consumers Energy already voluntarily doubled our cap. It took 12 years to reach the first cap. Raising the cap to 2% provides significant opportunity for growth.”
However, bill supporters maintain that the inflow-outflow tariff based on the cost of service eliminates the need for program caps.
“We heard the MPSC last year say there’s no subsidy and no engineering or cost of service-based reason to have a cap,” Michigan Energy Innovation Business Council President Laura Sherman told MiBiz.
Unlike during the last legislative session that combined a bill to eliminate the cap with other energy-related legislation, H.B. 4236 is a standalone, “simple” bill, Sherman added.
“Once the state switched over to something less than net metering, the state does the job of capturing the full cost of serving those customers,” Sherman said. “Without the subsidization or concerns about cost shifting, then you don’t need to have a limit on this free market.”