Published in Energy

Michigan’s top energy regulator discusses grid reliability after Texas power crisis

BY Sunday, February 28, 2021 10:44am

The polar vortex of 2019 sent sustained extreme cold weather throughout the Great Lakes states, and in Michigan led to a strained electric and gas system. At the time, newly elected Gov. Gretchen Whitmer declared a state of emergency and launched a formal inquiry. But the situation pales in comparison to what happened in Texas two weeks ago as cold weather caused outages for millions and rolling blackouts as energy demand far exceeded supply. Although Michigan’s grid is far more prepared for extreme weather conditions than Texas’ proved to be, there’s still room to improve the gas and electricity delivery system here, and several ongoing statewide efforts aim to do just that. Michigan Public Service Commission Chairman Dan Scripps recently discussed Michigan’s energy infrastructure with MiBiz, as well as a looming threat to solar energy jobs here.

How likely is it for a scenario that just played out in Texas and Great Plains states to happen in Michigan?

Michigan Public Service Commission Chairman Dan Scripps COURTESY PHOTO

It’s significantly less likely for a couple of reasons. One, the market structure looks different in Texas. It’s designed to rely entirely on price signals to ensure there will always be enough capacity available. Two, Michigan’s 2016 energy reforms require all providers, utilities and alternative suppliers to demonstrate they have adequate capacity for four years into the future. Third is the integrated resource planning process that requires utilities to develop five-, 10- and 15-year plans to meet customer needs. The last piece is: We’re just much more experienced in winter weather. We’ve had challenges — the polar vortex in 2019 was an eye opener, but it highlighted some vulnerabilities. 

What work is happening to improve grid reliability in Michigan?

On the electric side, we’re looking at supply and demand, such as demand response and making sure customers are willing to be interruptible, which is giving greater confidence about when those will be available when needed. For distribution outages in particular, we have approved a fair amount of spending on tree trimming for utilities. We’re also being strategic in grid hardening in an attempt to better align utility business interests with customers and greater reliability. 

On the gas side, it’s about redundancy. When gas outages happen, they’re very difficult. If you have something like that, it can really strain the system and be hard to turn around quickly.

Can Michigan expect to see natural gas prices spike like other states have seen in the past week?

We saw some increases, certainly, but even in comparison to other parts of the Midwest, they weren’t as steep. We rely on gas from Texas and the Gulf Coast, but we also get a fair amount from Appalachia. Those were less impacted. We’re keeping a pretty close eye on how this plays out. Choice customers on the gas and electric side may have greater exposure to those price increases.

Is what happened in Texas and other states over the past few weeks an argument against deregulated energy markets?

I think it shows there are tradeoffs in any system. Candidly, Texas customers have benefited from cheaper electricity prices for a long, long time. The question they’re asking themselves today is: Given the price spikes and the unavailability of resources in the worst possible time, was it worth it? There’s a strong argument for the regulated approach, but it also means we may have better insulation against what we saw in Texas but may end up paying more for it. It’s for policymakers in Michigan, Texas and everywhere else to think about the inherent tradeoffs in any market structure.

Former Chairwoman Sally Talberg left the MPSC at the end of 2020 to join the board of ERCOT, the grid operator in Texas. She chaired ERCOT’s board for about a week before resigning in the aftermath of the crisis there. Do you have any comments on her resignation?

I think this is a sad day for folks who believe in good regulation and who care about what happened in Texas and what the fallout is. Sally’s experience was in some ways uniquely well-suited in helping to address this on a going-forward basis. I’m disappointed she won’t have that chance. She’s a person of absolute integrity and selflessness.

You testified recently on proposed state legislation that would eliminate caps on customer participation in utility rooftop solar programs. How real of a threat to solar companies are those caps?

I think it’s a real threat. Based on experience in other states where they’ve hit these similar caps and what happens, the market just goes away. It’s utility by utility here, but if all of a sudden there’s zero market here, it’s really tough to run a business.

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