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Regulators cut proposed cost of utility’s renewable energy plan, find clean energy and efficiency cheaper than new coal

May 27, 2009
LANSING – On Tuesday, the Michigan Public Service Commission (PSC) issued an order cutting the proposed cost of Consumers Energy’s clean energy plan and warning the company to keep its costs of renewable energy in line.

The PSC said it will approve the clean energy plan submitted by Consumers Energy, but only if the utility agrees to modifications sought by other parties, including numerous environmental groups who have weighed in against unnecessarily costly aspects of the plan. The PSC also cautioned Consumers that it may not ultimately approve recovery of costs if they are in line with the utility’s current projected cost for wind energy – a figure that many analysts consider grossly inflated.

“The changes proposed by the Commission improve the plan submitted by Consumers Energy, but continued oversight will be essential to realizing the full potential of clean energy,” said James Clift, Policy Director at the Michigan Environmental Council.

The clean energy plan is required by laws passed by the Michigan Legislature last year requiring state utilities to generate 10 percent of their electricity from renewable sources by 2015.

Renewable energy and efficiency programs will reduce Michigan’s dependence on imported fuels like coal, diversify and help spark the economy, and create in-state jobs. It also will be a hedge against increasing costs of conventional power sources like coal.

Among the changes the PSC will require is a reduction of the surcharge being paid by residential customers from $3 a month to $2.50.

Expert witnesses pointed out that if Consumers Energy’s costs for renewable energy matched those projected by Detroit Edison, the surcharge could be lowered by an additional $1 to $2. Consumers projects a per megawatt hour cost of more than $170. Detroit Edison, in contrast, says its costs will be $108. In other states, wind power costs have come in at less than $100.

Those rates are lower than comparable electricity generated from a new coal plant.

“The Commission did make a specific finding that the cost of the renewable energy and energy efficiency plans proposed by Consumers is cheaper than building a new coal-fired power plant to meet energy demand,” said Clift.

The utility’s energy efficiency plan, also required by the 2008 state law, will save Michigan residents and businesses money by reducing power use and diminishing the need for expensive new electric generation systems.

“Michigan rate payers want lower energy costs — investment in energy efficiency from the utilities will get us there while also creating jobs and cutting pollution,” said Rebecca Stanfield, Senior Energy Advocate for the Natural Resources Defense Council (NRDC). “All around the country, energy efficiency programs translate into cost savings and cheaper monthly energy bills. But they only work when the utilities implement them with transparency and in partnership with the community. The Michigan Public Service Commission decision should help to make sure this project is done right. If they follow through, ratepayers and the environment will reap the benefits.”

Among the other changes required by the PSC are the following:

Renewable Energy Plan:
· Consumers is to work with PSC staff in developing and designing its future bidding process to meet concerns raised by a number of parties regarding a badly designed current bid process.
· Depreciation rates will be revised in a future proceeding, further reducing the cost to ratepayers.
· The fee for a new solar program will be revised based on the size of the system.

Energy Efficiency Plan:
· The incentive payment program that rewards Consumers for exceeding benchmarks in the energy efficiency plan will be revised in a future proceeding.
·A collaborative process will be established for program support and will be the basis of recommendations for future plan updates, as well as evaluation of program performance. ·A rulemaking proceeding will ensure anticipated energy savings are realized.
James Clift, Michigan Environmental Council: 517-256-0553

Rebecca Stanfield, Natural Resources Defense Council: 312-651-7910

Meleah Geertsma, Environmental Law and Policy Center: 312-795-3713

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