Billions in utility construction hinge on repeal of state law
Date Posted: April 4 2008
Adopted in 2000, Public Act 141, The Electric Restructuring Act, partially deregulated Michigan's electrical industry.
The act was supposed to lead to enhanced competition, greater choice and lower costs for Michigan's residential and business utility customers.
Instead, only about 3 percent of Michigan's residential customers have taken advantage of electric choice, energy costs haven't gone down, and the alternative utility suppliers have been allowed to "cherry pick" profitable commercial and industrial customers from traditional utilities.
The lack of a dependable customer base has led to uncertainty for Michigan's traditional utilities - Consumers Energy and DTE Energy - who have said they are putting a pause on the construction of at least two baseload power plants until P.A. 141 is replaced with a more competition-friendly legislation package that would mostly re-regulate Michigan's utilities.
"Repeal of Public Act 141 is a jobs bill for you," said DTE Energy Vice President Ron May to delegates to the Michigan Building and Construction Trades Council legislative conference.
Echoed Michigan Gov. Jennifer Granholm to the same delegates: "Passing this package of bills is the single quickest way for us to create construction jobs in this state. "There's a whole sector of the economy that can be created. The jobs are coming somewhere - and they will choose Michigan if we have the right policy in place."
The Michigan Building and Construction Trades Council is part of the "Protect Michigan" coalition, which is seeking passage of House Bill 5521. The bill would partially re-regulate certain private utilities, provide for alternative energy suppliers and encourage use of resource recovery facilities. Most importantly, passage of the bill would clear the way for billions of dollars in Michigan-based power plant construction.
Granholm said there's some $6 billion in baseload construction on the horizon that's awaiting reversal of PA 141. Last fall Consumers Energy announced that if state law is changed, it would construct a new $1.5 billion coal-burning plant, and possibly a second unit, at its Karn-Weadock plant near Bay City. And, Detroit Edison has started work on preparing a license application for a new nuclear plant at the existing Fermi site near Monroe.
Jim Beaubien of Protect Michigan, who serves as president of IBEW Local 17, told building trades delegates that "if we do nothing we are going to be way worse off and no plants are going to be built." He's a strong advocate of the plan to replace Public Act 141, which limits, but doesn't eliminate, customer choice.
"This plan restricts customer choice to 10 percent, and that's a good start because it takes care of 90 percent of the problem," Beaubien told delegates. "It gives Wall Street some assurance that these utilities are going to have a customer base and a revenue stream to be able to build a power plant."
Overturning P.A. 141 won't be easy. A Consumers Energy lobbyist told building trades delegates that there's a "small but vocal minority" who oppose doing away with the state law.
Michigan Attorney General Mike Cox is part of that opposition. He told the Bay City Times that repealing P.A. 141 would discourage manufacturers from building in Michigan because they won't be able to shop for low energy costs. "It's not only anti-competitive, it's anti-consumer," he said.
Whatever happens with the state law, Beaubien pointed out that Michigan's energy consumption is continuing to rise - during the past five years, despite our massive job losses, electrical demand in our state has risen 8 percent. The state's 21st Century Energy plan estimates peak electrical demand of Michigan consumers will rise 1.2 percent each year.
Increasingly, Beaubien said, our state will be relying on out-of-state, non-regulated providers for power, at rates that are at the whim of the marketplace. Private electricity suppliers, Beaubien said, "want us at some point to rely on them when they can command a premium price."
Beaubien said during the early part of this decade, some 4,000 megawatts of new generating capacity (mostly fired by natural gas) were built in Michigan, but much of that capacity is untapped because of the relative high price of natural gas vs. coal.
"The companies that built that capacity have gone bankrupt," Beaubien said. "That's one of most compelling reasons why investors won't finance another power plant in this state until we fix Public Act 141."
Consumers Energy Senior Vice President Jim Coddington said even without the construction of a new power plant, Consumers Energy alone will be spending $6.4 billion in Michigan in the next four to five years with pollution control construction work at its fleet of plants.
"People have to start thinking about building new nuclear plants in this country," Coddington said.
He said if Public Act 141 is overturned - and then taking into account the need to acquire the proper permits and the holding of public hearings - Consumers Energy expects to "put shovels" in the ground in the summer of 2010 for a new power plant on their Karn-Weadock site near Bay City.