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Midwest Regulatory Update: Michigan HB 4298 Advances to House Vote

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In recent months, the Midwest has had a number of major policy and regulatory developments that could spur new markets and big changes for the region's energy landscape. 

Here's a brief state-by-state rundown of the latest news. 

Missouri

Missouri recently created a buzz when the Secretary of State approved a petition to put electric choice on the ballot. If enough signatures are obtained, Missouri citizens will have the opportunity to change their state law and open up the entire state for electric choice. This process is a new take on how states have traditionally opened electric choice, by bypassing politicians and taking the decision straight to voters. 

Illinois

Over the past few months, Illinois has remained active with capacity pricing for the Midcontinent Independent System Operator (MISO) and a legislative stalemate. The MISO auction results put a legislative halt to Exelon’s ask for a carbon standard, which would have allowed their nuclear power to qualify for payment. It also lead to a FERC investigation into the auction results. 

The Illinois Commission is holding meetings to decide if MISO should carve the Ameren territory out of the normal capacity auctions and move to a 3 year model. Meanwhile, sweeping legislation to expand the state's renewables has stalled due to an impasse between the legislature and the Governor over budget issues. While Illinois came back for a one-day session this month, no energy related items made it to the Governor’s desk for signature.  

Ohio

Ohio continues to debate whether utilities should be allowed to bailout generation owned by their unregulated affiliates. AEP and FirstEnergy have cases open requesting a rider be placed on all customers to pay for uneconomic generation owned by the utilities’ affiliates. 

The process would allow the utility to enter into 20+ year power purchase agreements (PPAs). The PPAs would place all costs and a revenue requirement on customer bills. The utility would sell the power into market and – if it was a winner or loser after all costs and a rate of return were recovered – a credit or charge would appear on the customers bill. However, throughout the hearings, it has become clear customers are always going to pay.  In addition, the Public Utilities Commission of Ohio (PUCO) would have no ability to deny a cost. If the cost was incurred – no matter the reason or how egregious – it would pass to the rider. The PUCO only has the ability to review the costs – not deny them.  

Michigan

The Michigan House Energy Policy Committee passed out version H-9 of House Bill (HB) 4298 on November 5th. During the committee hearing, they took up and amended the H-3 version of the bill, however after much confusion version H-9 was reported out. On November 6th, the final version of HB 4298 (H-9) was released.

The new language is up for a vote before the whole House. That vote is likely delayed until early December.   

This newest version would require Alternative Suppliers provide dedicated and firm capacity to the Commission for the upcoming planning year plus four additional years regardless of customer contract length. The issue is how "dedicated and firm" is defined. The definition would eliminate use of the MISO capacity auction and result in a supplier being forced to pay for and procure 5 years of capacity to meet the Commission’s assessment.

While many legislators are being told that suppliers must only submit a plan under this requirement, the exact language is unclear. If that is the intent HB 4298, it needs to be amended. Additionally, there are new provisions which allow the Commission to predict capacity shortfalls. One of the criteria for the Commission to predict a shortfall is a price increase. In that case, only customers of a supplier must procure more capacity. 

Even worse, the criteria for prediction is a 1000 percent increase in prices. Finally, HB 4298 would require that any customer currently waiting in queue for electric choice would be forced to pay generation to the utility for 15 years if they switch to a supplier.  

Stay tuned to the Direct Energy Business Blog for the latest regulatory and policy developments. For other recent updates, please visit our regulatory page

Posted: November 18, 2015

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