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Michigan Gov. Snyder Would Maintain Electric Choice Under Current Limit, If Suppliers Can Show Resource Adequacy Five Years Out

March 16, 2015

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Copyright 2010-15 EnergyChoiceMatters.com
Reporting by Karen Abbott • kabbott@energychoicematters.com

In an address outlining Michigan's energy policy, Gov. Rick Snyder said that the state does not need to eliminate the current provision for retail access, if retail suppliers can demonstrate that they are assuring reliability for their customers.

"We ... need to make sure that every company that sells energy in Michigan is protecting its customers from unpredictable price spikes due to a lack of generation or import ability. We can fix our electric capacity problem without forcing customers to change electric providers. But we can't fix our electric capacity problem until every electric provider has an equal responsibility to ensure that the plants or transmission lines their customers rely on will be there. Right now, we know we have a problem coming on that front. We need to require everyone selling power in Michigan to be part of solving that problem," Snyder said

"We can solve this problem without getting rid of retail open access – sometimes called choice -- for those businesses that have already made plans and commitments to get their power from an alternative electric supplier. But we can only solve this problem if that choice is a fair choice. In Michigan, any company that sells you life insurance has to show the state that they have enough reserves to make good on the policy they are selling. It's only fair to make sure that everyone who sells power is also required to buy the insurance policy that protects us all from big risks if there is not enough power available," Snyder said.

"Right now, our incumbent utilities are required to be ready to take 100 percent of customers back – but those utilities will not receive approval to build plants their current customers don't need. When there were plenty of plants, that system worked without causing a reliability problem. But that is not going to be the case in the coming years. Instead, we face the question of how to pay for plants that may only need to run a few weeks a year, if no utility can be authorized to build them, and no investor thinks they can make their money back," Snyder said

"In Michigan, we believe in the principle of cost of service – users should not be subsidizing each other. That principle needs to apply to our market design too, and make sure everyone is fairly sharing in the costs of those plants we may only need a few times a year, or the lines we need to bring in the power that keeps our grid running. This must be a top priority," Snyder said.

"While we need to change our market structure, we need to recognize the fact that in much of Michigan, 10 percent of businesses have relationships with other electric providers. When we change our system, we can respect those business decisions and allow those relationships to continue, if those providers can be part of the solution to our current problems. Reorganizing and redesigning electric markets, and giving our electric companies and their customers time to respond to those changes, is crucial. We also need to have a defined universe of megawatts we are addressing, so we need to keep the 10 percent limit," Snyder said

"It takes 3-5 years to build a new generating plant, including all regulatory approvals and permit requirements. So we need to know electric customers are protected now and 5 years into the future. That will give us time to construct a new, efficient plant if needed. All electric companies should be required to show the MPSC they have the capacity to serve their customers for the next five years in order to do business in Michigan. I am calling on the legislature to help us reform this system before the summer break, so that we can give ourselves as much time as possible to make a smooth transition," Snyder said.

In materials accompanying Snyder's speech, the governor's office said that Michigan must, "Make changes to our electric market structure to ensure we never experience massive outages due to lack of supply."

"We must change our electric market structure to ensure all electric providers are protecting their customers from massive outages due to lack of supply," Snyder's plan states.

Michigan must, "[p]revent the Lower Peninsula from developing the same crisis the Upper Peninsula faced by reforming our electrical market to require every electric provider to protect its customers," Snyder's plan states.

Michigan must, "[e]mpower regulators to determine when we may face a shortage, tools to address it, and ensure that all electric providers are required to protect their customers by ensuring the infrastructure we need will be there to serve them," Snyder's plan states.

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