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In Addressing Whether Utilities Should Be Required To Allow C&Is To Independently Contract With Renewable Energy Suppliers, Michigan PSC "Encourages" Utilities To Cooperate With C&Is On Customers' Preferred Mechanism

July 13, 2017

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

While not adopting a prescriptive requirement at this time, the Michigan PSC, in directing the utilities to file voluntary green power programs as required under the state's recent Act 342, "encourage[d]," the utilities to work in cooperation with any C&Is who feel that contracting directly with a renewable supplier best meets the customer's individual corporate sustainability goals at a competitive price.

Several renewable energy suppliers had recommended that the utilities' voluntary green power programs should provide an option that allows for large commercial and industrial customers to negotiate directly with renewable energy providers to obtain a renewable energy power purchase agreement (PPA). This type of program would allow large customers to purchase renewable energy from an offsite facility, with the power purchase agreement (PPA) contract sleeved through that customer’s local utility. Customers and renewable energy developers would be allowed to negotiate directly to set the terms of such a contract, subject to utility approval and agreement.

As the PPA would be sleeved through the utility, renewable energy suppliers said that any load connected with such transactions should not count against any retail open access participation caps.

Several renewable suppliers pointed to a recent arrangement between Dominion Virginia Power and Amazon as an example mechanism. As described by Apex Clean Energy, "In this instance, Amazon signed an agreement to buy renewable power sold into the wholesale market. Dominion, as the incumbent utility, will provide management and market settling services for the wholesale power produced by Amazon’s renewable assets. Amazon’s retail rate will be determined by the price of power sold on the wholesale market and Dominion will provide retail service to Amazon."

An alternate variation proposed by renewable energy suppliers was a market-based rate that customers can use in conjunction with a virtual PPA, a financially-based arrangement between a renewable energy generator and a customer, with the customer owning the RECs

As summarized by the PSC, DTE Electric had in comments objected to any recommendation wherein a customer would be permitted to negotiate directly with a supplier, noting that DTE strongly prefers that any special contract, PPA, or other arrangement be negotiated by the company, not the customer. DTE Electric further contended that special contracts or PPAs must comply with MCL 460.10a, which limits the amount of energy that can be provided by alternative electric suppliers to 10% of the previous year’s weather-normalized sales (the choice cap)

Addressing such issues, the PSC did not order the utilities to allow PPAs between C&Is and renewable suppliers, but encouraged cooperation on the issue

"Recognizing that the preferences and objectives of many commercial and industrial customers are perhaps more easily satisfied with an approach that allows independent contracting between customers and third-party renewable energy providers, the Commission encourages utilities to work in cooperation with these customers to source and contract for renewable energy that meets individual corporate sustainability goals at a competitive price. As was noted by Ceres, MCP, Edison Energy, and EIBC, there are myriad ways that a VGP [voluntary green program] program, contract, or tariff can be structured in a regulated market and the Commission recommends the providers explore various opportunities in collaboration with interested customers," the PSC said

As to DTE's assertions regarding the choice cap, the PSC addressed the issue as it relates to virtual PPAs and "self-service" power (but not explicitly addressing third-party PPAs sleeved through the utility), stating, "the Commission notes that, despite DTE Electric’s claims to the contrary, the limits on electric choice do not apply to virtual PPAs or to self-service power under MCL 460.10a(4)."

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