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Critics say Michigan utility needs to show its work on solar energy rate

Rooftop Solar
Consumers Energy failed to develop data and facts to justify slashing solar credits almost in half, challengers say.

Michigan solar advocates say Consumers Energy has failed to justify a proposed cut in the rate it pays for solar power generated on customers’ rooftops.

The criticism comes as Michigan regulators consider the utility’s latest rate case, which calls for significantly decreasing the solar rate while also increasing how much residential customers pay for grid electricity. 

“Excess energy that’s put on the grid creates some value, and it creates some costs,” said attorney Margrethe Kearney of the Environmental Law & Policy Center. As she sees it, Consumers Energy has made “broad and unsubstantiated claims about the impact that excess solar has on the grid, but the truth is they haven’t quantified any of that.”

By law, utilities bear the burden of proving to regulators that regulatory rates are justified. “In Michigan, we base rates on data — not rhetoric or politics or shareholder demands,” Kearney said.

A spokesperson for the utility, which serves about 1.8 million electric customers in Michigan’s Lower Peninsula, said the company is committed to increasing the amount of power it gets from renewable sources, but that customer-owned rooftop solar is not the best value for customers overall.

A 2016 Michigan law called for an end to the state’s net metering policy, in which residential customers are credited for unused solar power at the same rate they pay for electricity from the grid. Instead, it mandates a shift to a distributed generation program with an inflow/outflow tariff. The amount customers are credited for solar power flowing back onto the grid must be determined in individual rate cases.

Consumers’ proposal would decrease the rate for unused solar power by roughly 46%. It would also increase residential rates by roughly 14%t, in part to cover the cost of distribution infrastructure but also to help offset a proposed 6.7% rate decrease for industrial customers.

Brian Wheeler, a spokesperson for Consumer Energy, said even under the existing proposal rooftop solar customers would be paid for unused solar power at a rate 2.5 times higher than what it can buy from larger-scale projects. 

“Much more is required to deliver 24/7 reliable service than a few panels on a roof,” Wheeler said, adding that in his view, “rooftop solar developers are the ones trying to get something for nothing.”

Utility payments under net metering or other programs that pay customers for unused power sent onto the grid are an important piece of the equation for installers selling homeowners and businesses on rooftop panels. Without them, customers would face longer and smaller returns on their investments.

Kearney said the utility’s preference to sell solar power itself shouldn’t preclude people from putting solar panels on their property.

“That’s a choice that customers get to make on their own,” Kearney said. “If they want to have rooftop solar, they should get the fair value of any excess put on the grid. The utility doesn’t get to make that decision.”

Other customers could lose out under the proposed rate plan as well. The city of Grand Rapids has committed to move to 100% renewable energy for its municipal operations by 2025. To help do that, it wants to add on-site solar energy at several facilities. Those facilities would already get a somewhat reduced rate under the current program, because they fall into a different category than residential customers do.

Under Consumers Energy’s proposal, however, “you’d be getting back even less,” said Alison Sutter, Grand Rapids’ sustainability and performance management officer. Indeed, the proposed rate structure would make it uneconomic to install solar in most places the city had initially planned to use. 

“It’s just making it cost-prohibitive,” Sutter said.

Beyond the credit value, Michigan law says utilities only have to credit customers for excess solar energy up to 1% overall for average peak load, and an even lower cap of 0.5% applies for most residential installations. The utility for Michigan’s Upper Peninsula has already voluntarily agreed to raise its cap, but there’s no word so far from Consumers Energy, Sutter said.

Because the utility could meet the caps by the end of this year, some residential customers may be cut off from any credits at all, she continued. That in turn will put on-site solar energy further out of reach for many homeowners, especially those in lower-income groups, she noted. And although draft legislation would have raised the cap, there has not been positive action on that front, she said.

On the other hand, the fact that Consumers Energy is nearing the current cap suggests that it has years of data about customer-supplied electricity, loads, and other information.“The utility should go out and do a thorough study to examine what is the value of solar,” Sutter said.

“If you do a valuation that pays folks what the value of that energy is, nobody is hurt,” Kearney said. But in that case, she added, “The only people who wouldn’t benefit are Consumers’ shareholders, because the company does not and should not earn a return on the investments individual consumers make.”

For its part, Consumers Energy has committed to getting 40% of its electricity from renewable sources by 2040 and to eliminate coal-powered generation by then. Yet the utility seems to prefer that it be the one supplying that energy.

“Solar energy is a tremendously valuable resource and, when built or procured at scale, provides significant customer and environmental value,” Wheeler said. “Claims that rooftop solar, which is not dispatchable and intermittent in nature, is more valuable than larger-scale solar [are] erroneous and misleading.”

Making matters more complicated are Consumers Energy’s efforts to raise rates. A large chunk of the increase would subsidize a rate decrease of 6.7% for industrial customers, said Charlotte Jameson, program director for legislative affairs, energy and drinking water policy at the Michigan Environmental Council.

“All taken together their proposal means that residential rates would increase an astounding 14%,” Jameson said. For a customer using 550 kilowatt-hours of electricity, that would be an additional $150 per year. And although the case was filed before the COVID-19 pandemic, hitting Michiganders with those cross-subsidies now would be even worse, she said.

“If the 14% rate increase is approved, it would pour accelerant on what has been a disturbing trend in Michigan electric rates, where over the last decade residential rates have dramatically increased while rates for industrial customers have remained flat,” Jameson said.

Consumers Energy’s proposed rates would take effect next year. Reply briefs are due Wednesday, Sept. 16. Then it’s up to the administrative law judge to read the briefs and submit a proposal to the Michigan Public Service Commission for its final order.

This article was originally posted on Energy News Network and was republished with permission.