What is your reaction to how the EPA’s carbon emissions rule might affect your state? What are some ways your state is already prepared and what might be more challenging?
I was relatively pleased with the rule as it was proposed. I say relatively, but I thought that they listened. They seemed to kind of put their money where their mouth is and they did listen to a lot. I think they missed some things…We would like to be able to get credit for some of the things that we’ve already done.
Back in the 1980s, Michigan spent hundreds of millions of dollars cleaning up our emissions on our own. When the 1990 Clean Air Act amendments passed, we did not get credit for what we had done. Other states who had done nothing basically were given a pass. We were basically put at a disadvantage trying to compete. They were grandfathered into the law, we still had to meet that standard, regardless of its effect.
There was a lesson learned there that you have to be careful if you are the ones that go out and try to do the right thing. In 2008, we passed a Renewable Portfolio Standard and an energy efficiency standard. They have been tremendously successful. We developed a lot of renewable energy at much lower cost, and even though it’s a 10 percent RPS…the fact is our 10 percent is more megawatts than other states. To get to 10 percent because we have a bigger load that was actually a bigger lift than many other states have. We also passed this energy efficiency standard that has been tremendously successful. Every provider in the state is meeting the standard.
We thought as long as they use the 2005 base year, we’re in really good shape. So then the question is OK how do we somehow get credit for that. (If they’re not going to change the starting year) we’re going to have to find out if there’s other things they will accept.
I really think that the regional opportunities may be our most cost-effective opportunities. They’re telling us they want to encourage us to figure out regional solutions, but I don’t think the EPA has even figured out how that will work.
(On the timeline): I’d like to say 2020 is doable. There’s some tight timeframes here. I was asking for three years if we do a regional approach. They gave us two, so that’s pushing the envelope. I believe they have timeframes they have to work within. So it wasn’t necessarily a big surprise, but nonetheless two years is going to be tough…If we have to negotiate among regional entities, that’s going to put a significant layer of complexity on.
Do you foresee your state having a formal or informal stakeholder process?
We have a very good relationship with our air regulators…we have the technical expertise, they’re going to help us understand the rule…It’s mostly informal.
First we have to figure out our own situation. We’ll probably look at Michigan on a standalone basis but we’re not going to wait until we have that answer to talk to other states. There’s an informal group of fellow states in the region—Illinois, Minnesota, Michigan, and others—folks from the air regulators, the commissions, some of the industry folks. We’ve been meeting for a year now. Those talks are continuing, they’re perhaps becoming a bit more formalized.
No one’s getting to the point yet where there’s a formal arrangement, but that’s a big open question. State compacts require federal legislation. We have to figure out how does this work.
There is a group of (Midcontinent Independent System Operator) states working together.
Do you feel your role and responsibilities as a state regulator are evolving? Why or why not?
This is an industry in transition, in a good way in my view. We are moving toward cleaner energy. This is something we could have and should have been doing before now. But the technology is enabling it…At the same time, I’ve been in this business for a long time, approaching 30 years. The issues seem to be getting more complex. There seem to be more moving parts. Back then we doubled vertically integrated utilities in kind of a command-and-control scenario—now we have so many more stakeholders. Customers are being empowered, which is a good thing, but it adds to complexity with how do you pay for things if customers are getting off the grid.
We in Michigan have a hybrid restructured and regulated law, we work in two (regional transmission organizations), we have two peninsulas served by distinctly different transmission companies. So there’s just an awful lot of things we didn’t have to think about 20 years ago.
What are some of the biggest energy issues facing your state?
We do have some geographic challenges—we are a peninsula state, so there are limited interconnections. The interconnections in the lower peninsula are through Indiana and Ohio, a little bit with Ontario. The upper peninsula is solely through Wisconsin. Different companies, different players, different loads. The lower peninsula is a huge load, probably the biggest in MISO. Whereas the upper peninsula is very sparsely populated.
This interview was conducted at the NARUC summer meetings in July 2014. To see Q&As with commissioners from other states, visit our interactive map. For a broader story about how state regulators from around the country are reacting to the EPA’s carbon emissions proposal, click here.
If you’re a commissioner and didn’t get to talk to Morning Consult at the conference, feel free to contact Emily Holden. We’d love to hear from other state officials and stakeholders too.