Glenn: Senate energy bill will drive electricity costs up, destroy jobs

GG_official_House_photo_II.jpgLansing, Mich. -- House Energy Policy Committee vice-chairman Rep. Gary Glenn, R-Midland, Thursday said energy reform legislation approved by a state Senate committee Wednesday is worse than the House version of such legislation that has failed to win support in the House since its approval by Glenn's committee -- over his objections -- over six months ago. Glenn vowed that if the full Senate approves the legislation, he will do everything in his power to persuade his House colleagues to block it.

"Michigan homeowners and businesses already pay the highest electricity rates in the Midwest, and this protectionist, pro-monopoly, anti-competition legislation will drive our electricity costs even higher, drive existing and future jobs away from Michigan, and strip tens of millions of dollars in annual savings from 'electricity choice' customers such as our public schools who've testified they'll be forced to lay off hundreds of teachers just to cover higher electricity bills," Glenn said.

Glenn said the outcome of the energy reform debate is critical to Dow Chemical, Hemlock Semiconductor, and other major area employers for whom the biggest cost of doing business is the price of electricity. Dow Chemical CEO Andrew Liveris in a speech last year at the H Hotel in Midland identified electricity rates as the key determinant in whether Dow would locate future manufacturing facilities in lower electricity cost states such as Tennessee and Texas.

It's also critical to the future viability of Midland Cogeneration Venture, the nation's largest gas-fueled electricity and steam generating facility in North America. MCVwants changes in the legislation to allow them to competitively bid against the major utilities for future energy generation needs rather than see utilities continue to be given first right of refusal on the construction of all new power plants. MCV executives consider competitive bidding critical to their future economic viability and ability to continue to provide all the electricity and steam supplies needed by Dow Chemical for its Midland operations, without which Dow would be forced to return to Consumers Energy for their electricity needs at a much higher price, forcing the possibility of relocating electricity-intensive manufacturing elsewhere.

"I will not only vigorously argue that free market principles, competition, and consumer choice in our electricity market offers the most prosperous, low cost energy future for Michigan's homeowners and economic growth, but I will aggressively defend the economic interests of major employers in Bay and Midland counties in particular," Glenn said.

Of equal importance is preserving and hopefully expanding the only 10 percent of Michigan's electricity market who are allowed to buy electricity from suppliers other than the state's two near-monopoly utilities, Consumers Energy and Detroit Edison, who are guaranteed 90 percent of market share by a law passed in 2008. Prior to that, all Michigan electricity users were free to choose.

Nearly half of Michigan public school districts and some colleges and universities "were smart enough fast enough" to get in under the 10 percent cap in 2008, including Bay City Schools and Saginaw Valley State University, both of which report saving $200,000 a year by buying their electricity from suppliers other than Consumers or DTE. Because of the arbitrary cap on choice, all other school districts in Bay and Midland counties, which Glenn represents, plus Northwood University and Delta College, are prohibited by law from buying electricity from anyone other than Consumers Energy at a higher price. Glenn has introduced legislation to allow all school districts and universities to choose a cheaper electricity supplier.

The legislation approved by the Senate Energy Committee Wednesday would effectively kill the electricity choice option for schools and some 6,000 other choice customers, plus an additional 11,000 customers on a choice waiting list, by imposing so many new fees and regulations on alternative energy suppliers that they can no longer afford to do business in Michigan.

Glenn pointed to a May 3rd report by UBS Securities, an international stock and securities marketing company that's hired by the two monopoly utilities to market their stock to prospective investors.

While utility spokesmen and their allies argue the Senate legislation doesn't technically eliminate choice, UBS Securities -- under threat of severe Securities and Exchange Commission penalties if they mislead prospective buyers of Consumers and DTE stock -- marketed the utilities' future stock value on the promise that the utility-backed legislation in Michigan will eliminate electricity choice.

"As previously discussed," UBS Securities said in its May 3rd quarterly investors newsletter, "we believe the legislation is likely to include new capacity requirements for competitive electric suppliers and a multi-year stay out period for commercial/industrials that stay with choice. These 'fairness' provisions are expected to effectively end retail open access 'organically' over time and create incentives for the utilities to build (new power plants)."

UBS Securities continued: "The legislation should reduce risk to Consumers Energy around choice. ...The upside spending (by utilities) that would result from the passage of Michigan energy legislation is based on replacing purchase power agreements with utility-owned generation, the termination of retail open access ('electricity choice'), as well as spending to meet (new renewable energy goals)."

Glenn noted that while UBS Securities would face legal penalties for misleading prospective buyers of Consumers and DTE stock, there are no similar penalties for utility lobbyists who tell legislators that the legislation won't affect electricity choice, exactly the opposite of what UBS reports.

Glenn also said the Senate legislation is even worse than the House version which has languished without support since committee passage last November because it disincentivizes future investment in solar energy by phasing out the state's "net-metering" policy under which utilities are required to pay homeowners with solar energy shingles, for example, for any excess electricity they generate beyond the homeowner's own use at the same retail rate the utility would charge the homeowner to buy the electricity. The utilities want homeowners who generate rooftop solar energy to be forced by law to sell the electricity they generate to the utility at a wholesale price, then buy it back at a higher retail rate even for the homeowner's personal use. Such a policy would eliminate any savings incentive for homeowners to invest in generating their own solar energy.Glenn noted that three retired business executives in Midland -- John Bartos, Steve Ellebracht, and Ted Skinner -- constructed what was at the time the largest privately-owned solar array in Michigan, located in Homer Township. "We should be encouraging investment in alternative energy supplies such as solar energy, not changing state law to penalize such investors," Glenn said.

"The bottom line is, the two near-monopoly utilities in Michigan -- while they've been good corporate citizens and a reliable supplier of electricity needs for over a century -- simply don't want and are seeking changes in state law to eliminate competition in any form," Glenn said.

"But if we want a cheaper and more secure energy supply to stimulate economic growth and job growth in Michigan, we must pursue reforms that stimulate more diversity, competition, and customer choice in Michigan's energy market," Glenn said."Two major utilities who aren't satisfied with already being guaranteed 90 percent of the state's electricity market by law must not be allowed to succeed in passing 100 percent-monopoly legislation that will drive their already legally-restricted competition out of business altogether, further driving up electricity costs and destroying current and future jobs in Michigan in the process," Glenn said.