Michigan Energy Forum - September 6, 2012 - Bruce Goodman

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Bruce Goodman presented this powerpoint at the Michigan Energy Forum event on September 6th, 2012.

Bruce Goodman presented this powerpoint at the Michigan Energy Forum event on September 6th, 2012.

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  • 1. Michigan Energy Forum September 6, 2012 Ann Arbor, MichiganImportant Notice: This presentation has been prepared by Varnum LLP for informational purposes only and does not constitute legal advice. Copyright © 2012, Varnum LLP. All rights reserved.
  • 2. Ballot Initiative – November 6, 2012  To add New Section 55  Michigan’s Clean Renewable Electric Energy Standard  Has been certified for the ballot  Has not yet been given a number  Initiative Petition to amend to the Michigan Constitution of 1963
  • 3. Amending the Michigan Constitution  The Michigan Constitution can be amended three ways:  Through a legislatively-referred constitutional amendment  Vote of 2/3rds of the members elected to and serving in each house  Then a vote at the next general election  Through an initiated constitutional amendment  Gathering of petition signatures equal to 10% of total voters in Governor’s race in preceding election  Then a vote at the next general election  Decisions on validity must be made within 60 days of election  Needs a 100 word statement of purpose  Through a constitutional convention  A question about whether to hold a constitutional convention automatically appear on the states ballot every sixteen years  This issue was rejected in the last general election
  • 4. Amendments since 1963  The 1963 Michigan Constitution has been amended 35 times since it went into effect in January 1964  nearly doubling its length and adding to its complexity  many were changes that could have been made statutorily  The legislature’s record  49 proposed  22 passed by the electorate  The initiative record  31 proposed  13 passed by the electorate  So the batting average is less than 50% [35/80]
  • 5. Some successful amendments  Definition of marriage as between one man and one woman  Ban certain affirmative action programs  Authorize stem cell research  Authorize a state lottery  Increase the drinking age from 18 to 21  Establish term limits for elected officials  Prohibit state aid to non-public schools  Property tax limitations  Limit property tax funding of schools  Elimination of sales tax on food and prescription drugs  Authorize deposit of state funds into savings and loan and credit unions  Grant state troopers collective bargaining rights
  • 6. Some unsuccessful amendments  Lower drinking age to 19  Lower minimum age of legislators from 21 to 18  Election of Public Service Commission  Remove prohibition on school vouchers  Reduce property taxes and increase sales taxes  Reduce property tax assessment from 50% to 25% of true cash value  Limit state taxes to 8.3% of state personal income  Remove prohibition against graduated income taxes  Direct tobacco settlement revenues to health care organizations  Lower the minimum voting age from 21 to 18 (26th Amendment to U.S. Constitution mooted this issue)
  • 7. Why a constitutional amendment?  More difficult for an amendment to be modified or reversed  Requires a 2/3 vote of each house of the legislature and  A majority vote at the next general election  A statute adopted by petition and general election  Can be amended or canceled by a majority vote of the Michigan Legislature  Michigan legislature  38 Senators  110 Representatives
  • 8. Electricity 101 – Who builds generation? Regulatory compact (in the beginning)  Electric utilities granted a monopoly  In exchange utilities agreed:  Rate regulation  Duty to serve Utilities earn a profit only on capital improvements  Build a power plant, entitled to cost plus profit  10.5% return on common equity or 6.586% overall rate of return  The cost of purchases are only a pass through of costs (without a mark up)  Cost of coal  Cost of purchased power Electric generation from third parties is purchased power, with no mark up Building generating plants is how utilities make money for their shareholders  This is one of the keys to this debate
  • 9. What is the Amendment?  Provides that as a matter of policy 25% of the generation of electricity in Michigan will come from renewable sources  Biomass  Wind  Solar  Geothermal  Hydro
  • 10. Six Sections of the Amendment Section 1 defines what is meant by clean renewable electric energy sources
  • 11. Clean Renewable Electric Energy Standard 1. It is the policy of Michigan to promote and encourage the use of clean renewable electric energy sources. Clean renewable electric energy sources, which naturally replenish over a human rather than geological time frame, are wind, solar, biomass, and hydropower.
  • 12. Section 2 Sets out the details of the standard/goal.
  • 13. Clean Renewable Electric Energy Standard 2. Beginning no later than 2025, at least 25% of each electricity provider’s annual retail electricity sales in Michigan shall be derived from the generation or purchase of electricity produced from clean renewable electric energy sources.
  • 14. The foregoing clean renewable electricenergy standard shall be implementedincrementally and in a manner that fostersa diversity of energy generationtechnologies.
  • 15. Facilities used for satisfying the standardshall be located within Michigan or withinthe retail customer service territory of anyelectric utility, municipally-owned electricutility or cooperative electric utilityoperating in Michigan.
  • 16. Section 3 How will the ratepayers be charged for the cost of this generation.
  • 17. Clean Renewable Electric Energy Standard 3. Consumers shall be charged for electricity from clean renewable electric energy sources in the same manner and on the same basis as for electricity from other sources.
  • 18. Section 4 Protection against unreasonable increase in rates due to renewable generation
  • 19. Clean Renewable Electric Energy Standard 4. To protect consumers, compliance with the clean renewable electric energy standard shall not cause rates charged by electricity providers to increase by more than 1% in any year. Annual extensions for meeting the standard may be granted, but only to the extent demonstrated to be necessary for an electricity provider to comply with the foregoing rate limitation.
  • 20. Section 5 Legislature is to use this policy to promote Michigan jobs.
  • 21. Clean Renewable Electric Energy Standard 5. The legislature shall enact laws to promote and encourage the employment of Michigan residents and the use of equipment manufactured in Michigan in the production and distribution of electricity derived from clean renewable electric energy sources.
  • 22. Section 6 Savings clause
  • 23. Clean Renewable Electric Energy Standard 6. Any provision or portion of this section held invalid or unconstitutional shall be severable from the remaining portions, which shall be implemented to the maximum extent possible.
  • 24. Approved Ballot Language This proposal would:  Require electric utilities to provide at least 25% of their annual retail sales of electricity from renewable energy sources, which are wind, solar, biomass and hydropower, by 2025.  Limit to not more than 1% per year electric utility rate increases charged to consumers only to achieve compliance with the renewable energy standard.  Allow annual extensions of the deadline to meet the 25% standard in order to prevent rate increases over the 1% limit.  Require the legislature to enact additional laws to encourage the use of Michigan made equipment and employment of Michigan residents.
  • 25. Questions?  Any questions on:  Amending the Michigan Constitution  The language of the amendment  The regulatory framework
  • 26. On to the Discussion…  Doug Jester 5 Lakes Energy  Irene Dimitry DTE Energy