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SB-0213, As Passed House, July 23, 2008

HOUSE SUBSTITUTE FOR

SENATE BILL NO. 213

A bill to require providers of retail electric service to

establish a renewable energy program; to prescribe the powers and

duties of certain state agencies and officials; to establish an

energy efficiency program in this state for electric and natural

gas utilities; to promote load management; and to provide for

sanctions.

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

PART 1. GENERAL PROVISIONS

Sec. 1. This act shall be known and may be cited as the

"renewable energy portfolio and energy efficiency act".

PART 2. RENEWABLE ENERGY

Sec. 3. As used in this part:

(a) "Biomass" means any organic matter that is not derived

from fossil fuels, that can be converted to usable fuel for the

production of energy, and that is available on a renewable basis,

including, but not limited to, all of the following:

(i) Agricultural crops and crop wastes.

(ii) Short-rotation energy crops.

(iii) Herbaceous plants.

(iv) Trees and wood, but only if derived from sustainably

managed forests or procurement systems, as defined in section 261c

of the management and budget act, 1984 PA 431, MCL 18.1261c.

(v) Paper and pulp products.

(vi) Precommercial wood thinning waste, brush, or yard waste.

(vii) Wood wastes and residues from the processing of wood

products or paper.

(viii) Animal wastes.

(ix) Wastewater sludge or sewage.

(x) Aquatic plants.

(xi) Food production and processing waste.

(xii) Organic by-products from the production of biofuels.

(b) "Commission" means the Michigan public service commission.

retail customer. Customer meter does not include a municipal water

pumping meter or additional meters at a single site that were

installed specifically to support interruptible air conditioning,

interruptible water heating, net metering, or time-of-day tariffs.

(d) "Electronic waste" means any of the following discarded

items:

(i) A computer, including a computer monitor or peripheral.

(ii) A television.

(iii) A telephone.

(iv) A personal digital assistant device.

(v) A radio.

(vi) A compact disc or digital video disc or a compact disc or

digital video disc player.

(vii) Other similar items as determined by the commission.

(e) "Incremental costs of compliance" means the net revenue

required by a provider to comply with the renewable energy

portfolio standard, calculated as provided under section 27(2).

(f) "Industrial cogeneration" means the generation of

electricity using industrial thermal energy.

(g) "Industrial thermal energy" means thermal energy that is a

by-product of an industrial or manufacturing process and that would

otherwise be wasted. For the purposes of this subdivision,

industrial or manufacturing process does not include the generation

of electricity.

(h) "Provider", subject to sections 7(1) and 9(1), means any

of the following:

(i) Any person or entity that is regulated by the commission

for the purpose of selling electricity to retail customers in this

state.

(ii) A municipally owned electric utility in this state.

(iii) A cooperative electric utility in this state.

(iv) An alternative electric supplier licensed in this state.

(i) "PURPA" means the public utility regulatory policies act

of 1978, Public Law 95-617.

(j) "Qualifying cogeneration facility" means that term as

defined in 16 USC 824a-3.

(k) "Qualifying small power production facility" means that

term as defined in 16 USC 824a-3.

Sec. 5. As used in this part:

(a) "Renewable energy" means electricity generated using a

renewable energy system.

(b) "Renewable energy contract" means a contract to acquire

renewable energy and the associated renewable energy credits from 1

or more renewable energy systems.

this part that represents generated renewable energy.

(d) "Renewable energy portfolio" for the years 2012 through

2015 means the percentage determined as follows for a given

provider and year:

(i) Determine the number of renewable energy credits used to

comply with this part during that year.

(ii) Divide by 1 of the following at the option of the provider

as specified in its renewable energy portfolio plan:

(A) The number of weather-normalized megawatt hours of

electricity sold by the provider during the previous year to retail

customers in this state.

(B) The average number of megawatt hours of electricity sold

by the provider annually during the previous 3 years to retail

customers in this state.

(iii) Multiply by 100.

(e) "Renewable energy portfolio" for the year 2016 and

thereafter means the number of renewable energy credits used to

comply with this part during that year.

(f) "Renewable energy portfolio plan" or "plan" means a plan

approved under section 7(3) or 9(3).

(g) "Renewable energy portfolio standard" means the minimum

renewable energy portfolio required to be achieved under section

13.

(h) "Renewable energy resource" means any of the following:

(i) Biomass.

(ii) Solar energy.

(iii) Wind energy.

(iv) Kinetic energy of moving water, including all of the

following:

(A) Waves, tides, or currents.

(B) Water released through a dam.

extent that the water was pumped into the storage facility using

renewable energy.

(v) Hydrogen synthesis gas produced from the plasma

gasification of industrial by-products or electronic waste.

(vi) Geothermal energy.

(vii) Industrial thermal energy.

(viii) Municipal solid waste, including, but not limited to,

landfilled municipal solid waste that produces landfill gas.

(i) "Renewable energy system" means a facility, electricity

generation system, or integrated set of electricity generation

systems that use 1 or more renewable energy resources to generate

electricity. Renewable energy system does not include any of the

following:

(i) A hydroelectric facility that uses a dam constructed after

the effective date of this act unless the dam is a repair or

replacement of a dam in existence on the effective date of this

act.

(ii) An incinerator unless the incinerator is a municipal solid

waste incinerator as defined in section 11504 of the natural

resources and environmental protection act, 1994 PA 451, MCL

324.11504, and was brought into service before the effective date

of this act.

(j) "Renewable energy generator" means a person that, together

with its affiliates, has constructed or has owned and operated 1 or

more renewable energy systems with combined gross generating

capacity of at least 10 megawatts.

(k) "Revenue recovery mechanism" means the mechanism for

recovery of incremental costs of compliance established under

section 7(4).

Sec. 7. (1) As used in this section, "provider" means a

provider whose rates are regulated by the commission.

(2) Within 90 days after the commission issues a temporary

order under section 37, each provider shall file a proposed

renewable energy portfolio plan with the commission. The proposed

plan shall meet all of the following requirements:

(a) Describe how the provider will meet the renewable energy

portfolio standards.

(b) Specify whether the number of megawatt hours of

electricity used in the calculation of the renewable energy

portfolio will be weather-normalized or based on a 3-year running

average. Once the plan is approved by the commission, this option

shall not be changed.

the renewable portfolio standard for a 20-year period beginning

when the plan is approved by the commission.

(d) Include a nonvolumetric mechanism for the recovery of the

incremental costs of compliance within the provider's customer

rates.

(e) For a provider that is an electric utility with 1,000,000

or more retail customers in this state as of January 1, 2008,

describe the bidding process to be used by the provider under

section 17(2). The description shall include measures to be

employed in the preparation of requests for proposals and the

handling and evaluation of proposals received to ensure that any

bidder that is an affiliate of the electric utility is not afforded

a competitive advantage over any other bidder and that each bidder,

including any bidder that is an affiliate of the provider, is

treated in a fair and nondiscriminatory manner.

(3) The commission shall conduct a contested case hearing on

the proposed plan filed under subsection (2), pursuant to the

administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to

24.328. If a renewable energy generator files a petition to

intervene in the contested case in the manner prescribed by the

commission's rules for interventions generally, the commission

shall grant the petition. After the hearing and within 90 days

after the proposed plan is filed with the commission, the

commission shall approve, with any changes consented to by the

provider, or reject the plan. A provider shall not begin recovery

of the incremental costs of compliance within its rates until the

commission has approved its proposed plan.

(4) The plan, as approved by the commission, shall establish a

nonvolumetric mechanism for the recovery of the incremental costs

of compliance within the provider's customer rates. The revenue

recovery mechanism shall not result in rate impacts that exceed the

monthly maximum retail rate impacts specified under section 25. A

customer participating in a commission-approved voluntary renewable

energy program under an agreement in effect on the effective date

of this act shall not incur charges under the revenue recovery

mechanism except to the extent that the charges under the revenue

recovery mechanism exceed the charges the customer is incurring for

the voluntary renewable energy program. The limitation on charges

applies only during the term of the agreement, not including

automatic agreement renewals, or until 1 year after the effective

date of this act, whichever is later. Before entering an agreement

with a customer to participate in a commission-approved voluntary

renewable energy program and before the last automatic monthly

renewal of such an agreement that will occur less than 1 year after

the effective date of this act, a provider shall notify the

customer that the customer will be responsible for the full

applicable charges under the revenue recovery mechanism as well as

under the voluntary renewable energy program as provided under this

subsection.

(5) If proposed by the provider in its proposed plan, the

revenue recovery mechanism shall result in an accumulation of

reserve funds in advance of expenditure and the creation of a

regulatory liability that accrues interest at the average short-

term borrowing rate available to the provider during the

appropriate period. If proposed by the provider in its proposed

plan, the commission shall establish a minimum balance of

accumulated reserve funds for the purposes of section 27(4).

(6) A revenue recovery mechanism is subject to adjustment

under sections 27(4) and 29.

(7) Every 2 years after initial approval of a renewable energy

portfolio plan under subsection (3), the commission shall review

the plan. The commission shall conduct a contested case hearing on

the plan pursuant to the administrative procedures act of 1969,

1969 PA 306, MCL 24.201 to 24.328. A renewable energy generator may

intervene in the contested case as provided in subsection (3). The

annual renewable cost reconciliation under section 29 for that year

may be joined with the overall plan review in the same contested

case hearing. After the hearing, the commission shall approve, with

any changes consented to by the provider, or reject any proposed

amendments to the plan.

(8) If a provider proposes to amend its renewable energy

portfolio plan at a time other than during the biennial review

process under subsection (7), the provider shall file the proposed

amendment with the commission. If the proposed amendment would

modify the revenue recovery mechanism, the commission shall conduct

a contested case hearing on the amendment pursuant to the

administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to

24.328. A renewable energy generator may intervene in the contested

case as provided in subsection (3). The annual renewable cost

reconciliation under section 29 may be joined with the plan

amendment in the same contested case proceeding. After the hearing

and within 90 days after the amendment is filed, the commission

shall approve, with any changes consented to by the provider, or

reject the amendment.

Sec. 9. (1) As used in this section, "provider" means a

provider whose rates are not regulated by the commission.

(2) Within 90 days after the commission issues a temporary

order under section 37, each provider shall file a proposed

renewable energy portfolio plan with the commission. The proposed

plan shall meet all of the following requirements:

(a) Describe how the provider will meet the renewable energy

portfolio standards.

(b) Specify whether the number of megawatt hours of

electricity used in the calculation of the renewable energy

portfolio will be weather-normalized or based on a 3-year running

average. Once the plan is approved by the commission, this option

shall not be changed.

the renewable portfolio standard for a 20-year period beginning

when the plan is approved by the commission.

(d) Describe the manner in which the provider will allocate

costs, subject to section 25(1).

(3) The commission shall provide an opportunity for public

comment on the proposed plan filed under subsection (2). However,

the commission need not provide an opportunity for public comment

if the provider is a municipally owned electric utility and the

governing body of the provider has already provided an opportunity

for public comment and filed the comments with the commission along

with the plan. After the applicable opportunity for public comment

and within 90 days after the proposed plan is filed with the

commission, the commission shall approve, with any changes

consented to by the provider, or reject the plan. The provider

shall not begin recovery of the incremental costs of compliance

within its rates until the commission has approved its proposed

plan. However, if the provider is a municipally owned electric

utility, the provider may begin recovery of the incremental costs

of compliance upon approval of its proposed plan by the governing

body of the municipally owned electric utility.

(4) Every 2 years after initial approval of a renewable energy

portfolio plan under subsection (3), the commission shall review

the plan. The commission shall provide an opportunity for public

comment on the plan. However, the commission need not provide an

opportunity for public comment if the provider is a municipally

owned electric utility and the governing body of the provider has

already provided an opportunity for public comment and filed the

comments with the commission. After the applicable opportunity for

public comment, the commission shall approve, with any changes

consented to by the provider, or reject any proposed amendments to

the plan.

(5) If a provider proposes to amend its renewable energy

portfolio plan at a time other than during the biennial review

process under subsection (4), the provider shall file the proposed

amendment with the commission. The commission shall provide an

opportunity for public comment on the amendment. However, the

commission need not provide an opportunity for public comment if

the provider is a municipally owned electric utility and the

governing body of the provider has already provided an opportunity

for public comment and filed the comments with the commission.

After the opportunity for public comment and within 90 days after

the amendment is filed, the commission shall approve, with any

changes consented to by the provider, or reject the amendment.

Sec. 11. The commission shall ensure that plans submitted by

providers serving customers in the same distribution territory do

not create an unfair competitive advantage for any of those

providers.

Sec. 13. Subject to sections 15 and 25, each provider shall do

all of the following:

(a) In each of years 2012, 2013, and 2014, achieve a renewable

energy portfolio of at least 4%.

(b) In 2015, achieve a renewable energy portfolio of at least

10%.

energy portfolio that consists of at least the same number of

renewable energy credits as were required in 2015 under subdivision

(b).

Sec. 15. (1) Upon petition by a provider, the commission may

for good cause grant 2 extensions of renewable energy portfolio

standard deadlines under section 13. Each extension shall be for up

to 1 year. Good cause includes, but is not limited to, the

provider's inability, as determined by the commission, to meet the

renewable energy portfolio standard because of a renewable energy

system feasibility limitation including, but not limited to, any of

the following:

(a) Renewable energy system site requirements, zoning, siting,

land use issues, permits, including environmental permits, any

certificate of need process under section 6r of 1939 PA 3, MCL

460.6r, or any other necessary governmental approvals that

effectively limit availability of renewable energy systems,

including, if the provider has exercised reasonable diligence in

securing the necessary governmental approvals. For purposes of this

subdivision, "reasonable diligence" includes, but is not limited

to, submitting timely applications for the necessary governmental

approvals and making good faith efforts to ensure that the

applications are administratively complete and technically

sufficient.

(b) Equipment cost or availability issues including, but not

limited to, electrical equipment or renewable energy system

component shortages or costs that effectively limit availability of

renewable energy systems.

transmission and interconnection.

(d) Projected or actual unfavorable electric system

reliability or operational impacts.

(e) Labor shortages that effectively limit availability of

renewable energy systems.

(2) If 2 extensions of the 2015 renewable energy portfolio

standard deadline have been granted under subsection (1), upon

subsequent petition by a provider at least 6 months before the

expiration of the second extended deadline, the provider shall be

considered to be in compliance with this part at a renewable energy

portfolio determined by the commission to be attainable by that

provider.

(3) Any provider that makes a good faith effort to spend the

full amount of incremental costs of compliance as outlined in its

approved renewable energy portfolio plan, revised, subject to

extensions under this section or revisions under section 29, shall

be considered to be in compliance with this part.

Sec. 17. (1) A provider shall comply with the renewable energy

portfolio standard by obtaining renewable energy credits by any of

the following means:

(a) Producing electricity from renewable energy systems.

(b) Purchasing electricity through a renewable energy

contract.

electricity.

(2) Subject to subsection (3), a provider that is an electric

utility with 1,000,000 or more retail customers in this state as of

January 1, 2008 shall obtain the renewable energy credits that are

necessary to meet the renewable portfolio standard under section

13(b) and (c) as follows:

(a) At the provider's option, up to but no more than 33-1/3%

of such renewable energy credits shall be from renewable energy

systems that were developed by and are owned by the provider. A

provider shall competitively bid any contract for engineering,

procurement, or construction of any new renewable energy systems

described in this subdivision.

(b) At the provider's option, up to but not more than 33-1/3%

of such renewable energy credits shall be from renewable energy

systems that were developed by 1 or more third parties pursuant to

a contract with the provider under which the ownership of the

renewable energy system may be transferred to the provider, but not

before the renewable energy system begins commercial operation. A

transfer of ownership resulting from such a contract does not count

toward the new renewable energy systems ownership limit under

subdivision (a). Any such contract shall be executed after a

competitive bidding process conducted pursuant to guidelines issued

by the commission. An affiliate of the provider may submit a

proposal in response to a request for proposals, subject to the

code of conduct under section 10a(4) of 1939 PA 3, MCL 460.10a, and

the sanctions for violation thereof under section 10c of 1939 PA 3,

MCL 460.10c.

from renewable energy contracts that do not require transfer of

ownership of the applicable renewable energy system to the provider

or from contracts for the purchase of renewable energy credits

alone. A renewable energy contract or contract for the purchase of

renewable energy credits under this subdivision shall be executed

after a competitive bidding process conducted pursuant to

guidelines issued by the commission. An affiliate of the provider

may submit a proposal in response to a request for proposals,

subject to the code of conduct under section 10a(4) of 1939 PA 3,

MCL 460.10a, and the sanctions for violation thereof under section

10c of 1939 PA 3, MCL 460.10c. Ownership of renewable energy

systems by affiliates of the provider resulting from renewable

energy contracts executed under this subdivision do not count

toward the provider's new renewable energy systems ownership limit

under subdivision (a). If a provider selects a bid other than the

least price conforming bid from a qualified bidder, the provider

shall promptly notify the commission. The commission shall

determine under section 21 whether the provider had good cause for

selecting that bid. If the commission determines that the provider

did not have good cause, the commission shall disapprove the

contract.

(3) The allocation formula in subsection (2) does not apply to

either of the following:

(a) Renewable energy credits that are transferred to the

provider pursuant to section 19(4).

(b) Renewable energy credits that are produced or obtained by

the provider from renewable energy systems for which recovery in

electric rates was approved as of the effective date of this act,

including renewable energy credits resulting from biomass co-firing

of, or use of industrial thermal energy in, electric generation

facilities in existence on the effective date of this act, except

to the extent the number of megawatt hours of electricity annually

generated by biomass co-firing or industrial thermal energy exceeds

the number of megawatt hours generated during the 1-year period

immediately preceding the effective date of this act.

(4) For purposes of subsection (2), the method of procuring

the renewable energy credits generated from a renewable energy

system that uses water released from a pumped storage facility

shall be considered to be the method of procuring the renewable

energy used to pump the water into the facility.

(5) A provider may submit a contract entered into pursuant to

subsection (2) to the commission for review and approval. If the

commission approves the contract, it shall be considered to be

consistent with the provider's renewable energy portfolio plan.

Sec. 19. (1) A renewable energy system that is the source of

renewable energy credits used to satisfy the requirements of

section 13 shall be either located outside of this state in the

retail electric customer service territory of any provider that is

not an alternative electric supplier or located anywhere in this

state. For the purposes of this subsection, retail electric

customer service territories shall be considered to be those

recognized by the commission on January 1, 2008 together with any

expansions of retail electric customer service territory that may

be recognized by the commission after January 1, 2008 for purposes

of 1939 PA 3, MCL 460.1 to 460.10cc. The commission may also expand

a service territory for the purposes of this subsection if a lack

of transmission lines limits the ability to obtain sufficient

renewable energy from renewable energy systems that meet the

location requirement of this subsection.

(2) The requirements of subsection (1) do not apply if 1 or

more of the following requirements are met:

(a) The renewable energy system is a wind turbine or wind farm

and the electricity generated from the wind, or the renewable

energy credits associated with that electricity, is being purchased

under a contract in effect on January 1, 2008. If electricity and

associated renewable energy credits purchased under such a contract

are used by a provider to meet renewable energy portfolio

requirements established after January 1, 2008 by the legislature

of the state in which the wind turbine or wind farm is located, the

provider may, for the purpose of meeting the renewable energy

portfolio standard under this part, obtain, by any means authorized

under section 17(1), up to the same number of replacement renewable

energy credits from any other wind farm or wind farms located in

that state.

(b) The renewable energy system is a wind turbine or wind farm

that was under construction and owned by a provider on January 1,

2008.

the wind turbines meets the requirements of subsection (1), and the

remaining wind turbines are within 15 miles of a wind turbine that

is part of that wind farm and that meets the requirements of

subsection (1), as determined by the commission.

(d) Before January 1, 2008, a provider that serves not more

than 75,000 retail electric customers in this state filed an

application for a certificate of authority for the renewable energy

system with a state regulatory commission in another state that is

also served by that provider. However, renewable energy credits

shall not be granted for electricity generated using more than 10.0

megawatts of nameplate capacity of the renewable energy system.

(e) Electricity generated from the renewable energy system is

sold by a not-for-profit entity located in Indiana or Wisconsin to

a municipally owned electric utility in this state or cooperative

electric utility in this state under a contract in effect on

January 1, 2008, and the electricity is not being used to meet

another state's portfolio standard for renewable energy.

(f) Electricity generated from the renewable energy system is

sold by a not-for-profit entity located in Ohio to a municipally

owned electric utility in this state under a contract approved by

resolution of the governing body of the municipally owned electric

utility by January 1, 2008, and the electricity is not being used

to meet another state's portfolio standard for renewable energy.

However, renewable energy credits shall not be granted for

electricity generated using more than 13.4 megawatts of nameplate

capacity of the renewable energy system.

(3) Renewable energy from industrial cogeneration shall not

constitute more than 1/10 of the renewable energy portfolio

required by this part.

(4) If a provider obtains renewable energy for resale to

retail or wholesale customers under an agreement under PURPA,

ownership of the associated renewable energy credits shall be as

provided by the PURPA agreement. If the PURPA agreement does not

provide for ownership of the renewable energy credits, then:

(a) Except to the extent that a separate agreement governs

under subdivision (b), for the duration of the PURPA agreement, for

every 5 renewable energy credits associated with the renewable

energy, ownership of 4 of the renewable energy credits shall be

considered to be transferred to the provider with the renewable

energy, and ownership of 1 renewable energy credit shall be

considered to remain with the qualifying cogeneration facility or

qualifying small power production facility.

(b) If a separate agreement in effect on January 1, 2008

provides for the ownership of the renewable attributes of the

generated electricity, the separate agreement shall govern until

January 1, 2013 or until expiration of the separate agreement,

whichever occurs first.

(5) If an investor-owned electric utility with less than

20,000 customers, a municipally owned electric utility, or

cooperative electric utility obtains all or substantially all of

its electricity for resale under a power purchase agreement or

agreements in existence on the effective date of this act,

ownership of any associated renewable energy credits shall be

considered to be transferred to the provider purchasing the

electricity. The number of renewable energy credits associated with

the purchased electricity shall be determined by multiplying the

total number of renewable energy credits associated with the total

power supply of the seller during the term of the agreement by a

fraction, the numerator of which is the amount of energy purchased

under the agreement or agreements and the denominator of which is

the total power supply of the seller during the term of the

agreement. This subsection does not apply unless 1 or more of the

following occur:

(a) The seller and the provider purchasing the electricity

agree that this subsection applies.

(b) For a seller that is an independent investor-owned

electric utility whose retail electric rates are regulated by the

commission, the commission reduces the number of renewable energy

credits required under the renewable energy portfolio standard for

the seller by the number of renewable energy credits to be

transferred to the provider purchasing the electricity under this

subsection.

Sec. 21. If, after the effective date of this act, a provider

whose rates are regulated by the commission enters a renewable

energy contract or a contract to purchase renewable energy credits

alone, the commission shall determine whether the contract provides

reasonable terms and conditions that will ensure a favorable

economic outcome for the provider and its customers. In making this

determination, the commission shall consider the contract price and

term. If the contract is a renewable energy contract, the

commission shall also consider at least all of the following:

(a) The cost to the provider and its customers of the impacts

of accounting treatment of debt and associated equity requirements

imputed by credit rating agencies and lenders attributable to the

renewable energy contract. The commission shall use standard rating

agency, lender, and accounting practices for electric utilities in

determining these costs, unless the impacts for the provider are

known.

(b) The life-cycle cost of the renewable energy contract to

the provider and customers including costs, after expiration of the

renewable energy contract, of maintaining the same renewable energy

output in megawatt hours, whether by purchases from the

marketplace, by extension or renewal of the renewable energy

contract, or by the provider purchasing the renewable energy system

and continuing its operation.

renewable energy systems supporting the renewable energy contract

move from contracted pricing to market-based pricing after

expiration of the renewable energy contract.

Sec. 23. (1) The commission shall establish a renewable energy

credit certification and tracking program. The certification and

tracking program may be contracted to and performed by a third

party through a system of competitive bidding. The renewable energy

credit certification and tracking program shall include all of the

following:

(a) A process to certify renewable energy systems, including

all existing renewable energy systems operating on the effective

date of this act, as eligible to receive renewable energy credits.

(b) Certification that the operator of a renewable energy

system is in compliance with state and federal law applicable to

the operation of the renewable energy system when certification is

granted. If a renewable energy system becomes noncompliant with

state or federal law, renewable energy credits shall not be granted

for renewable energy generated by that renewable energy system

during the period of noncompliance.

(d) Determining the date that a renewable energy credit is

valid for transfer under this part.

(e) A method for ensuring that each renewable energy credit

traded and sold under this part is properly accounted for under

this act.

(2) A renewable energy credit purchased from a renewable

energy system in this state is not required to be used in this

state.

(3) Except as provided in section 19(4), 1 renewable energy

credit shall be granted to the owner of a renewable energy system

for each megawatt hour of electricity generated from the renewable

energy system subject to all of the following:

(a) If a renewable energy system uses both a renewable energy

resource and a nonrenewable energy resource to generate

electricity, the number of renewable energy credits granted shall

be based on the percentage of the electricity generated from the

renewable energy resource.

(b) Renewable energy credits shall not be granted for

renewable energy generated from an incinerator to the extent that

the renewable energy was generated by operating the incinerator in

excess of its boilerplate capacity on January 1, 2008.

generation of renewable energy, such as wind energy, used to pump

water into a pumped storage facility or to fill other energy

storage facilities, but shall be granted for renewable energy

generated upon release from a pumped storage facility or other

energy storage facility. However, the number of renewable energy

credits shall be calculated based on the number of megawatt hours

of renewable energy used to fill a pumped storage facility or other

energy storage facility, not the number of megawatt hours actually

generated by discharge from the energy storage facility.

(d) Renewable energy credits shall not be granted for

renewable energy whose renewable attributes are used by a provider

in a commission-approved voluntary renewable energy program.

(4) Subject to subsection (3), the following additional

renewable energy credits, to be known as Michigan incentive

renewable energy credits, shall be granted under the following

circumstances:

(a) 2 renewable energy credits for each megawatt hour of

electricity from solar power.

(b) 1/5 renewable energy credit for each megawatt hour of

electricity generated from a renewable energy system, other than

wind, at peak demand time as determined by the commission.

electricity generated from a renewable energy system constructed

using equipment made in this state as determined by the commission.

The additional credit under this subdivision is available for the

first 3 years after the renewable energy system first produces

electricity on a commercial basis.

(d) 1/10 renewable energy credit for each megawatt hour of

electricity from a renewable energy system constructed using a

workforce composed of residents of this state as determined by the

commission. The additional credit under this subdivision is

available for the first 3 years after the renewable energy system

first produces electricity on a commercial basis.

(5) A renewable energy credit expires when used by a provider

to comply with its renewable energy portfolio standard. If not

already used, a renewable energy credit automatically expires 3

years after the generation of the electricity associated with the

renewable energy credit. A renewable energy credit associated with

the generation of electricity within 120 days after the start of a

calendar year may be used to satisfy the prior year's renewable

energy portfolio standard and expires when so used.

Sec. 25. (1) A provider is not required to comply with the

renewable portfolio standard to the extent that, as determined by

the commission, recovery under section 27 of the incremental cost

of compliance with the renewable energy portfolio standard pursuant

to the renewable energy portfolio plan, as calculated over 20 years

beginning when the plan is approved by the commission, subject to

annual revision, will have a retail rate impact that exceeds any of

the following:

(a) $3.00 per month per residential customer meter.

(b) $16.58 per month per commercial secondary customer meter.

customer meter.

(2) For a provider whose rates are regulated by the

commission, the commission shall determine the appropriate charges

for the provider's tariffs that permit recovery of the incremental

cost of compliance subject to the limits set forth in subsection

(1).

Sec. 27. (1) Notwithstanding any other provision of law, the

commission shall consider all actual costs reasonably and prudently

incurred in good faith to implement a commission-approved renewable

energy portfolio plan by a provider whose rates are regulated by

the commission to be a cost of service to be recovered by the

provider, whether or not those costs are incremental costs of

compliance. Notwithstanding any other provision of law, a provider

whose rates are regulated by the commission shall recover through

its retail electric rates all of the provider's incremental costs

of compliance during the 20-year period described in section 7(2)

and all reasonable and prudent ongoing costs of compliance during

and after that period. The recovery shall include, but is not

limited to, the provider's authorized rate of return on equity,

which shall remain fixed at the rate of return and debt to equity

ratio that was in effect in a provider's base rates when the

provider's renewable energy portfolio plan was approved. However,

the costs of purchasing renewable energy credits under section

31(1) are not a recoverable cost of service.

(2) Incremental costs of compliance shall be calculated as

follows:

(a) Determine the sum of the following costs to the extent

those costs are reasonable and prudent and not already approved for

recovery in electric rates as of the effective date of this act:

(i) Capital, operating, and maintenance costs of renewable

energy systems, including property taxes, insurance, and return on

equity associated with a provider's renewable energy systems,

including the provider's renewable energy portfolio initially

established to achieve compliance with the renewable energy

portfolio standard and any additional renewable energy systems that

are built or acquired by the provider to maintain compliance with

the renewable energy portfolio standard during the 20-year period

beginning when the provider's plan is approved by the commission.

(ii) Financing costs attributable to capital, operating, and

maintenance costs of capital facilities associated with renewable

energy systems.

(iii) Interconnection and substation costs associated with

renewable energy systems.

(iv) Except to the extent the costs are allocated under a

different subparagraph, all of the following:

(A) The costs of renewable energy credits purchased under this

act other than those purchased under section 31(1).

(B) The costs of contracts described in section 17(2).

(v) Expenses incurred as a result of state or federal

governmental actions related to renewable energy systems including,

but not limited to, changes in tax or other law.

(vi) Any additional provider costs considered relevant by the

commission.

(b) Subtract from the sum of costs not already included in

electric rates determined under subdivision (a) the sum of the

following revenues:

(i) Revenue derived from the sale of environmental attributes

associated with the generation of renewable energy. Such revenue

shall not be considered in determining power supply cost recovery

factors under section 6j of 1939 PA 3, MCL 460.6j.

(ii) Interest on regulatory liabilities as provided in section

27(4).

(iii) Tax credits specifically designed to promote renewable

energy.

(iv) Revenue derived from the provision of energy from

renewable energy systems to retail electric customers subject to a

power supply cost recovery clause under section 6j of 1939 PA 3,

MCL 460.6j, of a provider whose retail electric rates are regulated

by the commission. Beginning in 2008, after providing an

opportunity for a contested case hearing for a provider whose rates

are regulated by the commission, the commission shall annually

establish a price per megawatt hour. In addition, a provider whose

retail electric rates are regulated by the commission may at any

time petition the commission to revise the price. In setting the

price per megawatt hour under this subparagraph, the commission

shall consider factors including, but not limited to, projected

capacity, energy, maintenance, and operating costs; information

filed under section 6j of 1939 PA 3, MCL 460.6j; and information

from wholesale markets, including, but not limited to, locational

marginal pricing. This price shall be multiplied by the number of

megawatt hours of renewable energy. The resulting value shall be

considered a booked cost of purchased and net interchanged power

transactions under section 6j of 1939 PA 3, MCL 460.6j. For energy

purchased by such a provider under a renewable energy agreement,

the price shall be the lower of the amount established by the

commission or the actual price paid and shall be multiplied by the

number of megawatt hours of renewable energy purchased. The

resulting value shall be considered a booked cost of purchased and

net interchanged power under section 6j of 1939 PA 3, MCL 460.6j.

(v) Revenue from wholesale energy sales from a renewable

energy system. Such revenue shall not be considered in determining

power supply cost recovery factors under section 6j of 1939 PA 3,

MCL 460.6j.

(vi) Any additional provider revenue considered relevant by the

commission.

(3) The commission shall authorize a provider whose rates are

regulated by the commission to spend in any given month more to

comply with this part and implement an approved renewable energy

portfolio plan than the revenue actually generated by the revenue

recovery mechanism. A provider whose rates are regulated by the

commission shall recover its commission approved pre-tax rate of

return on regulatory assets during the appropriate period. A

provider whose rates are regulated by the commission shall record

interest on regulatory liabilities at the average short-term

borrowing rate available to the provider during the appropriate

period. Any regulatory assets or liabilities resulting from the

recovery of renewable energy through the power supply cost recovery

clause under section 6j of 1939 PA 3, MCL 460.6j, shall continue to

be reconciled under that section.

(4) If the incremental costs of compliance for a provider

whose rates are regulated by the commission in any given month

during the 20-year period described in section 7(2) are in excess

of the revenue recovery mechanism as adjusted under section 29 and

in excess of the balance of any accumulated reserve funds, subject

to the minimum balance established under section 7(5), the provider

shall immediately notify the commission. The commission shall

promptly commence a contested case hearing pursuant to the

administrative procedures act of 1969, 1969 PA 306, MCL 24.201 to

24.328, and modify the revenue recovery mechanism so that the

minimum balance is restored. However, if the commission determines

that recovery of the incremental costs of compliance would

otherwise exceed the maximum retail rate impacts specified under

section 25, it shall set the revenue recovery mechanism for that

provider to correspond to the maximum retail rate impacts. Excess

costs shall be accrued and deferred for recovery. Not later than

the expiration of the 20-year period described in section 7(3), for

a provider whose rates are regulated by the commission, the

commission shall determine the amount of deferred costs to be

recovered under section 7 and the recovery period, which shall not

exceed 5 years and shall not commence until after the expiration of

the 20-year period described in section 7(3). The recovery shall be

proportional to the retail rate impacts set forth in section 25 for

each customer class. However, if the retail rate impact is below

the limits set forth in section 25, the recovery shall begin

immediately but, until the expiration of the 20-year period

described in section 7(3), shall occur only to the extent allowed

by the limits of section 25.

(5) If, at the expiration of the 20-year period described in

section 7(3), a provider whose rates are regulated by the

commission has a regulatory liability, the refund to customer

classes shall be proportional to the amounts paid by those customer

classes under the revenue recovery mechanism.

(6) After achieving compliance with the renewable energy

portfolio standard for 2015, the actual costs reasonably and

prudently incurred to continue to comply with this part both during

and after the conclusion of the 20-year period described in section

7(3) shall be considered costs of service. The commission shall

determine a mechanism for a provider whose rates are regulated by

the commission to recover these costs in its retail electric rates.

Remaining and future regulatory assets shall be recovered

consistent with subsections (3) and (4) and section 29.

Sec. 29. (1) Concurrent with the submission of each report

under section 33(1), the commission shall commence an annual

proceeding, to be known as a renewable cost reconciliation, for

each provider whose rates are regulated by the commission. The

renewable cost reconciliation proceeding shall be conducted as a

contested case pursuant to the administrative procedures act of

1969, 1969 PA 306, MCL 24.201 to 24.328. Reasonable discovery shall

be permitted before and during the reconciliation proceeding to

assist in obtaining evidence concerning reconciliation issues

including, but not limited to, the reasonableness and prudence of

expenditures and the amounts collected pursuant to the revenue

recovery mechanism.

(2) At the renewable cost reconciliation, a provider whose

rates are regulated by the commission may propose any necessary

modifications of the revenue recovery mechanism to ensure the

provider's recovery of its incremental cost of compliance with the

renewable portfolio standard during the 20-year period described in

section 7(3).

(3) The commission shall reconcile the pertinent revenues

recorded and the allowance for the nonvolumetric revenue recovery

mechanism with the amounts actually expensed and projected

according to the renewable energy portfolio plan of the provider

whose rates are regulated by the commission. The commission shall

consider any issue regarding the reasonableness and prudence of

expenses for which customers were charged in the relevant

reconciliation period. In its order, the commission shall do all of

the following:

(a) Make a determination of a provider's compliance with the

renewable energy portfolio standard, subject to sections 15 and 25.

(b) Adjust the revenue recovery mechanism for the incremental

costs of compliance. The commission shall ensure that the retail

rate impacts under this renewable cost reconciliation revenue

recovery mechanism do not exceed the maximum retail rate impacts

specified under section 25. The commission shall ensure that the

recovery mechanism is projected to maintain a minimum balance of

accumulated reserve so that a regulatory asset does not accrue.

capacity and renewable energy to be recovered through the power

supply cost recovery clause under section 6j of 1939 PA 3, MCL

460.6j, as outlined in section 27(2)(b)(iv).

(d) Adjust, if needed, the minimum balance of accumulated

reserve funds established under section 7(5).

(4) If a provider whose rates are regulated by the commission

has recorded a regulatory liability in any given month during the

20-year period described in section 7(3), interest on the

regulatory liability balance shall be accrued at the average short-

term borrowing rate available to the provider during the

appropriate period, and shall be used to fund incremental costs of

compliance incurred in subsequent periods within the 20-year period

described in section 7(3).

Sec. 31. (1) If a provider whose rates are regulated by the

commission fails to meet the renewable energy portfolio standard by

the applicable deadline under section 13, subject to sections 15

and 25, both of the following apply:

(a) The provider shall purchase sufficient renewable energy

credits to meet the renewable energy portfolio standard.

(b) The provider shall not recover from its ratepayers the

cost of purchasing renewable energy credits under subdivision (a).

(2) The attorney general or any customer of a municipally

owned electric utility or a cooperative electric utility that has

elected to become member-regulated under the electric cooperative

member-regulation act may commence a civil action for injunctive

relief against a municipally owned electric utility or such a

cooperative electric utility if the provider fails to meet the

applicable requirements of this part.

(3) An action under subsection (2) shall be commenced in the

circuit court for the circuit in which the principal office of the

provider is located. An action shall not be filed under subsection

(2) unless the prospective plaintiff has given the prospective

defendant and the commission at least 60 days' written notice of

the prospective plaintiff's intent to sue, the basis for the suit,

and the relief sought. Within 30 days after the prospective

defendant receives written notice of the prospective plaintiff's

intent to sue, the prospective defendant and plaintiff shall meet

and make a good faith attempt to determine if there is a credible

basis for the action. If both parties agree that there is a

credible basis for the action, the prospective defendant shall take

all reasonable steps necessary to comply with applicable

requirements of this part within 90 days of the meeting.

(4) In issuing a final order in an action brought under

subsection (2), the court may award costs of litigation, including

reasonable attorney and expert witness fees, to the prevailing or

substantially prevailing party.

(5) Upon a complaint of an alternative electric supplier's

customer or the commission's own motion, the commission may conduct

a contested case to review allegations that the alternative

electric supplier has violated this part, including an order issued

or rule promulgated under this part. If the commission finds, after

notice and hearing, that an alternative electric supplier has

violated this part, the commission shall do 1 or more of the

following:

(a) Revoke the license of the alternative electric supplier.

(b) Issue a cease and desist order.

fine of not less than $5,000.00 or more than $50,000.00 for each

violation.

Sec. 33. (1) By a time determined by the commission, each

provider shall submit to the commission an annual report that

provides information relating to the actions taken by the provider

to comply with the renewable energy portfolio standard. By that

same time, a municipally owned electric utility shall submit a copy

of the report to the governing body of the municipally owned

electric utility, and a cooperative electric utility shall submit a

copy of the report to its board of directors.

(2) Each annual report under subsection (1) shall include all

of the following information:

(a) The amount of electricity and renewable energy credits

that the provider generated or acquired from renewable energy

systems during the reporting period and the amount of renewable

energy credits that the provider acquired, sold, or traded during

the reporting period.

(b) The capacity of each renewable energy system owned,

operated, or controlled by the provider, the total amount of

electricity generated by each renewable energy system during the

reporting period, and the percentage of that total amount that was

generated directly from renewable energy.

construction on, acquired, or placed into operation a renewable

energy system.

(d) Expenditures made in the past year and anticipated future

expenditures to comply with this part.

(e) Any other information that the commission determines

necessary.

(3) Concurrent with the submission of each report under

subsection (1), a municipally owned electric utility shall submit a

summary of the report to its customers in their bills with a bill

insert and to its governing body. Concurrent with the submission of

each report under subsection (1), a cooperative electric utility

shall submit a summary of the report to its members in a periodical

issued by an association of rural electric cooperatives and to its

board of directors. A municipally owned electric utility or

cooperative electric provider shall make a copy of the report

available at its office and shall post a copy of the report on its

website. A summary under this section shall indicate that a copy of

the report is available at the office or website.

(4) The commission shall monitor reports submitted under

subsection (1) and ensure that actions taken under this part by

providers serving customers in the same distribution territory do

not create an unfair competitive advantage for any of those

providers.

(5) Biennially, the commission shall submit to the legislature

a report that does all of the following:

(a) Summarizes data collected under this section.

(b) Discusses the status of renewable energy in this state and

the effect of this part on electricity prices.

at retail in this state, specifies the difference between the cost

of the renewable energy and the cost of electricity generated from

conventional sources.

(d) Provides a comparison of the cost effectiveness of the

methods of an electric utility with 1,000,000 or more retail

customers in this state as of January 1, 2008 obtaining renewable

energy credits under the options described in section 17(2).

(e) Describes the impact of this part on employment in this

state. The commission shall consult with other appropriate agencies

of the department of labor and economic growth in the development

of this information.

(f) Discuss how the commission is fulfilling the requirements

of subsection (4).

(g) Makes any recommendations the commission may have

concerning amendments to this part, including changes in the

definition of renewable energy resource or renewable energy system

to reflect environmentally preferable technology.

Sec. 35. (1) A person may file commercially or financially

sensitive information or trade secrets with the commission under

section 7 or 9, or with the commission or a third party contractor

under section 23, confidentially. To be filed confidentially, the

information shall be accompanied by an affidavit that sets forth

both the reasons for the confidentiality and a public synopsis of

the information.

(2) Information filed confidentially is exempt from the

freedom of information act, 1976 PA 442, MCL 15.231 to 15.246, and

shall remain confidential, except under the terms of a mandatory

protective order. If information is disclosed under a mandatory

protective order, then the commission may use the information for

the purpose for which it is required, but the information shall

remain confidential.

(3) There is a rebuttable presumption that any information

filed confidentially under subsection (1) is commercially or

financially sensitive information or trade secrets entitled to

protection under subsection (1).

Sec. 37. (1) Within 60 days after the effective date of this

act, the commission shall issue a temporary order implementing this

act, including, but not limited to, all of the following:

(a) Formats of renewable energy portfolio plans for various

categories of providers.

(b) Guidelines for requests for proposals under this part.

(2) Within 1 year after the effective date of this act, the

commission shall promulgate rules to implement this part pursuant

to the administrative procedures act of 1969, 1969 PA 306, MCL

24.201 to 24.328.

Sec. 39. This part does not provide the commission with new

authority with respect to municipally owned electric utilities

except to the extent explicitly provided in this act.

PART 3. ENERGY EFFICIENCY

Sec. 53. As used in this part:

(a) "Commission" means the Michigan public service commission

created in section 1 of 1939 PA 3, MCL 460.1.

(b) "Cost-effective" means that the program being evaluated

meets the utility system resource cost test.

corporation, association, or other legal entity whose transmission

or distribution of electricity the commission regulates under 1909

PA 106, MCL 460.551 to 460.559, or 1939 PA 3, MCL 460.1 to

460.10cc. Electric utility does not include a municipally owned

utility, a cooperative electric utility that has elected to become

member-regulated under the electric cooperative member-regulation

act, an affiliated transmission company, or an independent

transmission company.

(d) "Energy efficiency" means a decrease in the consumption of

electricity or natural gas achieved through measures or programs

that target customer behavior, equipment, devices, or materials

without reducing the quality of energy services. Energy efficiency

does not include load management.

(e) "Energy efficiency plan" means an energy efficiency plan

under section 55.

(f) "Large customer", with respect to a natural gas utility,

means a customer at a single premises with an annual natural gas

billing demand greater than 100,000 decatherms.

(g) "Large customer", with respect to an electric utility,

means either of the following:

(i) A customer at a single premises with an annual electric

billing demand greater than the following:

(A) 5 megawatts, until 3 years after the applicable utility

begins implementation of its energy efficiency plan.

(B) 2 megawatts, beginning 3 years after the applicable

utility begins implementation of its energy efficiency plan.

(ii) A customer with an aggregate annual electric billing

demand of at least 10 megawatts at all facilities within that

electric utility's service territory.

(h) "Load management" means measures or programs that decrease

peak electricity demand or shift demand from peak to off-peak

periods.

(i) "Natural gas utility" means an investor-owned business

engaged in the sale and distribution of natural gas within this

state whose rates are regulated by the commission.

(j) "Premises" means a contiguous site, regardless of the

number of meters at that site. A site that would be contiguous but

for the presence of a street, road, or highway shall be considered

to be contiguous for the purposes of this subdivision.

(k) "Utility", except as used in section 67, means an electric

utility or natural gas utility.

(l) "Utility system resource cost test" means a standard that

is met if, for an investment in energy efficiency, on a life-cycle

basis the total avoided supply-side costs to the utility, including

representative values for electricity or natural gas supply,

transmission, distribution, and other associated costs to the

utility, are greater than the total costs to the utility of

administering and delivering the energy efficiency program,

including any costs for incentives paid to customers.

Sec. 55. (1) Within 60 days after the effective date of this

act, the commission shall issue a temporary order specifying the

procedure for a utility to develop and submit an energy efficiency

plan to meet energy efficiency performance standards set forth in

section 57. Pursuant to the administrative procedures act of 1969,

1969 PA 306, MCL 24.201 to 24.328, the commission shall promulgate

rules specifying such a procedure. Within 120 days after the

effective date of this act and biennially thereafter, a utility

shall file an energy efficiency plan with the commission.

(2) An energy efficiency plan shall do all of the following:

(a) Propose a set of energy efficiency programs that include

offerings for each customer class, including low income

residential. The commission shall allow utilities flexibility to

tailor the relative amount of effort devoted to each customer class

based on the specific characteristics of their service territory.

(b) Specify necessary funding levels.

recovered from residential customers by volumetric charges, from

all other metered customers by per-meter charges, and from

unmetered customers by an appropriate charge.

(d) Demonstrate that the proposed energy efficiency programs

and funding are sufficient to ensure the achievement of applicable

energy efficiency performance standards under section 57.

(e) Demonstrate that the utility's energy efficiency programs,

excluding program offerings to low income residential customers,

will collectively be cost-effective.

(f) Include a plan for the practical and effective

administration of the proposed energy efficiency programs. The

commission shall allow utilities flexibility in designing their

energy efficiency programs and administrative approach. A utility's

energy efficiency programs may be administered by the utility,

alone or jointly with other utilities, by a state agency, or by an

appropriate experienced nonprofit organization selected after a

competitive bid process.

(g) Include a process for obtaining an independent expert

evaluation of the actual energy efficiency programs to verify the

incremental energy savings from each energy efficiency program for

purposes of section 57. All such evaluations shall be subject to

public review and commission oversight.

(h) Allow for the coordination of energy efficiency programs

with the energy efficiency programs of other utilities under the

direction of the commission pursuant to subsection (5).

(i) Provide funding equal to 1% of the utility's total program

spending each year to partially fund a rebate program under the

general sales tax act, 1933 PA 167, MCL 205.51 to 205.78, for

appliances that meet or exceed energy efficiency guidelines

developed by the United States environmental protection agency and

the United States department of energy. For the purposes of this

act, all utility expenditures under this subdivision shall be

considered reasonable, shall be recovered by the utility, and shall

be considered to save energy cost effectively and in the amount of

1% of the applicable energy efficiency performance standard under

section 57.

(3) An energy efficiency plan may provide for the utility to

facilitate third-party loans to customers to finance energy

efficiency measures.

(4) Within 120 days of receiving an energy efficiency plan

from a utility and after an opportunity for public comment, the

commission shall approve, approve with changes consented to by the

utility, or reject the plan. If the commission rejects the plan,

the commission shall state the reasons for its action. Within 30

days after the commission rejects a plan, the utility shall submit

a revised plan that addresses the reasons for rejection cited by

the commission. Within 30 days after receiving a revised plan and

after an opportunity for public comment, the commission shall

approve, approve with changes consented to by the utility, or

reject the revised plan. If the commission rejects the revised

plan, the commission shall state the reasons for the rejection. The

procedure for rejected plans shall be repeated until a revised plan

is approved or approved with changes consented to by the utility.

The commission's action under this subsection does not affect the

applicability of the requirements of section 57.

(5) The commission shall coordinate energy efficiency programs

among consenting utilities to maximize energy savings on a

statewide basis. However, money spent by a utility to comply with

this part shall only be used to fund energy efficiency programs in

that utility's service territory.

Sec. 57. (1) Except as provided in section 59, an electric

utility's energy efficiency programs shall collectively meet the

following minimum energy efficiency performance standards:

(a) Biennial incremental energy savings in 2008-2009

equivalent to 0.3% of total annual weather-normalized retail

electricity sales in kilowatt hours in 2007.

(b) Annual incremental energy savings in 2010 equivalent to

0.5% of total annual weather-normalized retail electricity sales in

kilowatt hours in 2009.

0.75% of total annual weather-normalized retail electricity sales

in kilowatt hours in 2010.

(d) Annual incremental energy savings in 2012 and each year

thereafter equivalent to 1.0% of total annual weather-normalized

retail electricity sales in kilowatt hours in the preceding year.

(2) A natural gas utility shall meet the following minimum

energy efficiency performance standards using energy efficiency

programs:

(a) Biennial incremental energy savings in 2008-2009

equivalent to 0.1% of total annual weather-normalized retail

natural gas sales in therms in 2007.

(b) Annual incremental energy savings in 2010 equivalent to

0.25% of total annual weather-normalized retail natural gas sales

in therms in 2009.

0.5% of total annual weather-normalized retail natural gas sales in

therms in 2010.

(d) Annual incremental energy savings in 2012 and each year

thereafter equivalent to 0.75% of total annual weather-normalized

retail natural gas sales in therms in the preceding year.

(3) If a utility's incremental energy savings in the 2008-2009

biennium or any year thereafter exceed the applicable energy

efficiency performance standard in subsection (1) or (2), those

savings may be carried forward and credited to the next year's

standard. However, both of the following apply:

(a) The amount of those savings carried forward shall not

exceed 1/3 of the next year's standard.

(b) Savings shall not be carried forward if, for its

performance during the same biennium or year, the utility accepts a

financial incentive under section 61(5).

(4) Incremental energy savings under subsection (1) or (2) for

the 2008-2009 biennium or any year thereafter shall be determined

for a utility by adding the energy savings expected to be achieved

during a 1-year period by energy efficiency measures installed

during the 2008-2009 biennium or year thereafter under any energy

efficiency programs consistent with the utility's energy efficiency

plan.

Sec. 59. (1) This section applies to electric utilities that

meet both of the following requirements:

(a) Serve not more than 200,000 customers in this state.

(b) Had average electric rates for residential customers using

1,000 kilowatt-hours per month that are less than 75% of the

average electric rates for residential customers using 1,000

kilowatt-hours per month for all electric utilities in this state,

according to the January 1, 2007, "comparison of average rates for

MPSC-regulated electric utilities in Michigan" compiled by the

commission.

(2) Beginning 2 years after a utility described in subsection

(1) begins implementation of its energy efficiency plan, the

utility may petition the commission to establish alternative energy

efficiency performance standards. The petition shall identify the

efforts taken by the utility to meet the energy efficiency

performance standards under section 57(1) and demonstrate why the

performance standards cannot reasonably be met with energy

efficiency programs that are collectively cost-effective. If the

commission finds that the petition meets the requirements of this

subsection, the commission shall revise the energy efficiency

performance standards in section 57(1) to a level that can

reasonably be met with energy efficiency programs that are

collectively cost-effective.

Sec. 61. (1) The commission shall allow a utility that

undertakes approved energy efficiency programs to recover the

actual costs of implementing the programs. However, costs exceeding

the overall funding levels specified in the energy efficiency plan

are not recoverable unless those costs are prudent and reasonable.

Costs shall be recovered from all gas customers and from

residential electric customers by volumetric charges, from all

other metered electric customers by per-meter charges, and from

unmetered electric customers by an appropriate charge, applied to

utility bills. For the electric primary customer rate class

customers of electric utilities and large customers of natural gas

utilities, the cost recovery shall not exceed 1.7% of utility

revenue.

(2) Upon petition by a utility and after an opportunity for

public comment, the commission may authorize the utility to

capitalize certain costs of implementing approved energy efficiency

programs. To the extent feasible, charges collected from a

particular customer rate class shall be devoted to energy

efficiency programs and services for that rate class. However, the

established funding level for section 55(2)(i) and low income

residential programs shall be provided from each customer rate

class in proportion to that customer rate class's funding of the

utility's total energy efficiency programs. Charges shall be

applied to distribution customers regardless of the source of their

electricity or natural gas supply.

(3) A natural gas utility that spends a minimum of 0.5% of

total natural gas revenues, including natural gas commodity costs,

per year on commission approved energy efficiency programs shall be

allowed to implement a symmetrical revenue decoupling true-up

mechanism that adjusts for sales volumes that are above or below

forecasted levels.

(4) A natural gas utility or an electric utility shall not

spend more than the following percentage of total utility sales

revenues, including electricity or natural gas commodity costs, in

any year on energy efficiency programs without specific approval

from the commission:

(a) In 2009, 0.75% of total utility sales revenues for 2007.

(b) In 2010, 1.0% of total utility sales revenues for 2008.

(d) In 2012 and each year thereafter, 2.0% of total utility

sales revenues for the preceding year.

(5) If a utility exceeds the energy performance standards

under section 57 or alternative standards under section 59(2)

during the 2008-2009 biennium or any year thereafter, as documented

through a commission-approved program evaluation, the commission

upon application and after a hearing may allow the utility to

receive a financial incentive for that performance. The incentive

mechanism shall be proposed in the utility’s energy efficiency plan

and may include a methodology whereby the utility incentive is

calculated as a percentage of the net savings customers receive

from the energy efficiency programs. As a general principle, the

highest incentives should be associated with success that

demonstrates extraordinary benefits to customers. Any financial

incentive under this subsection shall be in an amount up to 15% of

the utility's actual energy efficiency program expenditures for

that year.

(6) If a utility implements an energy efficiency plan using

products or services of companies headquartered in this state, as

documented through a commission-approved program evaluation, the

commission, upon application and after a hearing, may allow the

utility to receive a financial incentive. The financial incentive

under this subsection shall be in an amount up to 2% of the

utility's actual energy efficiency program expenditures for that

year.

(7) If approved, a financial incentive shall be added to the

total energy efficiency program costs to be recovered by the

utility. A financial incentive is subject to the requirement that

the utility's energy efficiency programs, excluding program

offerings to low income residential customers, collectively be

cost-effective.

Sec. 63. (1) Sections 55 to 61 do not apply to a utility that

pays the following minimum percentage of total utility sales

revenues, including electricity or natural gas commodity costs,

each year to an independent energy efficiency program administrator

selected by the commission:

(a) In 2009, 0.75% of total utility sales revenues for 2007.

(b) In 2010, 1.0% of total utility sales revenues for 2008.

(d) In 2012 and each year thereafter, 2.0% of total utility

sales revenues for the preceding year.

(2) Money received from a utility by the energy efficiency

program administrator under subsection (1) shall be used to

administer energy efficiency programs for the utility. Money

unspent in any given year shall be carried forward to be spent in

the subsequent year.

(3) The commission shall allow a utility that complies with

subsection (1) to recover the amount of money transferred. This

cost shall be recovered from residential customers by volumetric

charges, from all other metered customers by per-meter charges, and

from unmetered customers by an appropriate charge, applied to

utility bills.

(4) Money paid by a utility to the energy efficiency program

administrator under subsection (1) shall only be used to fund

energy efficiency programs in that utility's service territory. To

the extent feasible, charges collected from a particular customer

rate class and paid to the energy efficiency program administrator

under subsection (1) shall be devoted to energy efficiency programs

and services for that rate class.

(5) Money paid to the energy efficiency program administrator

and not spent by the administrator that year shall remain available

for expenditure the following year, subject to the requirements of

subsection (4).

(6) The commission shall select a qualified nonprofit

organization to serve as energy efficiency program administrator

under this section, through a competitive bid process.

(7) The commission shall arrange for a biennial independent

audit of the energy efficiency program administrator.

Sec. 65. (1) The commission shall monitor utility performance

to ensure compliance with the requirements of this part.

(2) If a utility violates this part, the commission shall

investigate the reasons for the violation. If the commission

determines that the violation is a result of a lack of good faith

effort by the utility, the commission shall impose regulatory

sanctions on the utility. Such sanctions may include a reduction in

the authorized rate of return.

(3) If a utility fails to meet the applicable energy

efficiency performance standard under section 57 or 59, as

applicable, in any particular year, the utility shall achieve

additional energy savings, equal to the shortfall, within the

following 2 years, and the additional energy savings shall be added

to the energy efficiency performance standards that apply in those

years. However, upon petition of the utility, the commission shall

waive or reduce the requirement to achieve additional energy

savings under this subsection if the commission determines that the

performance standards could not reasonably be met with energy

efficiency programs that are collectively cost-effective.

Sec. 67. (1) A municipally owned utility or a cooperative

electric utility that has elected to become member-regulated under

the electric cooperative member-regulation act shall comply with

the requirements of section 55(1). The commission may recommend

changes to the energy efficiency plan of the municipally owned

utility or the cooperative electric utility that has elected to

become member-regulated under the electric cooperative member-

regulation act.

(2) A municipally owned utility or a cooperative electric

utility that has elected to become member-regulated under the

electric cooperative member-regulation act shall comply with the

requirements of at least 1 of the following:

(a) Section 57 or, if applicable, section 65(3).

(b) Section 63.

(3) The attorney general or any customer of a municipally

owned utility or member of a cooperative electric utility that has

elected to become member-regulated under the electric cooperative

member-regulation act may commence a civil action for injunctive

relief against the municipally owned utility or cooperative

electric utility, respectively, if it fails to meet the

requirements of subsection (2).

(4) An action under subsection (3) shall be commenced in the

circuit court for the circuit in which the alleged violation

occurred. An action shall not be filed under subsection (3) unless

the plaintiff has given the governing body of the prospective

defendant and the commission at least 60 days' written notice of

the plaintiff's intent to sue, the basis for the suit, and the

relief sought. Within 30 days after the governing body of the

prospective defendant receives written notice of the plaintiff's

intent to sue, the governing body and the plaintiff shall meet and

make a good faith attempt to determine if a credible basis for such

action exists. If both parties agree that a basis for the action is

credible, the municipally owned utility or cooperative electric

utility that has elected to become member-regulated under the

electric cooperative member-regulation act must take all reasonable

steps necessary to comply with applicable requirements of this part

within 90 days of the meeting.

(5) In issuing a final order in an action brought under

subsection (3), the court may award costs of litigation, including

reasonable attorney and expert witness fees, to the prevailing or

substantially prevailing party.

(6) By 1 year after the effective date of this act, and every

2 years thereafter, a municipally owned utility or cooperative

electric utility that has elected to become member-regulated under

the electric cooperative member-regulation act shall report to its

customers or members, the commission, and the governing body of the

municipality or cooperative electric utility the expenditures of

the municipally owned utility or cooperative electric utility on

energy efficiency programs during the preceding calendar year,

details of each program, and the overall effectiveness of each

program.

Sec. 69. (1) A large customer may submit to the commission a

plan for a self-directed energy efficiency program. If the large

customer plan meets the requirements of this section, the

commission shall approve the large customer plan. After the plan is

approved, the large customer is exempt from charges the large

customer would otherwise incur under section 61 or 63 as long as

the plan's goals are achieved, the plan has not expired and is

still being implemented, or the plan has been succeeded by a new

approved plan.

(2) All of the following apply to a large customer plan:

(a) The plan shall be an annual or multiyear plan for an

ongoing energy efficiency program.

(b) If the large customer wishes, the plan may document that

the company achieved over the previous years the equivalent of the

energy efficiency goals in this part. The plan shall use the

definition of energy efficiency as set forth in this part. Energy

efficiency shall be calculated based on weather-normalized retail

sales.

and its subsidiaries in the relevant utility's service territory.

(3) All owned premises in the large customer plan shall be

grouped by the serving utility.

(4) If the aggregate energy efficiency reductions of the plan

meet or exceed the goals of this part, then all premises covered by

the plan shall be exempt from the energy efficiency program

charges.

(5) A large customer shall submit to the commission every 2

years verification of the completion of the large customer plan and

sufficient information to determine if the plan's annual goals have

been achieved. Along with submission of the verification, the large

customer shall also submit an updated plan that outlines how the

large customer intends to continue to meet the goals of this part.

(6) If the commission determines after providing an

opportunity for an evidentiary hearing that a large customer failed

to complete an energy efficiency project for which it obtained

commission approval, the large customer shall pay the relevant

utility the amount of any charges from which it was exempted for

that project under subsection (1), prorated to reflect any energy

savings that were achieved by that project. The utility shall use

the payment for the utility's energy efficiency programs under this

act.

(7) A facility of a large customer that is included in its

plan is prohibited from participating in the relevant utility's

energy efficiency program.

(8) Upon request of the large customer, all submissions to the

commission by the customer are confidential and exempt from

disclosure under the freedom of information act, 1976 PA 442, MCL

15.231 to 15.246.

(9) A large customer plan shall be submitted by a

knowledgeable official of the large customer along with an

affidavit that the information in the plan is true and correct to

the best of the official's knowledge and belief.

(10) A large customer's projected energy savings under a

commission-approved energy efficiency project or plan under this

section shall count as the relevant utility's incremental energy

savings under section 57 or 59, as applicable.

(11) A large customer shall pay to the commission costs

incurred by the commission under this section in conjunction with a

proposed energy efficiency plan of the large customer.

(12) As used in this section, "large customer plan" or "plan"

means a large customer's plan for a self-directed energy efficiency

program under subsection (1).

Sec. 71. The commission shall promote load management in

appropriate circumstances, including allowing rate recovery for

prudent load management expenditures.

Sec. 73. (1) A utility shall annually submit to its customers

Senate Bill No. 213 (H-2) as amended July 23, 2008

in their bills a statement specifying the reduction in electricity

or natural gas usage in this state attributable to this part during

the previous year. The statement shall also encourage each customer

to compare the customer's energy usage during the current and

preceding year. The statement shall indicate that it is being made

to comply with the requirements of this part. A cooperative

electric utility required to submit a statement to its members

under this subsection shall submit the statement in a periodical

issued by an association of rural electric cooperatives.

(2) By 1 year after the effective date of this act, and every

2 years thereafter, the commission shall report to the legislature

on the progress and results from the implementation of the energy

efficiency programs required to be implemented by utilities under

this part, including the net benefit to customers. The commission

shall make copies of the report available for distribution to the

public. The department of labor and economic growth shall post the

report on its website.

(3) By March 31 of every odd-numbered year, beginning in 2009,

the commission shall submit to the legislature a report that

evaluates this part and makes any recommendations the commission

may have for amendments to this part.

Enacting section 1. As provided in section 5 of 1846 RS 1, MCL

8.5, this act is severable.

[Enacting section 2. This amendatory act does not take effect

unless House Bill No. 5524 of the 94th Legislature is enacted into law.]