The Environment Report
9:00 am
Tue October 30, 2012

Proposal 3: Costs and Controversies

You can listen to today's Environment Report story here, or read an expanded version below.

In Michigan, we get more than half of our electricity from coal and all of that coal is imported from other states.

Soon, you’ll be asked whether you want more of our electricity to come from sources like the wind and the sun.

Proposal 3 will ask voters to amend the state Constitution to require utilities to get 25 percent of their electricity sales from renewable sources (the proposal defines these sources as wind, solar, biomass and hydropower) by the year 2025. 

It’s called a renewable portfolio standard.  We already have one on the books: it’s a 10 percent standard utilities have to meet by 2015. 

Eric Lupher is with the Citizens Research Council of Michigan. It’s a nonpartisan, nonprofit group that has analyzed the Michigan ballot proposals.

“The positive is we’d be keeping up with other states and clearly reducing our reliance on fossil fuels, it’d be creating more renewable energy, it’s good for the economy, it’s good for the health of our residents, it’s motherhood and apple pie, it’s things we should believe in.”

But he says there could be drawbacks.  He questions whether we should put energy policy in the state Constitution.

“We might be precluding ourselves from adapting to the future or hurting utilities in their ability to make wise investments in the future because they’ll be strung to what we’re tying into the Constitution which is very difficult to change and costly to change.”

Here's an excerpt from the CRC's report on Proposal 3:

Renewable energy is a field that is dynamic in terms of the ability to generate electricity from different types of energies, the technologies for generating that energy, and the ability to balance energy produced by non-renewable sources with renewable energy. Adoption of this amendment would provide some leeway to adapt to changing circumstances, but a future constitutional amendment(s) may be necessary to allow electric utilities to keep current in renewable energy usage to comply with state law. 

Michigan does not have any other provisions in its Constitution that compel persons or businesses to engage in activities or perform tasks. The 1963 Michigan Constitution, even after being amended many times in its 49 year history, defines and limits the basic organs of power, states general principles, and declares the rights of the people. Even for the governmental types provided for in the Constitution – the state government, counties, townships, school districts, universities – the provisions define powers, establish officers, and enable boundary changes. The constitution does not compel any of those governments to perform an activity. The proactive requirements in Proposal 2012-03 requiring changes in behavior and investment in a particular manner for private entities – albeit regulated utilities – would be unique to the Michigan Constitution.

Lupher points out the cost of electricity is likely to go up whether or not Proposal 3 passes.

That’s one of the biggest debates between the two campaigns: how much this will cost. Both sides agree we’d have to build more wind turbines to meet the standard.

Steven Transeth is a senior policy advisor with CARE for Michigan. It’s the group leading the effort to defeat the proposal.

“We estimate the cost is going to be about $12 billion to implement. That includes the cost of building, installing and all the expenses that go into that.”

He says his campaign estimates that would mean each ratepayer in Michigan would pay about $2500 over 20 years.

But supporters of the proposal say those costs are overblown. 

James Clift is with the Michigan Environmental Council.  He says the cost of implementing Proposal 3 would be closer to $10 billion.  And he says... the opposition campaign lumps businesses and residential ratepayers together.

“If you look at just residential ratepayers, that’s 4.2 million of those customers, they only use 40 percent of the energy. If you work out the math they should be paying $1000, not $2500.”

His group spreads that one thousand dollars over 25 years... and subtracts out fuel savings from burning less coal... and assumes we won’t have to upgrade some old coal plants.  They come up with an average cost of 50 cents per household per month.

As you can tell, the two campaigns use different assumptions and come up with much different price tags.

Liz Moyer is an assistant professor at the University of Chicago. She’s the co-director of the university's Center for Robust Decision-making in Climate and Energy Policy. She analyzed Proposal 3 in a new report at the request of University of Michigan faculty.

“I think the take home message is this isn’t dramatic on either side.”

She says Proposal 3 is likely to have a moderate financial impact on consumers.  She says at the most... if you pay $100 a month right now... by 2025 your bill could go up to $111 dollars to meet the new standard.  But she points out there’s a rate cap in the proposal that limits cost increases related to compliance with the renewable standard to one percent a year, so that portion of your bill would go up slowly.

“It’s not going to bankrupt Michigan. It’s not going to save the world and stop global warming. It’s not going to be free; it’s not going to be disastrous.”

An excerpt from her report:

Analysis of wind resources suggests that the proposed expansion of Michigan's renewable portfolio standard to require that 25% of the state's electricity sales derive from renewables (Proposal 3 on the 2012 ballot) can be met by its 2025 target date with a moderate direct financial impact on the consumer. Impacts on average Michigan electricity rates could be from 3.5-11% depending on the continuation of federal subsidies and details of implementation. Proposal 3 does allow the option of wind generation in some out-of-state areas with significantly higher windspeeds and therefore lower costs than in Michigan. Responsibility for balancing local interests vs. costs is left unclear in the statute and would likely be placed on the Michigan Public Service Commission (MPSC).

Moyer says the bottom line is: whether you’re willing to pay more for more renewable energy.

On Thursday’s Environment Report, we’ll take a look at how we might produce all that renewable energy.