SENATE BILL NO. 727

A bill to amend 2008 PA 295, entitled

"Clean and renewable energy and energy waste reduction act,"

by amending sections 29 and 51 (MCL 460.1029 and 460.1051), section 29 as amended and section 51 as added by 2023 PA 235.

the people of the state of michigan enact:

Sec. 29. (1) Subject to subsections (2) to (4), a renewable energy system that is the source of renewable energy credits used to satisfy the renewable energy standards shall must be located as described in either of the following:

(a) Anywhere in this state.

(b) Outside of this state, but only if the electric provider includes the capacity from the renewable energy system toward meeting its resource adequacy obligations to the applicable regional transmission organization.

(2) Subsection (1) does not require an electric provider to procure firm transmission rights to ensure deliverability to the resource adequacy zone where the load is served.

(3) Subsection (1) does not apply if electricity generated from the renewable energy system is sold by a not-for-profit entity located in Indiana, Ohio, or Wisconsin to a municipally owned electric utility in this state or cooperative electric utility in this state, and the electricity is not being used to meet another state's standard for renewable energy.

(4) Renewable energy credits produced in the continental United States and owned by a customer of an electric provider may be utilized by the electric provider to meet the renewable energy credit standard if the electric customer chooses to report renewable energy credits to its electric provider as attributable to the customer's electric load. Any renewable energy credits reported by an electric customer for use by its electric provider shall must be applied to the electric customer's proportional share of a renewable energy credit portfolio requirement for the year in which renewable energy credits are used to comply with the renewable energy credit standard. On an annual basis, not Not later than December 1 each year, the electric customer shall provide the electric provider with an update on its the electric customer's 5-year forecast and notify the electric provider of the expected amount of renewable energy credits to be used toward compliance in the coming year. If the projected amount of renewable energy credits available for compliance will be less than what the electric customer projected in its the electric customer's 5-year forecast, then the electric customer shall notify the electric provider at least 5 years before the compliance year in which a projected reduction in renewable energy credits will occur. If the electric provider's rates are regulated by the commission and the electric provider uses the reported renewable energy credits to comply with the renewable energy credit portfolio standard, the electric provider shall grant the customer an appropriate cost-based rate credit against the cost of compliance under section 47. As used in this subsection, "customer of an electric provider" or "customer" "electric customer" means any of the following:

(a) A customer taking service under a rate approved by the commission under section 10gg of 1939 PA 3, MCL 460.10gg.

(b) A customer whose manufacturing complex is described in section 10a(4)(c) of 1939 PA 3, MCL 460.10a, and that takes service for a portion of its load from an alternative electric supplier licensed under section 10a of 1939 PA 3, MCL 460.10a, on the effective date of the amendatory act that added section 51. February 27, 2024.

(c) A customer of a municipally owned electric utility on the effective date of the amendatory act that added this subsection February 27, 2024, if the customer represents at least 25% of the municipally owned electric utility's peak load.

(d) A customer of an investor-owned electric utility first authorized after January 1, 2016, to serve customers in this state if the customer operates an iron ore mining facility or iron ore operating facility, or both, and represents at least 25% of that electric utility's annual sales. Not later than 120 days after the effective date of the amendatory act that added this subdivision, the commission shall modify the renewable energy plan of an investor-owned electric utility described in this subdivision to grant the customer an appropriate cost-based rate credit against the cost of compliance under section 47. In the same proceeding, the commission shall provide recovery through volumetric rates of the incremental cost of compliance from other customers of the investor-owned electric utility for renewable energy from renewable energy systems previously approved by the commission based on levelized incremental cost of compliance for those energy systems.

(5) Renewable energy credits that qualify under subsection (1) and are owned by members of a public body corporate established under the urban cooperation act of 1967, 1967 (Ex Sess) PA 7, MCL 124.501 to 124.512, on or before December 1, 2022, if those members are part of Michigan's this state's educational community and take service from an alternative electric supplier licensed under section 10a of 1939 PA 3, MCL 460.10a, may be utilized by the members' electric provider to meet the renewable energy credit standards if the members choose to report renewable energy credits to the electric provider as attributable to the electric load of members of the cooperative. Any renewable energy credits reported by a member of the cooperative for use by a provider to the members of the cooperative shall must be applied to the member's proportional share of a renewable energy credit portfolio requirement for the year in which renewable energy credits are used to comply with the renewable energy credit standard.

Sec. 51. (1) As a clean energy standard, an electric provider shall achieve a clean energy portfolio of at least the following:

(a) In 2035 through 2039, 80%.

(b) In 2040 and each year thereafter, 100%.

(2) All of the following apply to an electric provider whose rates are regulated by the commission:

(a) The electric provider shall submit a plan to comply with the clean energy standard as part of that electric provider's integrated resource plans filed under section 6t of 1939 PA 3, MCL 460.6t. The costs of compliance with the clean energy standard are a cost of service and may be recovered as provided by 1939 PA 3, MCL 460.1 to 460.11.

(b) The commission may, upon on a showing of good cause based on a factor listed in section 32(2), grant the electric provider an extension of a clean energy standard deadline. Each extension shall must not exceed 2 years. An extension of a deadline does not affect a subsequent deadline. Upon On granting an additional extension for a particular clean energy standard deadline beyond the first 2 extensions, the commission shall notify the speaker of the house of representatives, the majority leader of the senate, and the chairpersons of the committees of the legislature having jurisdiction over energy issues that it the commission has granted an additional extension and the reasons for the extension.

(c) The electric provider qualifies for a financial incentive for a clean energy contract under section 28(8).

(3) All of the following apply to an alternative electric supplier or a cooperative electric utility that has elected to become member-regulated under the electric cooperative member-regulation act, 2008 PA 167, MCL 460.31 to 460.39:

(a) An electric provider described in this subsection shall file a proposed clean energy plan with the commission by January 1, 2028. The proposed clean energy plan shall must meet all of the following requirements:

(i) Describe how the electric provider will meet the clean energy standard.

(ii) Specify whether the number of megawatt hours of electricity used in the calculation of the clean energy portfolio will be weather-normalized or based on the average number of megawatt hours of electricity sold by the electric provider annually during the previous 3 years to retail customers in this state. Once the proposed clean energy plan is approved by the commission, this option shall must not be changed.

(b) The commission shall provide an opportunity for public comment on the proposed clean energy plan filed under subdivision (a). After the opportunity for public comment and within 150 days after the proposed clean energy plan is filed with the commission, the commission shall approve, with any changes consented to by the electric provider, or reject the clean energy plan.

(c) Every 4 years after initial approval of a clean energy plan under subdivision (b), the commission shall review the clean energy plan. The commission shall provide an opportunity for public comment on the clean energy plan. After the opportunity for public comment, the commission shall approve, with any changes consented to by the electric provider described in this subsection, or reject any proposed amendments to the clean energy plan.

(d) If an electric provider described in this subsection proposes to amend its clean energy plan at a time other than during the review process under subdivision (c), the electric provider shall file the proposed amendment with the commission. The commission shall provide an opportunity for public comment on the amendment. After the opportunity for public comment and within 150 days after the amendment is filed, the commission shall approve, with any changes consented to by the electric provider, or reject the amendment.

(e) If the commission rejects a proposed clean energy plan or amendment under this subsection, the commission shall explain in writing the reasons for its the commission's determination.

(f) The commission may, upon on a showing of good cause based on a factor listed in section 32(2), grant an alternative electric supplier an extension of a clean energy standard deadline. Each extension shall must not exceed 2 years. An extension of a deadline does not affect a subsequent deadline. Upon On granting an additional extension for a particular clean energy standard deadline beyond the first 2 extensions, the commission shall notify the speaker of the house of representatives, the majority leader of the senate, and the chairpersons of the committees of the legislature having jurisdiction over energy issues that it the commission has granted an additional extension and the reasons for the extension.

(g) The Except as otherwise provided in this subdivision, the governing board of a cooperative electric utility may, upon on a demonstration of good cause based on a factor listed in section 32(2), grant an extension of a clean energy standard deadline. Each extension shall must not exceed 2 years. An extension of a deadline does not affect a subsequent deadline. Upon On granting an additional extension for a particular clean energy standard deadline beyond the first 2 extensions, the governing board of a cooperative electric utility shall notify the commission that it the board has granted an additional extension and the reasons for the extension. A municipally owned electric utility located in a city in the Upper Peninsula with a population of more than 20,000 but less than 25,000 on the effective date of the amendatory act that added this sentence and that installed and placed into service before 2020 reciprocating internal combustion engines to facilitate the retirement of coal-fired generation may grant an extension of the clean energy standard deadline of up to 5 years, and may grant a second extension for an additional 5 years to enable the municipally owned electric utility to continue to utilize the output of the reciprocating internal combustion engines if the municipally owned electric utility complies with the renewable energy standard and energy waste reduction standard in a given compliance year.

(4) All of the following apply to a municipally owned electric utility:

(a) Each municipally owned electric utility shall file a proposed clean energy plan with the commission by July 1, 2028. Two or more municipally owned electric utilities may file jointly for the purposes of compliance with the requirements of this subsection. The proposed clean energy plan shall must meet all of the following requirements:

(i) Describe how the municipally owned electric utility or a joint filing of municipally owned electric utilities will meet the clean energy standard.

(ii) Specify whether the number of megawatt hours of electricity used in the calculation of the clean energy portfolio will be weather-normalized or based on the average number of megawatt hours of electricity sold by the municipally owned electric utility annually during the previous 3 years to retail customers in this state. Once the commission determines that the proposed clean energy plan complies with this act, this option shall must not be changed.

(b) Subject to subdivision (e), the commission shall provide an opportunity for public comment on the proposed clean energy plan filed under subdivision (a). After the applicable opportunity for public comment and within 150 days after the proposed clean energy plan is filed with the commission, the commission shall determine whether the proposed clean energy plan complies with this act.

(c) Every 4 years after the commission initially determines under subdivision (b) that a clean energy plan complies with this act, the commission shall review the clean energy plan. Subject to subdivision (e), the commission shall provide an opportunity for public comment on the clean energy plan. After the opportunity for public comment, the commission shall determine whether any amendment to the clean energy plan proposed by the municipally owned electric utility complies with this act. The proposed amendment is adopted if the commission determines that it the proposed amendment complies with this act.

(d) If a municipally owned electric utility proposes to amend its clean energy plan at a time other than during the review process under subdivision (c), the municipally owned electric utility shall file the proposed amendment with the commission. Subject to subdivision (e), the commission shall provide an opportunity for public comment on the amendment. After the applicable opportunity for public comment and within 150 days after the amendment is filed, the commission shall determine whether the proposed amendment to the clean energy plan complies with this act. The proposed amendment is adopted if the commission determines that it the proposed amendment complies with this act.

(e) The commission need not provide an opportunity for public comment under subdivision (b), (c), or (d) if the governing body of the municipally owned electric utility has already provided an opportunity for public comment and filed the comments with the commission.

(f) If the commission determines that a proposed clean energy plan or amendment under this subsection does not comply with this act, the commission shall explain in writing the reasons for its the commission's determination.

(g) The governing board of a municipally owned electric utility may, upon on a demonstration of good cause based on a factor listed in section 32(2), grant an extension of a clean energy standard deadline. Each extension shall must not exceed 2 years. An extension of a deadline does not affect a subsequent deadline. Upon On granting an additional extension for a particular clean energy standard deadline beyond the first 2 extensions, the governing board of a municipally owned electric utility shall notify the commission that it the board has granted an additional extension and the reasons for the extension.

(5) By December 1, 2024, the commission shall deliver to the governor, the senate majority leader, the senate minority leader, the speaker of the house of representatives, the minority leader of the house of representatives, and the chairpersons of the senate and house of representatives standing committees with primary responsibility for energy issues a written report detailing all of the following:An investor-owned electric utility first authorized after January 1, 2016 to serve customers in this state and that serves a customer described in section 29(4)(d) in accordance with a special contract may, until 2045, exclude from the calculation of the clean energy standard described in subsection (1) all electricity sales made to the customer described in section 29(4)(d) in accordance with that special contract if the commission determines that the customer described in section 29(4)(d) has supplied to the utility sufficient renewable energy credits to satisfy the clean energy standard under subsection (1).

(a) The unique conditions influencing electric generation, transmission, and demand in the Upper Peninsula.

(b) The unique role of the reciprocating internal combustion units placed in service to facilitate the retirement of coal-fired generation located in the Upper Peninsula after the regional transmission organization imposed system support resource charges.

(c) Changes in electric demand, including changes from mining-related economic development projects, that may influence the utilization of the reciprocating internal combustion units described in subdivision (b).

(d) Options to reduce the carbon intensity of the existing reciprocating internal combustion units described in subdivision (c), with particular focus on how the unique geological conditions within the Upper Peninsula influence the feasibility of deploying clean energy systems.

(e) Any other information the commission determines may be relevant to the development of strategies to satisfy the clean energy standard for an electric provider whose rates are regulated by the commission and that owns and operates reciprocating internal commission engine units in the Upper Peninsula.