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Distributed Energy Tariff

The 2016 new energy law PA 341, required the Michigan Public Service Commission (PSC) to initiate a study to determine the value of solar energy and then propose a ‘distributed energy tariff’ to replace the current net-metering law. The PSC completed this study in April 2018 and now the regulated utilities have the opportunity to propose their own 'distributed energy tariff' which DTE Energy has done.

The Michigan Public Service Commission (PSC) announced its recommendation on April 18, 2018 on what the new 'distributed energy tariff’ should be that will eventually replace the current net metering system. The Public Service Commission was ordered to research, make a recommendation and oversee a rate case of deciding what this new ‘distributed Energy tariff will be for each utility, by the Michigan Legislature in Public Act 341 and 342 enacted in December 2016.

The PSC recommended a new program called the 'In-Flow / Out-Flow’ billing mechanism. When a customer buys energy from a utility (solar or non-solar) they will pay the normal retail rate (this is In-Flow). But this In-Flow of electricity will be off set by any Out-Flow of electricity when a solar owner sells excess electricity from their solar system back to the utility. The PSC has recommended that this Out-Flow electricity be compensated at the utility's avoided cost, which the PSC estimates at around 9.5 - 10 cents per kilowatt-hour. This amount is less than the current net metering amount where a solar owner is compensated at the retail rate for selling electricity back to the utility.

The next step in this process is that the utilities can make their own proposal on what they think is appropriate for the ‘distributed energy tariff.’ First up is DTE Energy and what they have proposed is outrageous and if the PSC approves it, it will hurt prospective solar owners by undermining the financial rationale for investing in a renewable energy system.

DTE has proposed that rather than paying 9.5 to 10 cents per kilowatt-hour that the PSC has recommended for extra solar electricity that is exported to the grid (Out-Flow), DTE only wants to pay the “locational marginal price” which essentially means the wholesale price of about 4 cents per kilowatt-hour. On top of that, DTE is proposing a new monthly fee called a “system access charge” they want solar owners to pay. The amount of this new fee would depend on the size of your solar system. This new fee would be $2.30 per kilowatt size system a person owns. So for a homeowner with a 6 to 8 kilowatt system, they would pay every month another $13.80 to $18.40.

The combination of these two charges would undermine the economic rationale for installing a solar system, which very well may be the goal of DTE’s proposal. They are trying to stop homeowners and business from having the option of installing their own energy system so they generate their own electricity and not buy from DTE.

The key issue is whether renewable energy users are paying their fair share to maintain the ‘grid’ (the network of electrical wires that distribute electricity), or not. DTE argues that solar owners are not paying their fair share, whereas solar advocates contend that DTE is not being honest regarding the true value of the solar energy they get from solar owners. DTE takes this excess solar electricity they receive from solar owners and turn right around and sell it at full retail rate. This means that DTE may not have to bring on the older, expensive and in many cases dirtier plants when the demand for electricity is really high in the summer months when people are running their air conditioners. This is when solar energy is most productive and most helpful to DTE and they continue to deny that this has value.

The Public Service Commission must review DTE’s proposal and ultimately decide what the distributed tariff will be for DTE customers. GLREA has intervened in this rate case and will be fighting tooth and nail DTE’s proposal. But we will need your help and support, so be prepared to help out when called upon.

These rate cases generally take 10 months from start to finish so until April 2019, the current net metering rules will continue to operate and the amount of compensation that solar users are credited at for selling electricity back to DTE will be at the retail rate. In addition, if a homeowner or business installs a renewable energy system prior to the implementation of this new distributed tariff, they can continue to operate under the current net metering rules for another 10 years. Ten years is a decent amount of time for most solar owners to pay off their system in savings from not having to buy utility electricity.

This ‘distributed energy tariff’ is very important to the future of renewable energy in Michigan. If this tariff is set too low, then it may take solar users longer to pay off their system, which could undermine the expansion of renewable energy in Michigan. But on the other hand if DTE keeps pushing to pay the least amount to solar owners for their excess solar electricity and is successful in imposing this new “system access charge,” this could back fire on them because with the cost of battery storage coming down so dramatically, solar owners could add into their energy system battery storage, so rather than selling excess electricity to the utility, they just store it in the batteries and use it at night and cut out the utility all together.

GLREA Staff, and Members will be actively participating in DTE's Rate Case (U-20162) proceeding. We will keep GLREA Members posted on developments on this proceeding. But we need your support in this fight. If you are not already a Member of GLREA please join so we will have the resources to take on DTE! Click on Become a Member and that will take you to the Membership page on this website.

We will continue to keep you posted on developments. If you have any questions please contact John Freeman at Jfreeman13@comcast.net.