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Distributed Energy Tariff

In 2016 the new energy law Public Act 341, required the Michigan Public Service Commission (PSC) to conduct 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 utilities have the opportunity to propose their own 'distributed energy tariff.'

DTE is the first utility to do this and unfortunately their proposal is really bad and will slow down the expansion of solar for homeowners and small business in Michigan, which is DTE's goal. 

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 if a solar owner sells excess electricity from their solar system back to the utility, this is 'Out-Flow.'  The PSC has recommended that this Out-Flow electricity be compensated at the utility's avoided cost, which the PSC estimates is 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 but what they have proposed is outrageous and if the PSC approves 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.  So for a homeowner with a 6 to 8 kilowatt system, they would pay an additional $13.80 to $18.40 every month.

The combination of these two charges will undermine the economic rationale for installing a solar system.  And this must be the goal of DTE’s proposal.  They are trying to make homeowners and business think twice about installing their own energy system.  DTE doesn't want rate payers generating their own electricity and not buy from them.  DTE is using their enormous influence in Lansing to get the PSC to rubber stamp their proposal.  DTE wants to maintain their monopoly control on electricity and in essence is trying to stop ratepayers from excersizing their freedom to chose to generate their own electricty from solar. 

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 about the true value of solar electricity 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 power 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.

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.  The irony is that 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,' that because the cost of battery storage has come down so dramatically, solar owners could add battery storage to their solar system, 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!

The Public Service Commission will decide on whether to grant, modify or reject DTE’s proposal by May 2019.  GLREA is opposed to DTE's proposal and is doing everything it can to get the Public Service Commssioners to reject DTE's proposal.  

But we need your help!  I need you to call, send a letter or send a fax to Sally Talberg, the Chairman of the Public Service Commission and tell her to reject DTE's proposal in ratecase U-20162.  You can take the information in this article and compose a letter or fax and send it.  Or you can make a phone call.  The phone number is 517 284-8330, the fax number is 517 284-8334 and the address is Chairman Sally Talberg, MI Public Service Commission, PO Box 30221, Lansing, MI 48909.

And 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 this will take you to the Membership page on this website and you can sign up. 

Thanks for your help.  Please take action as suggested above!  If you have any questions please contact John Freeman at Jfreeman13@comcast.net.