State: Michigan’s energy efficiency program should save customers over $4 billion

Some utilities and large industrial companies in Michigan say the state’s energy efficiency mandate for electric utilities is no longer needed because customers are already demanding such efficiencies. (Photo by Consumers Energy via Flickr; used under Creative Commons license)

LANSING — The $257 million spent in 2014 by electric and gas utilities to reduce energy use should save customers at least $1.1 billion over the lifetime of the programs — a return of $4.38 for every $1 spent, according to a new report from the state’s energy regulatory agency.

The report from the Michigan Public Service Commission says electric utilities saved 1.4 million megawatt hours of electricity in 2014, or enough to power 172,500 homes for a year. That’s up from 1.3 million megawatt hours the year before, enough energy to cover 121,000 homes’ annual electricity use.

Natural gas utilities saved more than 4.86 million thousand cubic feet of natural gas last year, or roughly 57,000 homes’ annual natural gas use.

“The cheapest energy is the energy never used, and this has proven to be the case again with Michigan’s energy optimization programs in 2014,” said John Quackenbush, chairman of the MPSC, in a statement. “Because they focus on reducing energy waste, energy efficiency programs benefit all utility customers.”

The MPSC’s report was issued as the Michigan Legislature debates bills that would phase out the state’s energy efficiency mandate for electric utilities by January 2019 and replace it with a process called integrated resource planning when setting rates. (The standard would stay in place for natural gas.) Currently, utilities are required to reduce energy waste by at least 1 percent of their total electric sales.

Lawmakers, utilities and some large industrial companies say they believe the standard no longer is needed. Power companies say they will continue these programs on their own in part because customers demand them.

Some environmental and business groups, including Michigan-based appliance giant Whirlpool Corp., disagree. They argue the body of evidence — including the MPSC’s own reports — prove the mandate has led to actual savings and should be maintained.

The MPSC said utilities’ investment of $1.1 billion on energy efficiency programs from 2010 to 2014 should save customers $4.2 billion over the lifetime of the programs.

They include such things as rebates on light bulbs or other energy equipment and home weatherization.

The MPSC estimated the cost of both the state’s energy efficiency and renewable energy standards — the latter of which requires 10 percent of utilities’ power to come from renewable sources by this year — is $37 per megawatt hour. That’s roughly 28 percent of the estimated cost of a new coal plant, at $133 per megawatt hour, the MPSC said.

That’s also less than any other generation source, including natural gas combined-cycle plants, according to the MPSC.

“Renewable energy and energy optimization continue to be cost-effective resources in the state of Michigan,” the agency wrote.

Sam Gomberg, lead Midwest energy analyst with the Union of Concerned Scientists in Chicago, called Michigan’s efficiency standard “the biggest no-brainer of the bunch” and said nothing short of a guarantee would ensure the utilities hold true to their promise of continuing such programs.

“The argument just doesn’t really hold water,” Gomberg said. “They’re in the business of selling electricity. Selling less electricity is really not in their business model.

“The push to repeal the standard just comes down to political ideology.”

The utilities, however, say they don’t plan to end such programs.

By the end of the year, Detroit-based DTE Energy Co. says it will have spent more than $600 million on energy efficiency programs. Irene Dimitry, DTE’s vice president of business planning and development, recently testified before a Senate panel that the company’s programs to reduce energy use have saved its electric and gas customers more than $500 million on their energy bills.

Jackson-based Consumers Energy says it has saved its customers $855 million on efficiency programs. Spokesman Dan Bishop said programs including residential rebates and light bulb incentives have been popular.

“Customers think well of energy efficiency,” he said. “It’s often talked about as sort of the cheapest source of new energy, if you will — the power plant you don’t have to build because you’ve been able to reduce energy waste.”

Bishop declined to speculate, however, on which programs might continue should the efficiency mandate be phased out, adding that the integrated resource planning process would determine that.