Energy Waste Reduction Targets

Public Act 229 of 2023, known as the Clean and Renewable Energy and Energy Waste Reduction Act, amends Michigan’s 2008 energy law, Act 295. This new legislation sets revised Energy Waste Reduction targets for electric and natural gas providers and requires the filing of Energy Optimization Plans. These plans must include strategies for Energy Waste Reduction and may also include optional measures for Efficient Electrification. Under the Act, electric utilities are required to achieve annual energy savings of 1.5% of their total retail sales from the previous year, while natural gas utilities must achieve annual savings of 0.875%. Utilities were required to submit customer energy optimization plans including energy waste reduction plans by January 1, 2025.HistoryIn October 2008, Michigan enacted the Clean, Renewable, and Efficient Energy Act, Public Act 295, requiring the state's investor-owned utilities, alternative retail suppliers, electric cooperatives and municipal electric utilities to generate 10% of their retail electricity sales from renewable energy resources by 2015. This is known as the Renewable Energy Standard (RES). In addition, the standard requires both electric and natural gas utilities meet certain energy savings requirements, known as the Energy Optimization Standard (EOS). For both the electric and gas requirements, the Michigan Public Service Commission (MPSC) must submit an annual report to the legislature, describing the MPSC's efforts to implement energy conservation and energy efficiency programs and measures. The most recent reports were published in November 2014 and September 2015.Electric Sales ReductionThe Clean and Renewable Energy and Energy Waste Reduction Act requires electric utilities to reduce their annual energy sales by 1.5% each year.Natural Gas Sales ReductionThe Clean and Renewable Energy and Energy Waste Reduction Act requires natural gas utilities to reduce their annual energy sales by 0.875% each year. The cost of implementing approved energy optimization plans is recovered from natural gas customers by volumetric charges.Program Administrator TypeThe utilities required to meet these standards administer the programs required to meet the EOS. Cost Effectiveness and Program EvaluationWhile Michigan uses all five of the "California tests" of utility program cost effectiveness from the California Standard Practice Manual to evaluate EOS programs, it uses the Utility Cost Test (UCT) as its primary test.Utility Cost Recovery ProvisionsThe cost of implementing an approved energy optimization plan is recovered from volumetric charges on all natural gas customers and residential electric customers, per-meter charges on all other metered electric customers, and itemized charges on unmetered electric customers.For utilities that exceed the standards set forth, the MPSC may authorize additional financial incentives for the utility. Special ProvisionsCommercial and industrial electric customers may opt out of the surcharge and implement a self-directed energy optimization plan. In order to participate in this program, the customer must meet certain annual peak demand requirements. Forms and filing instructions are available on the MPSC website. Self-directed customers may not opt out of surcharges required for low income programs. Utilities are required to offer low income energy waste reduction programs that use at least 25% of the utility's total spending on their energy waste reduction plan.