News Story

Renewable Energy Mandate Takes A Hit In Michigan

Influential judge says Michigan law is unconstitutional

In a sense, Michigan's utilities and state officials brought recent renewable energy issues upon themselves.

When a federal judge this month declared part of Michigan's renewable energy mandate to be unconstitutional, he wasn't offering an unsolicited observation. He was rejecting a specific argument that attorneys representing Michigan's utilities and electric regulators were making on a different topic.

The case at issue was, "Illinois Commerce Commission v. Federal Energy Regulatory Commission." It was over a cost-spreading mechanism developed by the Midwest Independent Transmission System Operator (MISO). The purpose of the cost-spreading is to encourage expansion of high-voltage transmission facilities.

In the written decision on the case, released June 7, Judge Richard Posner of the U.S. Court of Appeals for the Seventh Circuit, wrote: "Michigan cannot, without violating the commerce clause of Article I of the Constitution, discriminate against out-of-state renewable energy."

Ironically, what prompted the judge's assertion was a claim by attorneys (among others) for the State of Michigan, DTE Energy, and Consumer Energy, that because Michigan has an in-state renewable energy production mandate, it should be excluded from paying a share of the cost of the transmission facilities.

But instead of swaying the court to let Michigan off the hook for the costs, the argument boomeranged. It led to Judge Posner making the assertion that Michigan's in-state mandate was unconstitutional.

"Michigan's preference for in-state renewable energy is unconstitutional," said Todd Wynn, director of a task force on energy, environmental and agriculture issues for the American Legislative Exchange Council. "That should have been recognized by those representing Michigan before they pursued that argument in court."

Judge Posner's statement is now seen by many as potentially being more significant than the court's ruling on the case that was actually before it at the time. It casts a legal shadow over Michigan's 10 percent renewable mandate that's supposed to be met by 2015. That 10 percent mandate, and the in-state requirement, was created in Michigan's 2008 Energy legislation, which is now Public Act 295.

"You'd have thought that Michigan lawmakers would have known this would be a problem before they passed the law," Wynn said. "But, at the time, they probably got more support for the legislation based on the promise of in-state development."

Scott Simons, spokesman for DTE Energy, pointed out that Judge Posner's comment does not carry the weight of law.

"This was what the attorneys call a dicta opinion,” Simons said. "It does not overturn any part of the Michigan law."

"Dicta" is a part of a judicial opinion that is merely a judge's editorializing and does not address the specifics of the case that's directly before the court. It is extraneous material that is merely informative or explanatory.

Michigan's renewable energy law was not before the U.S. Court of Appeals for the Seventh Circuit, and the dicta opinion doesn't alter the law. But that doesn't mean it won't eventually affect the law. Judge Posner's opinions are known to enjoy great respect from other judges. His statement on Michigan's in-state renewable energy requirement potentially opens the door for serious legal challenges to the statute. It could lead to challenges of similar requirements that artificially favor in-state renewable energy producers in other states as well.

In Michigan, "renewable energy" has become almost a euphemism for wind power. At the heart of the issue is the fact that Michigan simply is not a particularly good wind state. That means that in Michigan wind is not as efficient for producing energy as in some other states. This inefficiency results in higher costs for ratepayers. So, wind energy produced in Michigan would have trouble competing in a free and open market.

"The Attorney General is a party to the case," Joy Yearout, spokesperson for Michigan Attorney General Bill Schuette, said. "We are one of several in a group called the Northeast MISO Transmission Customers, so we are aware of the decision from the Seventh Circuit.

"The decision does not invalidate Michigan law, including the statute establishing renewable energy requirements," Yearout continued. "We are reviewing the opinion and our options moving forward."

Gov. Rick Snyder's office also is aware of the situation.

"We are studying it (the court decision)," said Sara Wurfel, spokesperson for Gov. Snyder. "The governor remains committed to making sure Michigan pays only its fair share of infrastructure."

If Michigan's in-state renewable energy requirement were struck down, then what?

Kevon Martis, senior policy analyst for the Interstate Informed Citizens Coalition, a non-profit that raises awareness of wind turbine issues, said the potential implications of Judge Posner's dicta statement could already be enough to scare off those contemplating further wind energy investments in Michigan.

"We are a high cost wind energy state," Martis said. "Without the in-state generation mandate, wind production in Michigan is of little economic value."

DTE Energy, Consumers Energy, the Michigan Attorney General, Michigan Municipal Electric Association, the Michigan Public Power Agency, and ABATE all were petitioners in the case before the U.S. Court of Appeals for the Seventh Circuit.

DTE Energy and Consumers Energy are Michigan's two quasi-monopolistic utilities. Consumers Energy did not respond to a request for comment.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.