The Building Tradesman Newspaper

Friday, April 22, 2016

Potential utility deregulation the latest threat to building trades jobs

By Marty Mulcahy, Editor

LANSING - Over the past few years, the positives have been scarce in the state Legislature for the state's organized construction industry.

The presence of right-to-work, the threat to prevailing wage, reductions in workers compensation, and the moves to lower licensing standards for electrical, plumbing and other mechanical trades have been but a few of the attacks on the well-being and wages of the state's construction workers.

The latest threat would be an indirect, direct hit on the building trades. Votes in the state House and Senate could come at any time on state House Bill 4298 and Senate Bill 437, twin pieces of legislation that are supported by the Michigan Building and Construction Trades Council that would provide a greater degree of stability to the energy marketplace for our utility partners, including Consumers Energy and DTE Energy.

Every year those utilities support millions of man-hours of new construction work and modification at their plants, and "we're right with them when it comes to supporting this sensible energy legislation," said Michigan Building and Construction Trades Council Legislative Director Patrick "Shorty" Gleason. "There is too much at stake, when it comes to creating jobs for our tradespeople as well as utility employees here in Michigan, to bring in any form of uncertainty for the future of our state's utilities."

No less than four representatives from those utilities were on hand at the Michigan Building and Construction Trades Council's Legislative Conference last month, stressing the importance of keeping "certainty" within the industry by adopting HB 4298 and SB 437.

Those bills would bring an update to the state's previous attempt at changing utility regulations in 2008. That law established the state's first renewable portfolio standard, requiring that Michigan's electric providers get 10 percent of their energy from renewable sources by the end of 2015 - a number that the state met. That law, and the new legislation, also limit alternative energy suppliers to 10 percent of the electric market.

The new proposed state legislation would set a clean-energy goal - but not a formal standard - of 30 percent by 2025, through the use of renewable energies and energy efficiency. Utilities would get incentives based on the amount of efficiency they invest in. However, some state lawmakers are calling for eliminating that 10 percent requirement for alternative electric suppliers, virtually deregulating the market by opening it up 100 percent to all energy providers.

DTE Energy Director of Government Affairs Renze Hoeksema told building trades delegates that DTE spent about $800 million per year on construction work at its plants from 2005 to 2010, and now spends about $2 billion a year. And, he said the company's policy is to actively partner with Michigan-based businesses, and they have done to the tune of about $450 million invested per year. DTE Energy sponsored 3 million man-hours of work at its facilities last year.

All that investment is not a given, going forward, if the state's energy market is further deregulated. In favor of renewable energy sources, Consumers Energy, DTE Energy have already throttled back operations of numerous coal-burning plants in Michigan (see related article), and Wisconsin Energies last year nearly went through with plans to close its Presque Isle plant in Marquette. Leaders at Michigan utilities have warned that deregulation would further displace plant jobs and operations in favor of out-of-state providers. This legislation is all in the pursuit of a theory that deregulating utilities will lead to lower costs for power customers, without any other economic repercussions.

"Tell your legislators," DTE's Hoeksema said, "to vote for Michigan companies, and for Michigan workers. This is an investment in you."

The current state law governing Michigan's utilities allows 10 percent of the market to be deregulated. Meaning, out-of-state power suppliers, or even just electrical transmission companies, are allowed to sell electricity to the 10 percent of Michigan's market seeking lower rates.

The problems with expanding that 10 percent are numerous, say DTE Energy and Consumers Energy. First, it's usually big power users in Michigan, not residential customers, that seek and get the open market rates. Second, the deregulated power is produced outside of Michigan and transmitted here over power lines - no in-state workforce is paid for producing it. Third, by law, Michigan-based utilities are required to provide sufficient power generation capacity to the state, with a 15 percent reserve requirement. But they maintain that if more out-of-state providers are let in and siphon away their customers, it's not fair to the local utilities that they have to maintain and upgrade their plants and distribution systems, but without a consistent customer base and the knowledge of how much power they will have to produce.

"Alternative energy suppliers are not paying their fair share of costs," said Consumers Energy Senior vice President David Mengebier. He said that the alternative energy suppliers are getting subsidized by other ratepayers to the tune of $1 billion. There are fully regulated markets in 36 other states, he added and said Consumers Energy offers electricity and natural gas at competitive rates compared to other states.

State Rep. Bill LaVoy (D-Monroe) said the status of the energy reform legislation remains stalled because of a tug of war between conservative lawmakers who understand that the current system "retains assets, retains jobs and maintenance in Michigan," vs. even more conservative lawmakers, "whose free market ideology is to get the cheapest price for energy to the detriment of our current generating assets." LaVoy told building trades delegates: the current system "retains assets, retains jobs and maintenance in Michigan. "Know that Michigan jobs are on the line."