Reply Brief on behalf of the Environmental Law & Policy Center, the Ecology Center, the Union of Concerned Scientists, and Vote Solar.

January 11, 2019 Ms. Kavita Kale Michigan Public Service Commission 7109 W. Saginaw Hwy. P. O. Box 30221 Lansing, MI 48909 RE: MPSC Case No. U-20165 Dear Ms. Kale: The following is attached for paperless electronic filing: Reply Brief on behalf of the Environmental Law & Policy Center, the Ecology Center, the Union of Concerned Scientists, and Vote Solar. Proof of Service Sincerely, Margrethe Kearney Environmental Law & Policy Center mkearney@elpc.org cc: Service List, Case No. U-20165

STATE OF MICHIGAN MICHIGAN PUBLIC SERVICE COMMISSION In the matter of the application of CONSUMERS ENERGY COMPANY for approval of its integrated resource plan pursuant to MCL 460.6t and for other relief Case No. U-20165 REPLY BRIEF ON BEHALF OF THE ECOLOGY CENTER, THE ENVIRONMENTAL LAW & POLICY CENTER, THE UNION OF CONCERNED SCIENTISTS, AND VOTE SOLAR January 11, 2019

TABLE OF CONTENTS I. INTRODUCTION... 1 II. ARGUMENT... 1 A. The Company s Proposal Discriminates Against Qualifying Facilities Because It s Proposed Method for Determining Whether A Capacity Need Exists Would Never Find a Capacity Need Exists Outside of the Competitive Solicitation Process.... 1 B. The Company s Proposal to Reduce Avoided Costs By the Value of RECs Is not Supported in the Record and Discriminates Against Qualifying Facilities.... 2 C. Staff s Initial Brief Misrepresented ELPC s Position on the PURPA Planning Horizon.... 4 D. The Attorney General Raises Reliability Concerns with the Company s Plan, but These Concerns Rely Exclusively on the Testimony of Sebastian Coppola, and That Testimony Contains Significant Flaws.... 4 III. CONCLUSION... 5 i

I. INTRODUCTION The Environmental Law & Policy Center, the Ecology Center, the Union of Concerned Scientists, and Vote Solar (collectively, Joint Intervenors respectfully submit this Reply Brief for the Commission s consideration and resolution of Consumer Energy Company s ( Consumers or the Company application for approval of its Integrated Resource Plan ( IRP and its Proposed Course of Action ( PCA. In addition to the relief requested in Joint Intervenors Initial Brief, the Commission should require modification of the Company s PCA because under the Company s proposal a capacity need would only exist during the competitive solicitation process, and the Company s proposal to reduce avoided cost by the value of Renewable Energy Credits ( RECs violates the Public Utility Regulatory Policies Act ( PURPA. Furthermore, Joint Intervenors clarify that they continue to support a 10-year capacity planning horizon under PURPA. The Attorney General raised reliability concerns with the Company s PCA. But the Attorney General sole witness on these issues failed to provide a reliable analysis in support of such an argument, and therefore the Commission should give little weight to those reliability issues. The Company s IRP provided a robust reliability analysis that supports finding the PCA is a reliable path forward. II. ARGUMENT A. The Company s Proposal Discriminates Against Qualifying Facilities Because It s Proposed Method for Determining Whether A Capacity Need Exists Would Never Find a Capacity Need Exists Outside of the Competitive Solicitation Process. Under the Commission s current PURPA framework established in Case No. U-18090, full capacity costs are paid to a Qualifying Facility ( QF when there exists a capacity need within the subsequent 10 years, also known as the 10-year PURPA Planning Horizon. Because 1

the capacity need determines avoided costs, and avoided cost rates cannot be discriminatory, 18 C.F.R. 292.304(a(1(ii, then the method for determining whether a capacity need exists cannot discriminate against QFs. Therefore, the key question remaining from Case No. U-18090 is how to determine whether a capacity need exists within that 10-year period in a way that does not discriminate against QFs or favor a utility s own capacity additions (whether planned builds or planned purchases. The simplest non-discriminatory method of determining whether a capacity need exists is to look at whether there are any deferrable capacity additions in the next 10-years, as proposed by expert witness Douglas Jester. 8 TR 2257-2258. A future capacity addition is deferrable if the Commission has not approved cost recovery for a capacity addition. Id. This allows lower-cost QFs to defer or avoid future capacity additions. The Company critiques expert Douglas Jester s proposal and argues that it is inappropriate as it would likely result in most of the Company s future capacity plan always being characterized as a need and subject to fulfillment by QFs. Consumers Initial Brief at 220. However, a method is no less valid merely because it results in a finding that the Company does not prefer. Indeed, as noted in Joint Intervenors Initial Brief and as demonstrated on the record, the only apparent method endorsed by the Company is one that would never result in a capacity need finding outside of the competitive solicitation process. See Joint Intervenors Initial Brief at 5-6; see also 8 TR 2255-56. While this is clearly the Company s preference, it does not comply with PURPA because it discriminates against QFs. B. The Company s Proposal to Reduce Avoided Costs By the Value of RECs Is not Supported in the Record and Discriminates Against Qualifying Facilities. In its Initial Brief, the Company proposed to reduce the avoided cost rate paid to QFs by the market value of the RECs. Consumers Initial Brief at 117. At the outset, there is no testimony 2

on the record that explains how the market value of RECs would be determined, and therefore the Company s proposal lacks sufficient evidence on the record. The Company cited to 8 TR 1272 to support its position, but a review of that citation does not provide any insight into how the market value of RECs would be determined. In addition, the Company is proposing to base avoided costs on the results of competitive solicitation but is not clear on whether RECs will be transferred as part of the competitive solicitation. If the competitive solicitation requires the transfer of RECs from winning bidders to the Company, then there s no basis to support the Company s proposal. In the event that the competitive solicitation does not require REC transfer, then reducing the avoided cost rate by RECs would discriminate against QFs. Likewise, if the competitive solicitation does require the transfer of RECs from winning bidders, then presumably the results of the solicitation will include a value for RECs that is separable from energy and capacity within the proposals. Therefore, the subsequent avoided cost rate based on that solicitation would capture the value of those RECs. As a result, it should be up to the QF to decide whether it wants to transfer its RECs to the Company for the REC value derived from the competitive solicitation. In the event that the QF opts to not transfer its RECs, which is unlikely, only then does it make sense to reduce the avoided cost rate based on the value of RECs. However, to avoid discrimination against QFs, that REC value must be clearly ascertainable from the results of the competitive solicitation s results. It would be discriminatory to forbid QFs the option of selling RECs to the Company if the Company is basing avoided cost rates on a competitive solicitation that required the transfer of RECs. 3

C. Staff s Initial Brief Misrepresented ELPC s Position on the PURPA Planning Horizon. In its Initial Brief, Staff stated that it was ELPC s position that the PURPA Planning Horizon should be five years. Staff Initial Brief at 59. To the contrary, ELPC never took such a position. ELPC believes that the PURPA Planning Horizon should remain 10-years. See Joint Intervenors Initial Brief at 6-7. Likewise, expert witness Douglas Jester, who ELPC relied upon, never stated in his testimony that the PURPA Planning Horizon should be five years. Jester s testimony only stated that the Company s initial proposal of a 3-year PURPA Planning Horizon conflicted with the 4-year period used for the state reliability mechanism and discriminates against QFs. See 8 TR 2254. D. The Attorney General Raises Reliability Concerns with the Company s Plan, but These Concerns Rely Exclusively on the Testimony of Sebastian Coppola, and That Testimony Contains Significant Flaws. The Attorney General s Initial Brief relies heavily on the testimony of Sebastian Coppola, but Coppola s testimony contains significant flaws that render his opinions unreliable and irrelevant. Grid reliability is a complex issue that requires complex solutions, and the Company s plan must meet the reliability standards imposed by the Commission, NERC, and MISO. 8 TR 2331-32. The Company s plan to meet its future needs with solar energy also meets these reliability standards. 8 TR 2332-33. Nonetheless, witness Coppola s testimony, which proclaims to demonstrate why the Company s plan is not reliable, fails to provide any analysis of the standards imposed by the Commission, NERC, and MISO. Coppola also fails to identify any failure by the Company to adequately evaluate the reliability of its PCA. 8 TR 2333. Coppola misunderstood MISO s Expected Load Carrying Capacity ( ELCC calculation. 8 TR. 2335. Coppola fails to discuss 4

reliability standards or understand common reliability metrics which renders his testimony unreliable. 8 TR 2336. Witness Coppola raises concerns with using MISO s Zonal Resource Credits ( ZRCs to show resource adequacy, but Coppola fails to acknowledge that ZRCs are not the sole metric by which to judge reliability. 8 TR 2338. Coppola argues that Michigan lacks adequate land resources to build solar, but Coppola fails to explain or cite information that would prove such a contention. 8 TR 2341. Lastly, Coppola provides an incomplete and unreliable opinion on the cost of solar resources. 8 TR 2342. While claiming that building solar facilities may, AG Brief at 16, be more expensive, Coppola failed to take into account the steady, historical cost declines that have occurred for solar energy. 8 TR 2342. In fact, cost projections for solar energy show that they will likely continue to fall in the coming years as the Company starts ramping up development of solar energy resources. 8 TR 2342-43. III. CONCLUSION For the foregoing reasons, and the reasons set forth in Joint Intervenors Initial Brief, the Commission should (1 reject the Company s PURPA proposals because they would render QF development almost impossible and violate PURPA; (2 clarify that the IRP process is not one where the Company s take it or leave it approach complies with the spirit of the IRP law; (3 require the Company undertake more comprehensive wind modeling, quantitative risk analysis, and carbon considerations in the next IRP; (4 adopt the recommended measures outlined above to ensure a fair competitive bidding process; and (5 ensure, if the Commission approves a FCM, that it is lower than the Company s WACC and the Company s current FCM proposal. 5

January 11, 2019 Respectfully Submitted, Margrethe K. Kearney (P80402 Environmental Law & Policy Center 1514 Wealthy Street SE, Suite 256 Grand Rapids, MI 49506 T: (312 795-3708 F: (312 795-3730 mkearney@elpc.org 6

STATE OF MICHIGAN MICHIGAN PUBLIC SERVICE COMMISSION In the Matter of the Application of CONSUMERS ENERGY COMPANY for approval of its integrated resource plan pursuant to MCL 460.6t and for other relief. Case No. U-20165 PROOF OF SERVICE I hereby certify that a true copy of the Reply Brief on behalf of the Environmental Law & Policy Center, the Ecology Center, the Union for Concerned Scientists, and Vote Solar was served by electronic mail upon the following Parties of Record, this 11 th day of January, 2019. Administrative Law Judge Sharon L. Feldman feldmans@michigan.gov rogersd8@michigan.gov MPSC Staff Heather M.S. Durian Daniel Sonneveldt Amit T. Singh Spencer A. Sattler durianh@michigan.gov sonneveldtd@michigan.gov singha9@michigan.gov sattlers@michigan.gov Attorney General Celeste R. Gill Gillc1@michigan.gov ag-enra-spec-lit@michigan.gov ABATE and Gerdau Macsteel, Inc. Bryan A. Brandenburg, Esq. Michael J. Pattwell, Esq. Consumers Energy Bret A. Totoraitis Gary A. Gensch, Jr. Robert W. Beach Michael C. Rampe Theresa A.G. Staley Anne M. Uitvlugt bbrandenburg@clarkhill.com mpattwell@clarkhill.com mpscfilings@cmsenergy.com bret.totoraitus@cmsenergy.com gary.genschjr@cmsenergy.com robert.beach@cmsenergy.com Michael.rampe@cmsenergy.com Theresa.staley@cmsenergy.com Anne.uitvlugt@cmsenergy.com 1

Cypress Creek Renewables Jennifer Utter Heston jheston@fraserlawfirm.com Michigan Environmental Council, Natural Resource Defense Council, Sierra Club, City of Flint, and City of Grand Rapids Christopher M. Bzdok Miles Soules Lydia Barbash-Riley Michigan Chemistry Council and Solar Energy Industries Association Timothy J. Lundgren Toni L. Newell Michigan Energy Innovation Business Council, Institute for Energy Innovation Laura A. Chappelle Toni L. Newell Timothy J. Lundgren Independent Power Producers Coalition of Michigan Laura A. Chappelle chris@envlaw.com msoules@earthjustice.org lydia@envlaw.com tjlundgren@varnumlaw.com tlnewell@varnumlaw.com lachapelle@varnumlaw.com tlnewell@varnumlaw.com tjlundgren@varnumlaw.com lachappelle@varnumlaw.com Cadillac Renewable Energy, LLC; Genesee Power Station, LP; Grayling Generating Station, LP; Hillman Power Company, LLC; TES Filer City Station, LP; Viking Energy of Lincoln, Inc; Viding Energy of McBain, Inc. Thomas J. Waters Anita G. Fox Midland Cogeneration Ventures, LP Jason T. Hanselman John A. Janiszewski twaters@fraserlawfirm.com afox@fraserlawfirm.com jhanselman@dykema.com jjaniszewski@dykema.com Michigan Electric Transmission Company Richard J. Aaron Courtney F. Kissel raaron@dykema.com ckissel@dykema.com 2

Great Lakes Renewable Energy Association & Residential Customer Group Don L. Keskey Brian W. Coyer Sierra Club Michael Soules Energy Michigan Timothy L. Lundgren Laura A. Chappelle Michigan Chemistry Council Timothy J. Lundgren Justin K. Ooms BMPs Thomas J.Waters Anita G. Fox donkeskey@publiclawresourcecenter.com bwcoyer@publiclawresourcecenter.com msoules@earthjustice.org tlundgren@varnumlaw.com lachappelle@varnumlaw.com tjlundgren@varnumlaw.com jkooms@varnumlaw.com twaters@fraserlawfirm.com afox@fraserlawfirm.com Margrethe Kearney Environmental Law & Policy Center MKearney@elpc.org 3