Federal Court Rules Michigan Cannot Limit Out-of-State Power

Federal Court Rules Michigan Cannot Limit Out-of-State Power
July 15, 2013

Kenneth Artz

Kenneth Artz (iamkenartz@hotmail.com) is a freelance reporter for The Heartland Institute based in... (read full bio)

Michigan cannot exclude out-of-state power from its renewable power mandate, a federal court of appeals ruled. The decision will have far-reaching implications as several states limit or exclude out-of-state power from their renewable power mandates.

The Seventh Circuit Court of Appeals decision upholds a Federal Energy Regulatory Commission (FERC) plan apportioning among Midwestern states new power line costs necessary to deliver remote solar and wind power to Midwestern population centers.

Michigan Opposed Power Lines
The legal row began following FERC’s approval in 2011 of the Midwest Independent Transmission System Operator’s (MISO) program that determined how new power lines would be planned and funded. MISO spread the cost of new projects among utilities powered by the Midwestern grid. MISO said the new power lines will boost reliability and prevent blackouts. MISO also said the new power lines will lower costs by delivering wind power from the Great Plains to the Great Lakes states. Wind power is cheaper to produce on the Great Plains than in Great Lakes states.

Michigan utilities and state officials argued the MISO program forced them to pay for expensive new power lines that carry out-of-state renewable energy not recognized under the state’s renewable portfolio standard.

Under the Michigan Clean, Renewable and Efficient Energy Act, utilities may not count out-of-state renewables when fulfilling the goal of providing retailers with at least 10 percent renewable energy by 2015.

Michigan utilities and state officials also argued Michigan obtains very little power from MISO’s extensive footprint in the Midwest, and utilities should only have to pay for local generation and transmission lines.

Commerce Clause Bans Protectionism
However, Judge Richard Posner found Michigan's law violates the Commerce Clause, which bars states from passing legislation that discriminates against goods produced in other states.

"Michigan cannot, without violating the Commerce Clause of Article I of the Constitution, discriminate against out-of-state renewable energy," Posner wrote.

Protectionism Raises Costs Further
Todd Wynn, director of the Energy, Environment, and Agriculture Task Force for the American Legislative Exchange Council (ALEC), says several states similarly discriminate against out-of-state power generation.

“Ultimately, the court ruling breaks down state barriers for other states, too,” Wynn noted. “As a result, electricity consumers will likely pay somewhat lower electricity prices because higher-priced in-state electricity can no longer corner the market.”

H. Sterling Burnett, a senior fellow at the National Center for Policy Analysis, says renewable power mandates typically contain protectionist language that discriminates against out-of-state power. The protectionist language ignores the reality that wind and solar power, which are already substantially more expensive than conventional power, cost more to produce in some states than in others. The protectionist language adds still higher costs to the additional costs already imposed by renewable power mandates.

“Labor unions demand that politicians put in a rider so that other states won’t ship them cheaper energy. Really what they are doing is behaving like a cartel. For instance, it’s like saying bicycles are good and we want more bicycles, but we have a caveat that says we can only have bicycles built in factories located in Michigan,” Burnett explained.

Hampers Emission Reductions
Kevon Martis, director of the Interstate Informed Citizen’s Coalition, Inc., says Michigan’s wind energy is very expensive in comparison with the western part of the MISO region. As a result, the Michigan law blocked consumers from importing wind power that would cost less from those western states. 

“Why would we pay twice what such energy is worth?” asked Martis. “If your goal is to somehow use wind energy to reduce emissions, mandating that that wind generation come from Michigan's anemic wind resources essentially means spending roughly twice as much as it would cost to import wind energy from Minnesota or Iowa. Where is the logic in that? It’s the same money for half the alleged reduction in emissions.”

Martis also noted the wisdom of the nation’s founders including the Commerce Clause in the U.S. Constitution, which benefits all U.S. citizens by prohibiting individual states from discriminating against each other’s goods and services.

“The bottom line is in-state mandates are unconstitutional,” Martis explained.

Kenneth Artz (iamkenartz@hotmail.com) writes from Dallas, Texas.

Kenneth Artz

Kenneth Artz (iamkenartz@hotmail.com) is a freelance reporter for The Heartland Institute based in... (read full bio)