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Turning up the Pressure for Cleaner Energy in Michigan

Posted by Dan Bakal at May 15, 2012 09:25 AM |
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Michigan’s DTE Energy is one of the nation’s top 25 largest electricity producers. It’s also one of the nation’s most polluting power companies. With 75 percent of its power coming from coal-fired plants, DTE faces a significant challenge from recently finalized EPA air emissions regulations.
by Dan Bakal, Director, Electric Power Program Ceres Posted on May 15, 2012

Michigan’s DTE Energy is one of the nation’s top 25 largest electricity producers. It’s also one of the nation’s most polluting power companies and is therefore uniquely exposed to new air pollution regulations.

With 75 percent of its power coming from coal-fired plants, DTE faces a significant challenge from recently finalized EPA air emissions regulations for mercury and other pollutants. These regulations will affect the company’s long-term financial performance, and investors want to know what the utility’s plans are for responding.

With an estimated $2 trillion in utility capital expenditures on the line in the next 20 years across the country, investors will be an important voice in determining how that money is spent. In Michigan, they’re already speaking up.

At DTE's recent annual meeting in Detroit, shareholders sent a strong message urging the utility to clean up its power plants. Investors put their voting power behind a resolution asking DTE to adopt specific goals for reducing greenhouse gases and other pollution in response to EPA regulations. The resolution was introduced by New York’s state pension fund, a major company shareholder.

"Reducing pollution is not just an imperative for the world, it's a necessary step for companies to remain at the cutting edge of this industry,” said New York State Comptroller Thomas DiNapoli, speaking about the resolution. “We are urging companies to find ways to be transparent, sustainable and profitable in the context of our current regulatory environment.”

Shareholders want a clear plan from DTE to reduce pollution from its power plants, and they have asked the company to report back to them by Sept. 30 on its plans for meeting specific goals. Their chief concerns include DTE’s plans for retrofitting or retiring its existing fleet of coal-fired power plants, including five of the seven highest mercury-emitting power plants in Michigan.

Nearly a third of the company’s voting shareholders supported the resolution, representing an impressive $2.8 billion in shares. At 29.5 percent of the total vote, those in favor were not only exercising their right as shareholders to better understand the risks DTE faces from these pollution-reducing rules, but were also sending a strong message of support for a cleaner energy future in Michigan.

Why DTE?

Between 2006 and 2008, DTE Energy moved up the list of the 100 largest power producers, and the utility’s total emissions of sulfur dioxide, nitrogen oxides, carbon dioxide and mercury rose as well. Increasing production can yield increased emissions, but compared to other utilities, DTE has not kept pace in reducing its overall pollution. In 2011, DTE's electricity fuel mix was 75 percent coal-fired, compared to a regional average of just under 65 percent. Meanwhile, new data from the U.S. Energy Information Administration shows that the power sector is rapidly shifting away from coal and toward natural gas. DTE’s greater reliance on coal leads to both increased pollution and increased financial risks.

Like many coal-fired utilities, DTE Energy faces a number of short and long-term risks associated with existing and proposed emissions regulations. These risks will very likely increase production costs and reduce profits from its existing fleet of coal plants. DTE is not disclosing sufficient information on its plans to cost-effectively reduce these emissions and the related impact on shareholder value, which is why investors were moved to act.

Many companies in DTE’s position recognize the value of retiring their old coal plants and boosting expenditures in cleaner energy resources. The Tennessee Valley Authority, for example, found that its lowest risk, lowest cost strategies for resource planning were increasing investments in energy efficiency and renewable energy. These alternatives offer the price stability that coal and other fossil fuels do not, along with the clear benefit of reduced emissions.

Current law requires that Michigan utilities get 10 percent of their electricity from renewable sources by 2015, and a bipartisan coalition of businesses, agriculture, health advocates, labor and conservation groups is pushing for even more.

In a letter to shareholders in advance of the annual meeting, the Michigan Energy Michigan Jobs coalition encouraged shareholders to support increasing Michigan's renewable energy standard to 25 percent by 2025. The group is collecting petition signatures to place a proposal on the November ballot, seeking to expand the use of renewable energy in Michigan that will:

  • Create thousands of new Michigan jobs, spark over $10 billion in new investment in the state and boost Michigan’s economy by helping to build a clean energy industry and start new clean energy businesses in the state.
  • Expand Michigan’s clean energy production without significantly increasing energy prices.
  • Reduce pollution and give Michiganders cleaner and healthier air and water, protect the Great Lakes, reduce asthma and lung disease, and, ultimately save lives.

Noting that nearly 30 states have already adopted renewable energy standards, the coalition asked shareholders to:

  • Encourage the utility, its subsidiaries and contractors to embrace the Michigan Energy Michigan Jobs initiative and live up to the many positive public statements made by the utility regarding renewable energy.
  • Instruct the utility to cease spending ratepayer resources to engage in a divisive public campaign aimed at thwarting the wishes of their customers.
  • Disclose any use of ratepayer dollars related to opposing renewable energy expansion in Michigan.

So far, DTE has called the proposed 25 percent goal an arbitrary target and suggested that it is too soon to discuss changing the state's renewable energy targets. We’ll see what Michigan’s citizens think about that goal soon, but there’s nothing arbitrary about the finalized EPA regulations staring DTE in the face, and as Ceres' new report "Practicing Risk-Aware Electricity Regulation: What Every State Regulator Needs to Know” indicates, utility commissioners are making decisions today that will impact our energy mix for decades to come.

Shareholders are acting, and voters are aligning. Their message is clear: For DTE and its fellow utilities, there's no time like the present to begin creating a cleaner energy future.

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Eric Justian says:
May 15, 2012 02:15 PM

For supportive readers, follow the Michigan Energy, Michigan Jobs coalition on Facebook here:

Make your voice heard. We want these jobs and that 10 BILLION DOLLAR INVESTMENT here in Michigan!

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Meet the Expert

Dan Bakal

Dan oversees Ceres’ electric power and coal research, shareholder engagement, and furthers the understanding of environmental risks, with a particular focus on climate risk. He works closely with Ceres coalition members, including environmental, investor, labor and public interest groups, to engage in dialogues with electric power companies, which often involve a comprehensive review of environmental policies, performance, and disclosure practices.

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