MPSC Behind the Meter Podcast: Planning Michigan’s Energy Future

This episode explores how Integrated Resource Planning (IRP) shapes Michigan’s long‑term energy decisions. We break down what an IRP is, why it matters, and how it guides utilities in delivering safe, reliable, and affordable power. Listeners will gain insight into the data, technologies, and policy considerations that inform Michigan’s energy future.

Transcript

SPEAKER_03 0:00

Hello, and welcome to another episode of Behind the Meter, an MPSC podcast, where we explore the people, policies, and technologies shaping Michigan's energy and telecommunications future. I'm your host, Mike Byrne. Today we're going to talk about a really interesting topic, maybe one that flies under the radar a little bit, but is super relevant and timely to all of our listeners and all the Michiganders that we serve. At a time of changing electricity resources generation, a time of increased sort of customer attachment to the system and size of customers attaching to the system. We can talk a little bit about the way that the commission thinks about some of these issues and the processes that are used to review plans by utilities to serve customers. So I'm joined by all three commissioners today. Welcome, Chair Scripps, Commissioner Peritic, Commissioner Myers. It's great to see all of you. And let's just jump right in. We're going to talk about integrated resource plans. What is an integrated resource plan?

SPEAKER_02 1:08

Well, it's really a set of things that allows us to make smart, long-term decisions today to ensure reliable, affordable energy in the future. And I will say, and this might say more about me than it does about our regulatory proceedings, but this is one of my favorite things that we do because it really is important. It allows us to evaluate not just what utilities are doing today and how they're operationally meeting the needs sort of hour by hour or minute by minute, but where are we going? Where are we headed? And how do we do it in a way that that is cost effective and that ultimately leads to the reliability that customers expect and deserve.

SPEAKER_01 1:46

At its core, an IRP is it's a long-term plan that utilities are required to file, outlining how they will meet customers' energy needs 5, 10, 15, 20 years into the future.

SPEAKER_00 2:00

Yeah, so the way I think about integrated resource planning is kind of if you were a restaurant owner and you had a plan for a busy upcoming weekend. Let's say it was the Art Fair in Ann Arbor or the Common Ground Music Festival in Lansing or the Cherry Festival in Traver City, some something. You might notice a correlation to the people sitting around the table, too. And uh so you have the that that restaurant owner then has to predict how many people are gonna show up, right? What they're gonna want to eat, um, the how much food they're going to want to eat, whether their existing kitchen equipment can handle that demand, when to schedule their staff to come in, how if they should hire more staff maybe to uh to to pitch in for that weekend, and how to avoid running out of food during during that dinner rush, maybe even over the course of the day, the number of people that are there changes. And if that restaurant owner underplans the system, then their customers are unhappy and people are turned away and and they they miss out. Uh but if they overplann, then they wasted a lot of money. And that's not good for business either. And our utilities in Michigan are facing that same sort of balancing act. They need to make sure that there's enough electricity available during peak demand and during extreme weather without overbuilding the expensive infrastructure that we all have to pay for. So instead of asking how much food they should be ordering, our utilities are asking questions like how much electricity will customers need, which power plants are getting old and might have to be replaced? Should we be building new generation? Uh, do we need to either fulfill new demand or to replace power plants that might be getting too old and need to retire? Or are uneconomical? Um, can we reduce that demand through energy efficiency programs or getting customers to use a little bit less electricity? And or how do we keep the lights on during any extreme weather? And uh and importantly, how do we do all of this at a reasonable cost, right? Like what is the least cost way of actually answering all of those questions and meeting customers' demands?

SPEAKER_03 4:15

Yeah, so those are all really important questions, and and it sounds like there's a a process at the commission to be able to kind of think through how to how to answer some of those questions. So when a utility files an IRP, what are they required to include? And then as a commissioner, what what are what are you all kind of evaluating?

SPEAKER_02 4:34

Yeah, it's it's a whole range of things. So um the projected demand is is one of the biggest things. So how do they see the system changing? How much are they adding? At what pace? Um, really, sort of what does what is the the demand outlook look like as they're looking, as as Commissioner Myers talked about, five, 10, 15, 20 years into the future. And those, you know, can have some pretty significant question marks around them. Um they're also looking at their generation resources uh and the different attributes. I mean, there's different, you know, nuclear operates different than gas, operates different than coal, operates different than renewables. Uh the role of batteries, obviously, is a growing issue. And and we've had experience with with energy storage, with the Luddington pumped storage facility for decades now, but but the sort of smaller batteries, four-hour batteries, are changing things uh as well. Um one of the things that I think is most important in Michigan's approach is that that we look at both the the generation side and on the demand side. So not just looking at how do we how do we create electrons, but but also ultimately how do we reduce the amount of load on the system, both at peak times through through things like demand response, uh as well as overall with things like energy waste reduction programs, where we've got some of the best programs in the country, and really sort of, and then also some other things. So things like our connection to the regional power grids with MISO and PJM, and how do we rely on out-of-state power to balance things? What do we do when we might be generating excess? And uh, are there transmission solutions that might actually be more efficient than a generation solution, or vice versa? And really trying to roll all of that together. And um in some ways, the the planning is you know, I mean, the planning is really important, but the the process of the planning is probably even more important than the plans themselves. We know we're we're not gonna be perfect on what the future holds, but but how do we find the the no regrets or at least the least regrets pathways given our our current information to try and keep the lights on at a reasonable cost as we look out into the future?

SPEAKER_00 6:35

That sort of having to predict what the future is gonna look like is one of the most uh difficult parts of this. And especially in this changing environment that we have now with you know increased electrification, with uh new very large loads that are coming onto the system, um, with uh you know population growth or population movement. Um so having to having to actually make those predictions is is really hard, and then matching the right generation resources to then uh to then to then fulfill whatever that uh that that final growth looks like. Um and I guess I also just want to highlight that this isn't it's not it's not just the utilities that the submit the plan and then the commission that reviews it. There's a lot of other parties that then participate in this too. So it's not just the the utilities uh prediction, it's their prediction, plus anybody else who wants to intervene in the case can put their own prediction on the on the record as well, and their own uh ideas for solutions for how to meet that ultimate load. And then it goes through the contested case process with the with the the ultimate outcome reflecting everybody's participation in that case.

SPEAKER_01 7:52

Not only are plans presented, but you look at the multiple pathways, and as the commission, we determine what's the most prudent and reasonable pathway that is to take.

SPEAKER_02 8:03

Yeah, I think that's a really important part of this too. I mean, it's for most of our decisions, it's is the is what's being proposed reasonable and prudent. And when the legislature put the integrated resource planning framework together in 2016, they actually elevated the standard. It's not, is the plan reasonable and prudent, it's is this the most reasonable and prudent? That's a really high bar, and I think that's appropriate given sort of the the amount of money that's being expended and the consequences of getting it wrong.

SPEAKER_03 8:36

Okay, so that that's that's that's helpful to understand, sort of, that that's the standard that um that the commission is is using to to try to make a determination in an IRP. Um maybe we could talk a little bit about sort of to your point, Commissioner Paritic, the the process that's utilized, the fact that it's a contested case, the fact that you know there are expert witnesses who who submit testimony, particularly the MPSC staff, uh, but other interveners as well. Um just just how how is the commission kind of uh how does the process work and how is the commission sort of evaluating IRPs that that are filed?

SPEAKER_00 9:10

Maybe I'll just start briefly with the the way that our our staff plays a role here. So we we talk about the role of our staff pretty regularly on this podcast and that we have with good reason. Absolutely. With uh uh we have a we have a fantastic staff of you know over over 200 professionals that are you know engineers, economists, attorneys, analysts, they they they have very deep understanding of all of the different pieces that come into play when you're trying to predict what the load looks like and then try to figure out how our utilities are going to then serve that load. So they I I mentioned that the utilities submit the plan and then other parties will submit their ideas too onto the record. Our staff also does that too. So they they get to have a very uh, you know, they get to look at all different all of the pieces of the plan and submit their expert testimony onto the record too, for us to be able to evaluate. Um then and then ultimately uh it comes down to us as the commissioners reviewing that full record, including our staff's analysis, all of the different input from all of the intervening parties, the all of the testimony, all of the exhibits, and then ultimately decide whether the plan meets that legal standard uh that you described, Chair.

SPEAKER_02 10:32

Yeah, I think that that's really important because it's it there are a lot of moving parts in this, and and it really needs to be based on evidence and it's got to be informed by expert analysis. It's not sort of the back of the envelope calculation that's provided by a utility or somebody else on whether we keep a goal plan open. It's really got to be how all the different pieces fit together, both supply side again and demand side, and uh and then where where we're going. We can't just skate to the puck, we've got to skate to where the puck is headed.

SPEAKER_03 11:03

That's great. And so I appreciate understanding sort of how uh how how the process works and and what the commission is looking at. Maybe it's important to talk a little bit right now about sort of why we are using IRPs and why they they are sort of important at this moment. So, you know, what's going on as it relates to kind of customer load growth? What are what are we seeing uh on the trends on that side of the equation? And then what else is changing within the the energy landscape, the the ways that the customers can be served?

SPEAKER_02 11:34

I might start with maybe just a historical look. So we actually had IRPs prior to 2000, and it was when we had vertically integrated utilities where where they own the wires, they own the generation, they own the transmission system, and it was a way of saying like when the utilities were putting together their plans, we wanted to vet them and make sure that we were optimizing for public benefit and not just for utility benefit. When we restructured, we actually got rid of the IRP planning statute uh and and actually didn't restore it until 2016. And I think one of the reasons for restoring it is that we we now we're living in a different place. We had created regional transmission organizations and energy markets that informed utility decisions. There was a pretty significant resource mix uh change that was taking place. 2016 was also the first year that we retired the first batch of old coal plants. Um we were seeing an increase in in renewables driven by uh by a number of factors, including the renewable portfolio standard that was enacted in 2008, but also the decline in costs and the ability to integrate those. We had seen some pretty significant results from energy waste reduction, but but really looking at a pretty flat demand landscape. And so, how do you optimize the system for a changing resource mix with the emergence of energy markets where you're not getting the benefits of growing demand to help spread the costs out? And and that really, I think, has helped us over the last decade to make sure that we're we're making informed long-term data-driven decisions. But I'll say that the future looks different today than it did even 10 years ago. And I think some of the demand growth challenges only underscore the importance of having the framework that we have.

SPEAKER_00 13:20

And I think to talk about the the elephant in the room or the data center in the room, um, I we that's that that that sort of new load growth, that really, really big load that is coming onto the system all at once and something that we've never experienced before, um, makes these these sorts of planning processes all the more important. We uh made it very clear in all of the past orders that we have issued, whether that's for data center generally applicable tariffs or for special contracts, that any of those new data center customers, those new very, very large loads, need to pay for 100% of the cost that they are causing to the system. That and that includes the cost of generation that would typically be paid be planned for in an integrated resource planning process like this that we're talking about. But that sort of process of looking at the system as a whole like that allows us to actually parse that out and see: okay, the load is growing here because of, I don't know, electric vehicle demand. The load is growing here because of uh people installing heat pumps. But the load is growing there because there's a data center there. And we can identify that and we can make sure that whatever resources are built and paid for to uh to serve that are being paid for by that customer. And that's gonna be a big part of this next round of integrated resource plans that we have being filed in front of the commission that we haven't done before. And it's it's gonna be it's uh it's gonna be important for us to to pay close attention there.

SPEAKER_02 14:59

And I'll say maybe just to round that out, I think that's a big difference between how we approach integrated resource planning in Michigan and and candidly how some other states do it. That we're not building on spec hoping that data centers arrive and leave being stuck with the bag at the end of the day if they don't. Really, we're we're for data center-driven load growth, that is the responsibility of data centers. And then we need to fit that into the broader plans, um, but with real clarity around how the data center customers themselves are paying for the infrastructure upgrades and new generation and new demand response and new batteries and everything else that are needed to serve those customers. So it's it's a both and, but it's not like in other states where we're we're just building based on projections and we'll see if we get there with everybody else paying the costs if we don't. That's that's a major difference.

SPEAKER_01 15:50

And honestly, when we did our public hearings around um the IRP planning process, that is what we heard overwhelmingly from regular um from constituents or customers that they don't want to be responsible for the cost of data centers. And that's why we built it into the the planning parameters for IRPs, right? Like we heard it at both stops that we did, and and I think we we got overwhelming comments on it. And so it was it was a priority for us in the plan parameters process. Say that three times fast, um, to ensure that you see, you know, that that data centers are carrying the full cost of of their growth.

SPEAKER_03 16:35

So let's build on that a little bit. Um we we you you're you're alluding to the fact that that the commission does take uh kind of public feedback into consideration when when setting up sort of the the the process by which it it evaluates IRPs. So can we talk about that a little more? How does the public fit into this process?

SPEAKER_01 16:55

I'll jump in. Oh god, since I already started talking about it. Um so we did two hearings last year. Well, wait, you guys did more before I came, right?

SPEAKER_02 17:05

I think it was just the two.

SPEAKER_01 17:06

Oh, it was just the two. Okay. Two hearings, um, one in Metro Detroit, one in Grand Rapids, so west side and east side parts of the state, to hear from um from average citizens about what is important in the IRP planning process. And again, we heard a lot about data centers, we heard a lot about battery storage, we heard about again the reliability like and affordability. Those were overwhelming themes across the state from Michiganders about what was important. And and um, when our order came out, I think it reflected that in our planning parameters.

SPEAKER_02 17:48

Yeah, I think I think that that's right. And I mean, you started, Mike, by saying like this this flies under the radar. And if you want to get wonkier than IRPs, it's the IRP planning parameters and filing requirements, but but they really sort of set the the boundaries, the context, and and it looks at what do we want the utilities in addition to the stat like or in interpreting the statutory requirements, what what do those mean in practice in terms of getting our arms around how the system's changing, what does load growth look like? And so, really, things around how much electricity do we expect to be used in the future, the impact of electric vehicles and electrification and onshoring of manufacturing and all the other changes that that are driving demand growth, the cost of fuels like natural gas, um, that there's there's been historic volatility. There have been times where it's really expensive, and you see you saw us actually building uh liquefied natural gas import terminals, and then a couple of years ago, or a couple of years later, after the advent of fracking and the decline in natural gas, some of those same facilities were actually being turned into export terminals. And so, that how do you get your arms around cost trends and volatility, how utilities can meet clean energy standards, including the clean energy standards that were enacted at the end of 2023, which for regulated utilities actually flow through the integrated resource planning process in terms of their clean energy plan compliance strategies, and then how technologies like rooftop solar affect the grid and really the spread of distributed energy resources more broadly. So it's really trying to understand what's changing in the landscape, and then how do we want utilities to reflect those changes in what they put in front of us in terms of their plans as well as what they study and model in the development of those plans.

SPEAKER_00 19:33

Right. And we wanted to make sure that the that the public had an opportunity for input into those assumptions behind the plans because that that and behind the model, right? Like because that that model is really what ends up dictating what the final uh submission looks like and what uh what what what ultimately comes before us. Um but then so so that's the the planning piece of it. I would I've been trying to think of a way to tie this back to my my uh restaurant analogy, and I I the best I can come up with is that it's like the Excel spreadsheet that you would put together for ordering for your ordering system, right? Like to to which which vendors you would go to to order order from. So it uh maybe it breaks down a little bit. But the um but uh but I also just wanted to highlight, it doesn't, it's not the the opportunity for public input isn't just during the planning parameters stage. Um we like I like I mentioned previously, there is an opportunity to participate formally during the actual uh integrated resource plan case process as well. So um it's not just the parameters behind it, but then you then you have to actually look at that plan that was submitted and say, these pieces I agree with, these pieces I don't agree with, and I think that you should be able to change them in this way.

SPEAKER_03 20:44

So as you're as once a plan comes before the commission, it's a lot of competing um elements that that that you are taking into consideration, right? There's an affordability piece, there's a reliability piece, there's whether you're meeting uh certain sort of environmental or other kind of clean energy standards, like that there's just a lot of elements to these plans. So how do you balance the priorities like cost, uh, reliability, sort of energy resource mix, and kind of what does that look like in practice when when you are evaluating um submissions in in an IRP?

SPEAKER_00 21:19

Yeah, it's really I I mean I think that's the hardest part of the job, right? Like that's that's uh that that's where so much of the judgment call comes in. It's where our experiences and of us and of the staff and what they've seen previously come into play. We look to to other jurisdictions to see how things have affected them. Um but really what it all comes down to is what is on that record and evaluate reading those opinions and those that that testimony and that looking at the data and the models that are that are on the record and seeing who has the best arguments and and really uh diving deep to understand the assumptions behind the model. The assumptions behind what the uh those predictions are, and asking, like, do we believe them? And and did that party over there actually make a better argument, right? And and how do you how like balancing those priorities of the of you know cost and affordability challenges, the uh reliability, the meeting the clean energy standards, like those that that really does create um a difficult task. And uh we're gonna be spending a lot of time working on this over the next year.

SPEAKER_01 22:35

I think it's important to point out that affordability is central to every decision we make, right? Like, like we're balancing all the things of meeting the clean energy goals and reliability and you know the future of, but a part of every decision when we're balancing like what path to take, we're we're thinking about affordability for the customer.

SPEAKER_02 22:59

Yeah, I I think that's right. And I think it's in some ways the most important thing that the legislature did in 2023 with those reforms to the energy laws, that we've had a balancing test essentially for a number of years. It wasn't just do the thing that's best for resource adequacy or reliability or cost effectiveness or environmental compliance. It was balance all of these around that standard of what is the most reasonable and prudent way of achieving our energy mix. But by statutorily and clearly articulating that affordability has to be one of those considerations, along with some other new ones, including compliance with the clean energy targets, uh labor standards, environmental justice considerations. But by explicitly naming affordability as one of the things that we've got to focus on, it gives us one more tool to make sure that as we're doing all that work, as we're trying to get that balance, we we are not losing sight of the people who pay the bills at the end of each month.

SPEAKER_03 23:58

So I think that's a great point. When we talk about the 2023 laws, they they enacted a number of ambitious new standards, right? 60% renewable energy by 2035, 100% clean energy by 2040. Um, and and as we are sort of evaluating the utilities' paths to be able to get there, you know, people have raised questions about sort of might this impact reliability in a negative way, affordability in a negative way. I think that you know we'll have to sort of see how these processes play out, but but if we're seeing that there that there may be issues, how how could we uh address any of those potential issues?

SPEAKER_02 24:37

Yeah, a lot of people have talked about these in in terms of off-ramps, and what they really are are it's sort of tapping the brakes. And but it but explicitly in statute, they give us four ways that we can extend compliance. One is around resource adequacy, if we're concerned that the the lights will go off, one is around grid stability, the sort of voltage issues that that are localized typically, but can have a pretty significant impact on the grid as a whole. Uh affordability is is one. So again, not only do we need to include it in how we do the planning, but if ultimately the result of that planning uh is a system that is not affordable for customers, we can extend compliance deadlines. And then there's been a lot of focus on disruptions in supply chains, and and if that ultimately has a material effect on the ability to sort of meet the standards articulated in the law, we can extend compliance for those as well. So it's it's not a waiver, it's not that you don't have to do this, but we can extend compliance by a year at a time, and then after two, I think we have to tell the legislature why we're seeing these challenges and how they're continuing, so that maybe they have a conversation about do we need to make changes on our side. But I think it it means that you know we're not gonna be in a Thelma and Louise situation where we're just driving the car off the cliff. That's not going to happen. And it's important, I think, that they gave us those those provisions and though and customers those protections so that if we do get to a situation where we're jeopardizing resource adequacy or affordability or the other factors, that we can say, all right, we're gonna we're still gonna get there, but we're gonna give it more time so that there's not rate shocks, there's not uh losing reliability and ultimately not leaving people in the dark.

SPEAKER_03 26:15

That's great. So we've talked about how IRPs balance reliability, affordability, different legal requirements, uh, but let's maybe talk a little bit about the actual tools and resources that the utilities may use to be able to meet the targets that are laid out in integrated resource plans. Um traditionally people think about large power plants and transmission infrastructure as the way to be able to serve customers, but are there other are there other sort of resources that that could be in the mix as well? What kinds of resources are utilities considering? How's the commission thinking about this? Um, and maybe in particular, why why has the commission talked so much about virtual power plants lately?

SPEAKER_00 26:55

Yeah, so uh virtual power plant can be a little bit of a confusing term, um, or VPP as it's shortened to. Um but really all that it means is that it's a a large set of small resources that are all coordinated to act as one. So that those small resources could be home batteries, they could be home thermostats, they could be um just general demand response programs, uh, but they're all kind of connected together and coordinated to respond as a as one entity. That's kind of what's meant by a virtual power plant. Um but uh your your point generally, I think, is really important that it's not just that we look at the traditional resources that we have been building in the past, right? Like coal plants or gas plants or um hydro facilities or or that, but that we're the we're looking at all of the different possible resources that are available to us today. And that's changed a lot. Like technology has gotten a lot better, we have a lot more reliable resources to choose from. And uh back to the chair's point that we need to we need to approve the most reasonable and prudent plan. Any plan that that comes before us needs to show that it's that it's incorporated, that it is considered all of these different options, including some of these newer options, like you know, rooftop solar that's paired with battery storage or um you know uh electric vehicles that uh are tied together and can respond as as one unit. Um and you know, the the these resources might seem small on the individual level, but when you aggregate them together, they can really reduce demand during peak periods, they can really help support the overall system reliability, um, and in some cases really reduce the need for more costly infrastructure investments in the traditional sense.

SPEAKER_02 28:49

Yeah, I mean I think the the virtual power plant's terminology is new, but a lot of the things that underscore it aren't. And so things in particular like uh like demand reduction that that Commissioner Peritic was was talking about, you know, that has been part of our IRP framework for a number of years. And because we're able to consider demand side resources on an equal footing with supply-side resources and think about how load reduction or or load shifting uh can play a role in the overall resource mix, we've been able to ultimately, I think, have a resource transition that's more cost-effective as a result. And in fact, when you look at our energy waste reduction uh performance over the over the last several years, we we believe that we've avoided the need for two central station gas plants and have done so at a fraction of the cost. And with demand response, I I'll go back to your analogy of sort of busy restaurants, like the ability to shift when some of those customers are coming in. So you don't have to build a 400-seat restaurant, you can have a 200-seat restaurant and a 200-meal kitchen, that saves a lot of cost to customers at the end of the day, instead of just building to whatever that one day out of every 365 or one hour uh per year standard is where you're at peak capacity. And so these demand side resources, particularly now that we're better able to aggregate them together through technology and through sort of meters that often are embedded in electric vehicle chargers or in smart uh smart washers and dryers or water heaters, or go, you know, the list goes on. That gives us new tools, but but the idea itself of how do you use both supply side and demand side uh levers to ultimately get balance in the most cost cost-effective, affordable way, is is something we've really been trying to do since since the IRP statute was put in place a decade ago.

SPEAKER_03 30:42

All right, so uh we've we've had a great conversation today. We understand that sort of the the the landscape for delivering electricity is changing. The the sort of um the the usage of the system is is likely to increase, and the the commission has a process in place to be able to evaluate how utilities themselves are gonna be able to most uh cost effectively, most reasonably and prudently serve their customers. So I appreciate all of you for for your insights. I would love to ask each of you though if if you just had one more takeaway for our for our listeners. Commissioner Peritek, I'll start with you.

SPEAKER_00 31:17

We have uh our two largest utilities submitting their IRPs in the upcoming months. So we've got our work cut out cut out for us both at our level, at the staff level, and everybody's everybody who's paying attention and who cares about the the resources that are used to serve the load.

SPEAKER_01 31:33

This is my first uh go-round with IRPs, and I'm really thinking about like, or I'm I'm really thinking about how to look at this, like how are utilities leveraging technology better, how are we making the grid more flexible and resilient, and how are we keeping affordability front and center? That is, yeah.

SPEAKER_02 31:53

Yeah, IRPs are really about planning ahead, about using a data-driven process and making thoughtful decisions today to make sure that we're protecting customers and avoiding problems in the future and ensuring that our energy future remains reliable, resilient, and affordable.

SPEAKER_03 32:09

That's great. Thank you to each of our commissioners for helping to break down this complex but but critical topic. And thank you to our listeners. Um IRP may sound technical, uh, it plays a major role in shaping the energy future for all Michiganders, and importantly, it's a process where your voice can can be heard to help to shape that future. Uh, thank you for listening and hope that you join us again next time behind the meter.