What changes to Michigan’s PACE program could mean for sustainability financing

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Dear Michigan Climate News readers,

We asked you what topics we should cover in this newsletter, and we got a resounding response — you want to stay up-to-date on climate solutions, politics, and policy. To that end, in addition to regular solutions-based stories, we will be bringing you this monthly policy tracker.

Our aim is to help keep you up-to-date on the latest state and federal government policies that impact climate and the environment in Michigan.

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– Nina at Planet Detroit

P.S. I was honored this week to be recognized as one of the Grist 50 for 2022, a list of "everyday climate champions who are demonstrating that a better, cleaner, more just future is still possible — and illuminating the path forward to get us there. The list also included Michiganders Missy Stults, Sustainability and Innovations Director, City of Ann Arbor and Rev. Kyle Meyaard-Schaap, Vice President, Evangelical Environmental Network in Grand Rapids.

On to the policy update:


What changes to Michigan’s PACE program could mean for sustainability financing

Three bills under consideration in the Michigan Legislature could expand the kinds of projects that PACE financing can be used for to include environmental remediation for things like PFAS contamination. One of these, HB 5761, which was recently discussed by the House Committee on Energy, would prohibit the ability of municipal governments to issue bonds or notes to fund PACE projects. The three bills are “tie-barred” meaning that they all must be approved for passage.

Although Williams says that HB 5761 could represent a missed opportunity, only a few early projects in Ann Arbor received any public funding. “We'd love to see that investment come into Michigan from private sources and not spend taxpayer money on it,” Williams said.

This modification may be small compared to the changes made by HB 5011, which expands PACE financing to address environmental hazards and adjusts the kinds of guarantees that contractors need to give for projects. Currently, contractors have to guarantee that savings from PACE-funded projects will outstrip their costs over the life of the loan, which could be a significant deterrent for contractors. Under HB 5011, property owners could modify these guarantees, while HB 5012 would allow projects where energy savings exceed building code requirements to receive PACE financing.

In general, Williams is bullish about the future of PACE in the state, saying the program continues to grow every year, although PACE in Michigan is currently limited to commercial properties. Another recently introduced bill would expand PACE to non-commercial non-industrial properties and allow for public financing.

One driver for the program’s growth may be its use of tax assessments. In participating communities the loans are paid back as part of a property’s regular tax bill in the same way payments for sidewalks or sewers are collected, with similar repercussions for non-payment. Williams says tax assessments make the loans highly secure for the lender, allowing them to offer low-interest loans that can be paid off over multiple decades.

It’s possible that HB 5761 could hinder the PACE program in the coming years, but the change seems unlikely to alter its current trajectory of bringing private financing into the state without taxpayer funding. “It's a direct impact and a direct investment in the properties and energy efficiency future of Michigan by third parties,” Williams said.

Michigan policy

MI Healthy Climate Plan: Michigan released a draft of its climate plan in December, which aims to make the state carbon neutral by 2050, among other goals. Gov. Gretchen Whitmer is set to sign off on the initiative on April 1, Earth Day. In the meantime, the state’s Council on Climate Solutions is reviewing feedback from residents concerning the plan. (MLive)

Sewage and stormwater: Several bills in the House look to make it easier for rural communities to qualify for the Clean Water State Revolving Fund and the Drinking Water State Revolving Fund. This is being done in anticipation of an influx of federal funding that could allow communities to replace lead service lines and update other water infrastructure. (Iron Mountain Daily News)

Protecting groundwater: Three new bills look to protect groundwater as a public trust. “The Great Lakes must never be for sale. And Michigan's groundwater must never become privatized and siphoned away,” said Liz Kirkwood, head of the group For Love of Water. Among other things, House Bills 5953, 5954, and 5955, were introduced by Michigan Reps. Yousef Rabhi, Laurie Pohutsky, Rachel Hood, and Padma Kuppa, would close the loophole for water-bottling that allows private interests to take water, as long as it’s packaged in 5.7-gallon containers or less. (MI Radio)

No dumping: After passing the House, an anti-dumping bill, HB 4084, is being considered in the Michigan Senate. The legislation would increase sanctions and penalties for dumping quantities of litter larger than three cubic feet, with additional fines for amounts exceeding five cubic yards. Dumping is a problem in cities as well as rural areas and the city of Detroit is estimated to spend $3 to $4 million a year to clean up trash dumped illegally.

State butterfly: The struggle to recognize the black swallowtail butterfly as Michigan’s state butterfly continues. Members of the Lowell Showboat Garden Club and several other groups submitted cards before the House Committee on Natural Resources and Outdoor Recreation to speak in the insect’s favor. If selected, the pollinator would join the painted turtle, white-tailed deer, and brook trout in representing the fecundity of the Great Lake State.

Woodcock protection: A bill in the House would require the Department of Natural Resources to create a plan for protecting the American woodcock, which are frequently found in forested areas, old fields, and wet meadows.

Federal policy

Superfund list: The Environmental Protection Agency (EPA) added the former Michener Plating site in Jackson, Michigan to its Superfund National Priorities List for “sites that pose significant human health and environmental risks”. Toxic PFAS chemicals have been found in the groundwater underneath the site and more than 65,000 people obtain water from wells within four miles of it. (Detroit News)

Attainment zone: The EPA declared this month that ozone levels in the Detroit area have fallen below the national standard for ozone pollution of 70 parts per billion. Nationally, average ozone levels went down 20% between 2000 and 2020.

Disclosures: The Securities and Exchange Commission (SEC) gave initial approval to a rule that would require companies to tell shareholders and the federal government how their operations affect the climate. The intention of the rule is to give investors a better sense of the risks that climate change poses for companies if it leads to changes in government regulation or consumer buying behavior. (NY Times)

Michigan Public Service Commission News

Outage credits: The Michigan Public Service Commission (MPSC) is moving to increase outage credits from $25 to $35 “per additional day beyond acceptable thresholds” and will make these credits automatic. Advocacy group Citizens Utility Board of Michigan, which had advocated for a rate of $2 per hour of the outage, were not happy with the outcome. "After several years of discussions, the Commission's order is very disappointing and represents a true missed opportunity. The Commissioners did not take the bold steps needed to confront the reliability crisis facing Michigan, where customers pay some of the highest electric rates in the country for some of the worst services in the country in terms of how often the power stays on," CUB Executive Director Amy Bandyk said in a statement.

Storm damage: The commission is continuing its inquiry into the storms that passed through the Lower Peninsula in early August, knocking out power for hundreds of thousands of customers and leaving some without power for more than a week. The MPSC will create a new template for tracking reliability, outages, and storm response.

Annual report: The MPSC’s Annual Report on the Implementation of PA 295 2020 Utility Energy Waste Reduction Programs found that the state’s investor-owned utilities spent $294.3 million on energy waste reduction programs. The report concluded that for every $1 spent on these programs in 2020, customers received $3.20 in savings.

Wind is king: In another report, the commission determined that utility-scale wind turbines supplied about 77% of the state’s renewable generation in 2021, while hydroelectric power made up 9%, biomass 7% solar 4%, landfill gas 3% and municipal solid waste 1%.

UP rate increase: The MPSC also approved a settlement that would allow Wisconsin’s Northern States Power Co. to increase rates by $1.7 million in two Michigan counties where it supplies power. The average residential customer will see a rate increase of $8.69 on their monthly bill.

Electric rate cases: Both DTE Energy and Consumers Energy have electric rate cases open in Michigan. DTE’s case asks for an 8.8% increase on residential customers, an increase from the 5.4% that was granted during their last rate case. Meanwhile, Consumers is also requesting an 8.8% increase for residential customers.

Gas rate case: DTE has also requested an 11% increase on its rate for residential gas service. Michigan Attorney General Dana Nessel has intervened in this case, saying, “(E)ven small monthly increases in the cost of gas service can have a tremendous impact on a family’s budget.”


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