Upper Peninsula Energy Task Force Committee Recommendations Part II – Energy Supply Department of Environment, Great Lakes, and Energy March 31, 2021 Compiled by: Public Sector Consultants Table of Contents Charge of the Task Force ................................................................................iii Letter from Chairperson ..................................................................................iv List of U.P. Energy Task Force Members .......................................................vi Report and Recommendations ........................................................................1 Section I – Assess the U.P.’s Overall Energy Needs and How they are Currently Being Met .................................................................1 Section II – Recommendations for Energy Supply and Distribution in the U.P..............................................................................15 Recommendations 1-16 ..................................................................................15-33 References ......................................................................................................51 Appendices I. Executive Order 2019-14 II. List of Presentations and Listening Sessions III. U.P. Energy Task Force Recommendations: Part 2 – Energy Supply IV. U.P. Energy Task Force Recommendations: Part 1 – Propane Supply ii Gov. Whitmer forms U.P. Energy Task Force On June 7, 2019, Governor Gretchen Whitmer issued Executive Order 2019-14, noting that Upper Peninsula residents were incurring some of the highest electricity rates in the nation. The Governor directed the U.P. Energy Task Force to consider all available information and make recommendations that ensure the U.P.’s energy needs are met in a manner that is reliable, affordable, and environmentally sound. Her goal was the development of policies that would lead to the implementation of real energy solutions to rein in high rates and provide relief to hardworking U.P. residents. The charge to the task force from Executive Order 2019-14 is as follows: 1. Assess the U.P.’s overall energy needs and how they are currently being met. 2. Formulate alternative solutions for meeting the U.P.’s energy needs, with a focus on security, reliability, affordability, and environmental soundness. This shall include, but is not limited to, alternative means to supply the energy sources currently used by U.P. residents, and alternatives to those energy sources. 3. Identify and evaluate potential changes that could occur to energy supply and distribution in the U.P.; the economic, environmental, and other impacts of such changes; and the alternatives for meeting the U.P.’s energy needs in response to such changes. The Executive Order is attached as Appendix I. A list of presentations and listening sessions is attached as Appendix II. Part I of the report focuses on the short-term steps the state could take in reaction to a disruption of propane supply to Michigan customers. Part II of the report evaluates the U.P.’s energy needs through a broader lens to ensure the U.P.’s energy needs long-term are met in a manner that is reliable, affordable, and environmentally sound. iii Letter from Chairperson The residents of the Upper Peninsula “deserve an energy supply that is affordable, secure, and environmentally sound.” Those were Governor Gretchen Whitmer’s words and vision when she created the U.P. Energy Task Force in June 2019. The exceptional geography which makes the U.P. such a spectacular place to live, work, and play has also hindered its infrastructure development and contributed to market dynamics that expose U.P. families and businesses to some of the nation’s highest electricity rates and energy supply vulnerabilities. The Governor called on the Task Force to recommend alternative solutions for meeting the U.P.’s unique energy needs that will overcome those challenges. This Task Force report, Upper Peninsula Energy Task Force Committee Recommendations: Part II – Energy Supply, makes 16 such recommendations for action by the Governor, State Legislature, and state agencies. They include solutions to promote enhanced planning and coordination among energy providers; support the transition to cleaner, more advanced energy supplies; expand opportunities for regional economic growth; and advance environmental justice for all U.P. residents. Importantly, this report is part of a larger conversation. It is informed by the Task Force’s initial focus on analyzing the U.P.’s use of propane and what a propane supply disruption might mean to residents and businesses. That work was summarized in the Task Force’s April 2020 Part I report to the Governor. This second Task Force report will also inform broader ongoing discussions about Michigan’s energy future across our two peninsulas, including those that will shape the MI Healthy Climate Plan. To be developed by the Department of Environment, Great Lakes, and Energy (EGLE) with support from the recently appointed Council on Climate Solutions, the Plan will serve as Michigan’s roadmap to fulfilling Governor Whitmer’s commitment to 100% economy-wide decarbonization by 2050. Understanding how to make this transition work in all areas of our state will be key to this effort, and the work of this Task Force will help ensure the U.P.’s unique energy realities, needs, and concerns remain front and center in that process. I want to thank the 19 members of the Task Force whose hard work made this report possible. They gave freely of their time, expertise, and creative thinking and remained steadfastly committed to our mission despite the uncertainty and upheaval of the COVID-19 pandemic. They deserve the thanks of all Michiganders for their service. Many others also contributed to this report and its recommendations by giving technical presentations at the Task Force’s ten virtual meetings and/or providing public comment. Their civic-mindedness, engagement, and insights into the U.P.’s complex energy systems were invaluable and demonstrated why we achieve the best outcomes when all voices and perspectives are heard. iv As Task Force deliberations made clear, delivering affordable, reliable, secure, and environmentally sound energy solutions for U.P. families and businesses will not be easy. But as Governor Whitmer frequently says, Michiganders know hard work and are up to the task. If anything, that’s especially true for those who call the U.P. home. May this report provide sound direction for that hard work. Liesl Eichler Clark Chairperson, U.P. Energy Task Force Director, Michigan Department of Environment, Great Lakes, and Energy v U.P. Energy Task Force members Name Role/Title Director, Department of Environment, Great Lakes, and Energy Liesl Eichler Clark (UPETF Chairperson) Mike Prusi U.P. Resident (UPETF Vice Chairperson) President, Michigan Electric and Gas Association of Lansing Tanya Paslawski1 (UPETF Secretary) Kristopher Bowman President, Bowman Gas Company David Camps Owner/Operator, Blue Terra Energy, LLC Mike Furmanski2 Electrical Superintendent, City of Escanaba Tom Harrell U.P. Resident Marquette City Commissioner, contractor with Citizens Utility Board of Jennifer Hill Michigan Douglas Jester Partner, 5 Lakes Energy Region Engineer, Michigan Department of Transportation - Superior Aaron D. Johnson, P.E.3 Region James Kochevar General Manager, Cleveland-Cliffs Michael Larson UP Operations Manager, Michigan Energy Options Mike Nystrom Executive VP/Secretary, Michigan Infrastructure & Transportation Assoc. Anthony Retaskie Exec. Director, UP Construction Council Adjutant General and Director, Department of Military and Veteran Maj. General Paul Rogers Affairs Dan Scripps Chair, Michigan Public Service Commission Dr. Roman Sidortsov Assistant Professor of Energy, Michigan Technological University Chris Swartz President, Keweenaw Bay Indian Community; tribal council member Tonya Swenor Program Manager, Superior Watershed Partnership 1 Tanya Paslawski is now a senior consultant at 5 Lakes Energy 2 Mike Furmanski is now general manager of Alger Delta Electric Cooperative 3 Michigan Department of Transportation Director Paul Ajegba’s designee vi Report and Recommendations Section I – Assess the U.P.’s overall energy needs and how they are currently being met Demographics The U.P. is home to approximately 300,000 residents in an estimated 130,000 households. The overall population estimates for the U.P. have been relatively consistent since the beginning of the 20th century; however, the population has steadily fallen from its peak in 1920. Demographers estimate that by 2040, the population will decline by an additional 13,000. The region’s overall population is also aging, with the proportion of the population age 75 and older projected to double in the coming years. While overall the population is dropping, urban areas in Houghton and Marquette Counties have grown from 2000 to 2017. The remaining 13 U.P. counties have all experienced population declines over the same period. The U.P. has also seen growth in the number of seasonal housing units constructed. Overall, seasonal housing accounts for 22 percent of all housing units and up to 50 percent in certain counties. Home Energy Use Characteristics 57 percent of U.P. households use natural gas as the primary fuel source for home heating (Census Bureau 2019). Despite being the dominant fuel source for home heating, natural gas service is not available everywhere in the U.P., and many households outside of more populous areas are still reliant on propane,