U.P. Energy Task Force submits propane recommendations to Gov. Whitmer

This map, from the Upper Peninsula Energy Task Force Committee Recommendations: Part I -- Propane Supply, submitted to Gov. Whitmer on Apr. 17 by the U.P. Energy Task Force, shows the residential use of propane as a primary heating source, by county, in Michigan. Click on image for larger size. (Photo from U.S. Census Bureau courtesy Michigan.gov)

LANSING -- On Friday, Apr. 17, 2020, the U.P. Energy Task Force submitted to Gov. Gretchen Whitmer its 14 recommendations on propane availability in the Upper Peninsula. The report, Upper Peninsula Energy Task Force Committee Recommendations: Part I – Propane Supply, has been posted online at Michigan.gov/UPEnergyTaskForce.*

"The report encapsulates hundreds of hours of discussion and work and includes important public input regarding affordable energy in the Upper Peninsula," said Liesl Clark, chair of the Task Force and director of the Michigan Department of Environment, Great Lakes, and Energy (EGLE). "The Task Force looks forward to working with the Legislature and stakeholders on these common-sense ideas designed to protect U.P. propane customers."

Liesl Clark, center, chair of the U.P. Energy Task Force and director of the Michigan Department of Environment, Great Lakes, and Energy (EGLE), opens the Sept. 20, 2019, meeting of the Task Force held at the Jutila Center in Hancock. Also pictured here at the same table are Mike Prusi, far left, U.P. Energy Task Force vice chair, and Task Force member Roman Sidortsov, far right, Michigan Tech assistant professor of Energy Policy. (Photo by Keweenaw Now)**

The U.P. Energy Task Force received more than 800 public comments on the draft recommendations and more than 1,000 total comments since it began meeting last July. An appendix to the report is a technical document, prepared for the Task Force by Public Sector Consultants (PSC), which explains how propane markets are changing across the country and explores how those markets might react to a propane disruption.

"We all know that there are unique challenges in the U.P. when it comes to energy and I appreciate Gov. Whitmer’s recognition of the issue and her desire to find possible solutions," said Mike Prusi, vice-chair of the U.P. Energy Task Force. "The Task Force encourages legislators and state agencies to take quick action on our recommendations so the region’s residents and businesses can be confident that any potential disruption in energy availability won’t mean a huge hit to their budgets."

The recommendations to the Legislature:

• Explore creation of a customer storage incentive program designed to encourage propane retailers and their customers to work together to maximize the amount of propane in customer storage at the beginning of and throughout the heating season.

• Explore a wholesalers and retailers storage incentive program to encourage wholesalers and retailers to create more propane storage capacity. In order to avoid creating a disadvantage for companies that made early investments in this area, the incentive could be designed to focus on the relationship between a company’s annual sales and its storage capacity.

• Review the Freight Economic Development Program to determine if any program revisions are needed to encourage greater capacity for receiving propane delivery by rail and diversifying our supply infrastructure to protect Michigan consumers. Because of the lead time necessary to expand rail infrastructure, action on this recommendation should be taken as soon as is practicable.

• Increase LIHEAP funding for weatherization to help reduce long-term resource burdens imposed upon low-income customers to pay utility bills.

• Engage the Michigan Propane Gas Association about the potential of levying a small surcharge on propane fuel to target an Energy Waste Reduction/weatherization program focused on propane users in Michigan. This program could be operated in a manner similar to the State’s Energy Waste Reduction program administrator for those utilities that choose to not run their own programs. 

• Establish a fund designated to pay for the weatherization program deferral home repair and mitigation measures needed to make a residence eligible for federal, state, and utility-sponsored weatherization assistance when utility-sponsored weatherization assistance includes the major measures of air sealing and/or insulation.

• Explore adopting fuel price gouging legislation, using the Wisconsin law as a potential model. The legislation should apply to both wholesalers and retailers of propane and ensure that the prices charged to customers reflect the actual costs incurred by propane providers plus a reasonable and customary profit.

The recommendations to the Department of Technology, Management and Budget:

• Explore whether the state could contract for propane in a manner that would create the equivalent of a strategic propane reserve that would be available in a timely manner in case of a disruption.

• Work with the Department of Health and Human Services to determine, in its implementation of assistance programs, if the state could contract for propane in such a way as to have a resident’s tank filled on a state account and therefore potentially at a lower cost. In implementing this recommendation, the state should recognize and work within existing contractual arrangements of the customer.

• Explore whether it can revise the method by which it contracts for propane, to potentially go beyond just serving to supply state facilities, and provide other benefits associated with added storage capacity or serving low-income residents eligible for bill payment assistance as discussed in other portions of this report.

The recommendation to the Department of Transportation:

• Pursue a State Planning and Research project that would include a survey of U.P. railroad companies to better understand their capabilities with regard to propane delivery and storage. The SPR project should also include ratings/classifications of railroad lines and spurs and needed upgrades to facilitate improved propane distribution in the Upper Peninsula. MDOT, in collaboration with the Railroad Companies, should provide a summary of the survey results and recommendations regarding needed rail line upgrades to the Michigan Legislature.

In their Analysis of Propane Supply Alternatives for Michigan, Public Sector Consultants (PSC) worked with MDOT to develop cost estimates for a potential new rail line serving the Rapid River facility, which now receives, from Enbridge Line 5, NGLs (Natural Gas Liquids) to be turned into propane, estimated to be 87.6 percent of the Upper Peninsula’s propane demand. This map, from p. 102 of the Task Force report (pdf p. 132), shows a possible extension of rail service to the Rapid River facility from the existing Canadian National rail line that runs south of the facility along U.S. Highway 2. PSC estimates costs for extending rail service to the Rapid River facility to be $6.5 to $10 million and estimates the incremental cost per gallon of propane delivered by rail would range from a low-end of $0.04 to $0.06 per gallon. On the high end, costs per gallon would range from $0.07 to $0.10 per gallon.

The recommendations to Public Service Commission:

• Identify and monitor factors that can cause or contribute to a propane shortage or disruption that could potentially affect Michigan customers. In addition, develop specific steps that would be taken by the state in response to warning signs they are monitoring. To the extent that identified significant factors are not required to be reported to a government agency, the MPSC should make recommendations to the Legislature or the appropriate agency of the nature of the information and the value of potentially requiring additional disclosure. In addition, if the MPSC has sufficient information but no authority to take necessary actions, it should make a recommendation to the Legislature regarding the need and value of additional authority.***

• Require one standard application for use by all regulated utilities for customers seeking energy waste reduction, weatherization and/or bill payment assistance and to the extent possible require utilities that serve the same location to harmonize both their eligibility requirements and the deployment of their energy waste reduction programs.

The recommendation to the Department of Health and Human Services:

• Review assistance programs to determine if more families in need could be identified earlier under current self-sufficiency programs and their support crafted to allow them to participate in lower cost budget plans offered by propane retailers, thus reducing the numbers of families which then need to rely on the SER program for family in crisis.

The Task Force will now launch its next phase of work, which was outlined in the Governor’s Executive Order: Formulate alternative solutions for meeting the U.P.’s energy needs, with a focus on security, reliability, affordability and environmental soundness; and identify and evaluate potential changes that could occur to energy supply and distribution in the U.P., the impact of the changes and alternatives for meeting the U.P.’s energy needs.

The public can address those topics by emailing comments to EGLE-UPEnergy@Michigan.gov.

A report on overall U.P. energy issues and alternatives is due to the Governor by March 31, 2021.

Follow the activities of the U.P. Energy Task Force at Michigan.gov/UPEnergyTaskForce.

Editor's Notes:

* Click here to go directly to the pdf document of the report.

** A video of the Sept. 20, 2019, meeting of the U.P. Energy Task Force in Hancock, is available here: https://www.youtube.com/watch?v=EbDFELYuHfQ&feature=youtu.be
Links to presentations from that meeting and other meetings of the Task Force are available here.

*** From the Executive Summary of this report: "One of the primary objectives for the task force is to develop a plan for the state’s propane supply in the event of a major disruption, such as the shutdown of the Line 5 pipeline that crosses the Straits of Mackinac....Issues related to Enbridge’s Line 5 pipeline have garnered significant attention over the past five years, including a number of studies assessing the pipeline’s safety, alternatives to the existing pipeline span crossing the Straits of Mackinac, the environmental impacts of a pipeline failure, and the impacts the disruption or closure of the pipeline would have on Michigan residents. This report does not seek to address the same questions posed in these earlier research efforts or to take issue with prior assessments; instead the State of Michigan has provided PSC with a clear directive: "Identify alternative approaches to meeting the propane needs of Michigan’s residents and businesses." (State of Michigan, 2019)

"Given the amount of information already compiled on this subject, PSC’s study sought to leverage existing research and to expand on the collective understanding of how Michigan can prepare itself in the event of future propane supply disruptions. This study does not attempt to address the questions related to the operation or safety of Enbridge’s Line 5, nor does it consider the potential impacts of various spill scenarios. Instead the study focuses on the options available to supply the state with required propane volumes under three potential supply disruption scenarios."

These three scenarios, as pointed out in our videos of the Portage Library presentation included in our April 11, 2020, article Attorney General Nessel comments on UP Energy Task Force Report on Propane, urges prompt planning to prepare for shutdown of Enbridge Line 5, are potential disruption of Line 1, potential disruption of Line 5, and extreme weather events. See pp. 63-66 (pdf pp. 93-96) of the Task Force report on these three scenarios.