Bruce Goodman presented this powerpoint at the Michigan Energy Forum event on September 6th, 2012.

1. Michigan Energy Forum
September 6, 2012
Ann Arbor, Michigan
Important Notice: This presentation has been prepared by Varnum LLP for informational purposes only and does not constitute legal advice. Copyright © 2012, Varnum LLP. All rights reserved.

2. Ballot Initiative – November 6, 2012
 To add New Section 55
 Michigan’s Clean Renewable Electric Energy
Standard
 Has been certified for the ballot
 Has not yet been given a number
 Initiative Petition to amend to the Michigan
Constitution of 1963

3. Amending the Michigan Constitution
 The Michigan Constitution can be amended three ways:
 Through a legislatively-referred constitutional amendment
 Vote of 2/3rds of the members elected to and serving in each house
 Then a vote at the next general election
 Through an initiated constitutional amendment
 Gathering of petition signatures equal to 10% of total voters in Governor’s race
in preceding election
 Then a vote at the next general election
 Decisions on validity must be made within 60 days of election
 Needs a 100 word statement of purpose
 Through a constitutional convention
 A question about whether to hold a constitutional convention automatically
appear on the state's ballot every sixteen years
 This issue was rejected in the last general election

4. Amendments since 1963
 The 1963 Michigan Constitution has been amended 35
times since it went into effect in January 1964
 nearly doubling its length and adding to its complexity
 many were changes that could have been made statutorily
 The legislature’s record
 49 proposed
 22 passed by the electorate
 The initiative record
 31 proposed
 13 passed by the electorate
 So the batting average is less than 50% [35/80]

6. Some successful amendments
 Definition of marriage as between one man and one woman
 Ban certain affirmative action programs
 Authorize stem cell research
 Authorize a state lottery
 Increase the drinking age from 18 to 21
 Establish term limits for elected officials
 Prohibit state aid to non-public schools
 Property tax limitations
 Limit property tax funding of schools
 Elimination of sales tax on food and prescription drugs
 Authorize deposit of state funds into savings and loan and credit unions
 Grant state troopers collective bargaining rights

7. Some unsuccessful amendments
 Lower drinking age to 19
 Lower minimum age of legislators from 21 to 18
 Election of Public Service Commission
 Remove prohibition on school vouchers
 Reduce property taxes and increase sales taxes
 Reduce property tax assessment from 50% to 25% of true cash
value
 Limit state taxes to 8.3% of state personal income
 Remove prohibition against graduated income taxes
 Direct tobacco settlement revenues to health care organizations
 Lower the minimum voting age from 21 to 18 (26th Amendment to
U.S. Constitution mooted this issue)

8. Why a constitutional amendment?
 More difficult for an amendment to be modified or
reversed
 Requires a 2/3 vote of each house of the legislature and
 A majority vote at the next general election
 A statute adopted by petition and general election
 Can be amended or canceled by a majority vote of the
Michigan Legislature
 Michigan legislature
 38 Senators
 110 Representatives

9. Electricity 101 – Who builds generation?
 Regulatory compact (in the beginning)
 Electric utilities granted a monopoly
 In exchange utilities agreed:
 Rate regulation
 Duty to serve
 Utilities earn a profit only on capital improvements
 Build a power plant, entitled to cost plus profit
 10.5% return on common equity or 6.586% overall rate of return
 The cost of purchases are only a pass through of costs (without a mark up)
 Cost of coal
 Cost of purchased power
 Electric generation from third parties is purchased power, with no mark up
 Building generating plants is how utilities make money for their
shareholders
 This is one of the keys to this debate

10. What is the Amendment?
 Provides that as a matter of policy 25% of the
generation of electricity in Michigan will come
from renewable sources
 Biomass
 Wind
 Solar
 Geothermal
 Hydro

11. Six Sections of the Amendment
Section 1 defines what is meant by clean
renewable electric energy sources

12. Clean Renewable Electric Energy Standard
1. It is the policy of Michigan to promote
and encourage the use of clean renewable
electric energy sources. Clean renewable
electric energy sources, which naturally
replenish over a human rather than
geological time frame, are wind, solar,
biomass, and hydropower.

13. Section 2
Sets out the details of the standard/goal.

14. Clean Renewable Electric Energy Standard
2. Beginning no later than 2025, at least
25% of each electricity provider’s annual
retail electricity sales in Michigan shall be
derived from the generation or purchase of
electricity produced from clean renewable
electric energy sources.

15. The foregoing clean renewable electric
energy standard shall be implemented
incrementally and in a manner that fosters
a diversity of energy generation
technologies.

16. Facilities used for satisfying the standard
shall be located within Michigan or within
the retail customer service territory of any
electric utility, municipally-owned electric
utility or cooperative electric utility
operating in Michigan.

17. Section 3
How will the ratepayers be charged for
the cost of this generation.

18. Clean Renewable Electric Energy Standard
3. Consumers shall be charged for
electricity from clean renewable electric
energy sources in the same manner and
on the same basis as for electricity from
other sources.

19. Section 4
Protection against unreasonable increase
in rates due to renewable generation

20. Clean Renewable Electric Energy Standard
4. To protect consumers, compliance with the
clean renewable electric energy standard
shall not cause rates charged by electricity
providers to increase by more than 1% in any
year. Annual extensions for meeting the
standard may be granted, but only to the
extent demonstrated to be necessary for an
electricity provider to comply with the
foregoing rate limitation.

21. Section 5
Legislature is to use this policy to promote
Michigan jobs.

22. Clean Renewable Electric Energy Standard
5. The legislature shall enact laws to
promote and encourage the employment
of Michigan residents and the use of
equipment manufactured in Michigan in
the production and distribution of electricity
derived from clean renewable electric
energy sources.

23. Section 6
Savings clause

24. Clean Renewable Electric Energy Standard
6. Any provision or portion of this section
held invalid or unconstitutional shall be
severable from the remaining portions,
which shall be implemented to the
maximum extent possible.

25. Approved Ballot Language
 This proposal would:
 Require electric utilities to provide at least 25% of their annual
retail sales of electricity from renewable energy sources, which
are wind, solar, biomass and hydropower, by 2025.
 Limit to not more than 1% per year electric utility rate increases
charged to consumers only to achieve compliance with the
renewable energy standard.
 Allow annual extensions of the deadline to meet the 25%
standard in order to prevent rate increases over the 1% limit.
 Require the legislature to enact additional laws to encourage
the use of Michigan made equipment and employment of
Michigan residents.

26. Questions?
 Any questions on:
 Amending the Michigan Constitution
 The language of the amendment
 The regulatory framework

27. On to the Discussion…
 Doug Jester
5 Lakes Energy
 Irene Dimitry
DTE Energy