LANSING – Governor Rick Snyder unveiled Tuesday the first piece of his much anticipated energy agenda in saying he will create a new agency that would combine the Public Service Commission with economic development and environmental elements.

Snyder will deliver his full energy proposal in March, coming in advance of the state’s main energy law, PA 295 of 2008, expiring at the end of the year. That proposal will address critical questions such as what percentage of energy utilities must generate from renewable resources and what percentage of the electricity market is open to competition from non-incumbent utilities.

For now, Snyder said he would move the Public Service Commission, the Energy Office of the Michigan Economic Development Corporation, portions of the Department of Licensing and Regulatory Affairs and part of the Department of Environmental Quality into the new energy agency. He has not yet determined whether the new entity would be a department or some other type of agency.

Currently, the PSC handles rate-setting for the state’s public utilities and enforces the law on them. The Department of Environmental Quality regulates emissions from the utilities’ plants and runs an energy efficiency program. And the Michigan Economic Development Corporation houses the state’s Energy Office that administers federal energy efficiency grant programs.

The proposal is in its early stages. Snyder administration officials said the exact lines of authority had yet to be determined.

DEQ Director Dan Wyant said the core functions of the DEQ – air, water, waste and remediation – would remain within the department. However, the department’s energy efficiency program, which uses retired engineers to conduct energy audits for businesses, would move to the new entity.

Wyant said that program could be a model for a revamp of the state’s energy policy.

Additionally, the DEQ can lend environmental expertise to the new agency, Wyant said. The new agency would tie together the three pillars of Snyder’s to-be-announced energy policy: affordability, reliability and environmental protection.

“Right now it doesn’t happen that way,” he said.

Incoming MEDC CEO Steve Arwood said the three entities communicate now, but the new agency would step up those efforts.

“Like everything else we do in this administration, we’ve gotten pretty good at matrixing together and really collaborating and coordinating,” Arwood said. “I think this is a coordination of policy and effort. Once again, I think you’ve got a situation where you have different activities around state government. If you really want to focus on a problem, you get the brightest people that are involved in it.”

Reaction to the proposal was positive, but cautious, given the lack of details and the forthcoming and more substantial matter of rewriting the entire energy law.

“We’re going to have to see how the actual implementation goes about,” said Rep. Aric Nesbitt (R-Lawton), chair of the House Energy Committee. “I do think there needs to be better communication between the Public Service Commission and the DEQ. … My hope is that with better coordination, it should be a good thing long term.”

Environmental groups praised Snyder’s emphasis on addressing wasted energy and converting from coal power to natural gas and renewables.

“We are encouraged by Governor Snyder’s commitment to a clean energy plan that will create jobs and protect our clean air and drinking water from pollution and look forward to hearing his more detailed plan in March,” Jack Schmitt, deputy director for the Michigan League of Conservation Voters, said in a statement. “With Michigan’s current clean energy goals expiring in 2015, this year must be the year of action.”

The Michigan Conservative Energy Forum and health professionals speaking through the MI Air, MI Health group sounded a similar theme.

The Michigan Jobs and Energy Coalition, which includes DTE Energy and Consumers Energy, the state’s two largest utilities, as well as top business groups and the Michigan Municipal Electric Association, praised the governor’s focus on the issue.

“This will require pragmatic decision-making in regard to the right mix of resources – energy efficiency, renewable energy and additional facilities – while at the same time keeping in mind the importance of addressing expected capacity shortfalls,” Steve Transeth, the group’s senior policy director, said in a statement. “The governor’s decision to create the Michigan Energy Agency reflects a long-term decision toward the development of a comprehensive energy policy that puts a premium on affordable, clean and reliable energy for the families and businesses of our state – for generations to come.”

Like other agencies, the new one will require a balance between the regulatory/enforcement functions the PSC now handles and the desire to make Michigan a business friendly state.

LARA Director Mike Zimmer, asked how that balance would be achieved in this case, said, “Very carefully.”

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