Dana DiFilippo/States Newsroom
“Can the State of Michigan require someone selling a product in Michigan to procure that product from the state? Or, phrased in the language of the coin’s other side, can Michigan bar in-state retailers from obtaining their merchandise from outside the state?”
These are the two basic questions Circuit Judge Chad A. Readler asked in the opening to an opinion issued Thursday, as the U.S. Sixth Circuit Court of Appeals considered whether certain requirements under the state’s 2016 energy law violated the U.S. Constitution’s Commerce Clause, which limits states’ abilities to restrict interstate commerce. The law was signed by former Gov. Rick Snyder, a Republican.
As it stands, alternative energy suppliers must procure at least some of the energy they supply from within the state of Michigan for reliability purposes, alongside guaranteeing they can meet energy capacity requirements four years into the future.
However, Energy Michigan, Inc., a collective of alternative energy suppliers and the case’s lead plaintiff, argues these requirements discriminate against in-state and out-of-state energy, and favors energy utilities — which control 90% of the state’s energy market — over alternative energy suppliers.
The Sixth Circuit Court ultimately agreed, finding the local energy sourcing requirement “facially discriminatory,” later noting “a state’s generic interest in local energy reliability does not exempt it from Commerce Clause scrutiny.”
While the court’s 2-1 ruling stopped short of eliminating these requirements, it returned the matter to district court, asking the court to determine whether those requirements are the “only means of achieving its goal of securing a reliable energy supply.”
In order for the law to stay in place, the defendants — the members of the Michigan Public Service Commission (MPSC), Michigan’s energy regulator — will need to prove that these rules are superior to all other alternatives, as the Court of Appeals notes “state laws that discriminate explicitly against interstate commerce are ‘almost always invalid.’”
In his dissenting opinion, Judge Danny J. Boggs argued the case involved a judgment on the “proper trade-off between maintaining the reliability of household electric service and the prerogatives of a home-state regulator on the one hand and amplifying competition on the other.”
“Should this court insert itself into a complex web of regulation in hopes of increasing competition within a sliver of the market? This court should err on the side of refusing to do so because the Commerce Clause ‘does not elevate free trade above all other values,’” Boggs said, citing Maine v. Taylor, a Supreme Court case which also addressed questions with the Commerce clause.
He also argued the court was operating in an area that was typically handled by the state.
With the defense facing a high bar in state court, it’s likely the case will be appealed to the U.S. Supreme Court with the defendants hinging their argument on several other Commerce Clause cases argued before the high court.
The results of the case would also carry significant consequences for Michigan consumers and energy companies. While state law would continue to restrict alternative energy suppliers to 10% of the market, they could potentially source their energy supply from out of state, giving them an edge when competing with utilities for those 10% of customers, which the opinion notes are predominantly large industrial groups.
Katie Carey, director of external relations for Consumers Energy, the state’s largest energy utility and an intervenor in the case, told the Michigan Advance in an email that the company is evaluating the opinion.
“We remain committed to providing reliable service to our customers and will continue to work with the MPSC, customers, and suppliers to ensure we have the power supply needed to continue to effectively power Michigan’s progress,” Carey said.
Dave Akerly, senior strategist at DTE Energy, Michigan’s other major energy utility, similarly said the company was reviewing the court’s opinion, and did not have a comment at this time.
MPSC spokesperson Matt Helms declined to comment on the commission’s behalf.
The Michigan Advance also contacted Energy Michigan, Inc., the group had not responded to an emailed request for comment as of the time of publication.
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