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                Located in Hemlock, Michigan since 1961, Hemlock Semiconductor specializes in producing ultra-high-purity polycrystalline silicon. The silicon is then sold to global manufacturers that need their silicon for use in photovoltaic cells or semiconductors. 1 in 3 electronic devices in the world use materials produced by Hemlock Semiconductor.[1]

    .

                Public Act 286 of 2008 altered the way in which electricity usage rates were set for different customer classes. Prior to this, large commercial and industrial customers received subsidies. PA 286 required large consumers to pay true cost of service[2]. The Public Service Commission would, under this statute, require Consumers Energy to make Hemlock Semiconductor (HSC) pay their true cost of service. They were in a contract with Consumers Energy, and were seeking to invest $1 billion in expansion in either their Michigan site or their Clarksville, TN site. Manufacturing hyper-pure silicon is extremely energy intensive. Paying true cost of service, as required under PA 286, would have made global competitiveness impossible for HSC.

                Public Act 297 of 2010 protected Hemlocks current contract with Consumers Energy and allowed them to receive tax abatements. The bill is set to expire in 2015, and Hemlock stated in a February 4th committee hearing that it must have certainty going into the future in order for it to continue investing its time and resources in Michigan.

                HB 5013, proposed by House Floor Leader Jim Stamas (R-Midland), is intended to provide a 2-6 year bridgein order to allow HSC to continue business uninterrupted by additional costs, while allowing legislature to enact comprehensive energy reform. The bill in its current form is designed to permanently grant the rate to HSC[3], but the committee was seemingly unanimous in its intention to amend the bill to create a bridge. The intention, regardless, is to extend or remove the regulatory sunset.

                Corporate tax abatements are a contentious issue. Laissez-faire champions will insist that showing one firm preference over another is detrimental to the economy. In addition to this, citizens tend to frown on the idea of their tax dollars being used to ensure the competitiveness of a single corporate entity.

                However, Hemlock Semiconductor is a globally competitive manufacturer. They export 90% of everything they manufacture, a rare phenomenon. An increase from the current subsidized rate to a cost-for-service rate would cause Hemlock Semiconductors energy expenditure to rise from 26% of total budget to 36%, a 70 million dollar increase[4]. This is important because HSC implied that a substantial yearly increase would force them to move their production to their site in Clarksville, TN. HSC has invested $2.5 billion at their current location, and has stated that they genuinely wish to stay in the state. They employ 1700 workers in Mid-Michigan, jobs that could leave the state should the rate not be extended.

                HSC uses 420 kilowatt-hours per year. That is a higher demand than all of Lansing and Ann Arbor combined. Losing that demand will inevitably cause rates to go up for households that receive their power from Consumers Energy. Electricity costs are the largest and most significant expenditure involved in HSC’s production process. Electricity costs account for more than labor, raw materials, and overhead.[5]

                The Michigan Chamber of Commerce, speaking on behalf of their 6,800 members, gave testimony to the House Energy Policy Committee on their opposition to HB 5013. General Motors also did so, claiming that the subsidy currently costs them $1 million every year. Businesses want to operate in a state with a fair climate, and subsidies encourage a race to the bottom.

                In the future, industrial energy policy is going to have to be reformed. At the February 4th House Energy Policy Committee hearing, Hemlock Semiconductors representatives fully endorsed the idea of reform, so long as they received their bridge during the meantime. The committee has not discussed HB 5013 again since its original hearing. It is likely that it will be referred to the House floor in an amended version, and will pass. HSC is a major subsidiary of Dow Corning, which has major influence in state politics. Regardless of whether or not it receives bipartisan support, if enough Republicans sign on, it will be passed without a problem. Convincing Governor Snyder with hard data will most likely be the hardest part of the battle.



    [1][1] Globally Competitive and Energy Intensive: an Introduction to Hemlock Semiconductor http://house.michigan.gov/sessiondocs/2013-2014/testimony/Committee225-2-5-2014.pdf

    [2]Bill Would $60 Million Dollar Deal In Place for Hemlock Semiconductor Jack Spencer, Capitol confidentialhttp://www.michigancapitolconfidential.com/19727

    [4] Globally Competitive and Energy Intensive: an Introduction to Hemlock Semiconductor http://house.michigan.gov/sessiondocs/2013-2014/testimony/Committee225-2-5-2014.pdf

    [5] Globally Competitive and Energy Intensive: an Introduction to Hemlock Semiconductor http://house.michigan.gov/sessiondocs/2013-2014/testimony/Committee225-2-5-2014.pdf

     

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