LANSING – A report to be released today says a 2008 state law that was supposed to result in lower electricity rates has instead led to double-digit increases for Michigan consumers.
The report, commissioned by the Energy Choice Now coalition that includes the Michigan Retailers Association, the Michigan Agri-Business Association and companies that want to compete with DTE Energy and Consumers Energy, says high electric rates are harming the Michigan economy.
A copy of the report, by Continental Economics, a New Mexico-based company that studies electric markets and rate regulation, was made available exclusively to the Free Press on Tuesday.
Spokesmen for DTE and Consumers said the law is working and rate increases have paid for environmental improvements and other long-term upgrades.
In October 2008, then-Gov. Jennifer Granholm signed legislation that capped at 10% the electric market that could be sold competitively, ending an eight-year period during which Michigan homeowners and business consumers could choose their electric providers.
Businesses rushed in to fill the 10% allotment in one year. Today, 9,600 businesses are on a waiting list to buy their electricity competitively. The 7,000 businesses allowed to buy competitively have paid $350 million less than they otherwise would have, the report says.
Residential electric customers in Michigan can’t take advantage of the 10% allotment because business users grabbed the entire amount.
The report says that between 2008 and 2012, residential electricity rates increased 47% for customers of Consumers and 28% for customers of DTE. Rates for small commercial customers increased 30% for Consumers and 20% for DTE, the report said. Industrial rates jumped 35% for customers of Consumers and 18% for customers of DTE.
Michigan’s residential electricity rates have been above the national average since 2009, while they were below it from 2001 through 2008, according to a Michigan Public Service Commission report released in February. The report showed commercial rates above the national average from 2001 through 2009 and matching the national average last year. Michigan’s industrial rates straddled the national average between 2001 and 2008 and have been above the national average since 2009, the PSC report said.
Dan Bishop, a spokesman for Consumers Energy, did not dispute the rate increase information quoted in the report. But he said the 2008 law is working.
“Consumers Energy’s electric rates are at about the national average,” Bishop said. “Increases in recent years pay for cleaner air in Michigan. For example, we’re investing more than $1.5 billion at our power plants on emission control equipment to comply with clean air regulations.”
Consumers will invest about $6.6 billion over the next five years on environmental improvements, smart energy technology, renewable energy and electric liability programs, and “that law is what makes that investment possible,” Bishop said.
Energy Choice Now “represents out-of-state power marketers who pay no taxes in Michigan, employ few people here, have no real responsibility for improving air quality in Michigan and have no legal obligation to serve all customers, as do Consumers Energy and DTE Energy,” Bishop said.
Len Singer, a spokesman for DTE, said he can’t address the specific numbers detailed in the report but said rates have gone up because of environmental improvements and other upgrades.
“Michigan’s energy law was designed to enable those investments, and we believe it is working as designed,” Singer said. “The 2008 law was crafted over two years to establish long-term energy policy for Michigan. The law is reflective of input from a variety of stakeholders, including out-of-state energy marketers who continue to try to make changes to the law based on short-term market conditions.”
Jonathan Lesser, president of Continental Economics, said wholesale electricity rates in Michigan dropped about 45% between 2008 and 2012 and that’s the reason businesses in the 10% cap have benefited.
“Residential customers now pay hundreds of dollars more each year for electricity, while commercial and industrial customers pay thousands more,” the report says. “Yet, over these same four years, wholesale electricity prices have fallen by almost half.”
Lesser said, “The best thing to do is to go to full deregulation” for prices related to generation of electricity.
If the least regulated state for electricity competition, Texas, was a 1 and Vermont, one of the most regulated states, was a 10, Michigan would be a 9, Lesser said. Some of Michigan’s Midwest competitors, such as Indiana, Wisconsin and Missouri, also have high levels of regulation, while others, such as Illinois, Pennsylvania and Ohio, do not, he said.
Rates in Michigan also had increased between 2000, when electric competition began in the state, and 2008, but at a pace that dropped Michigan rates below the national average and helped close Michigan’s gap with competing states, the report said.
During that period, independent developers also added 4,000 megawatts of new generating capacity in Michigan, the report said.
Energy Choice Now is backing legislation introduced by Rep. Mike Shirkey, R-Clark Lake, and Sen. Arlan Meekhof, R-West Olive, that would gradually increase the cap on electric competition in Michigan.
In a report this year, the Public Service Commission said Michigan is one of 16 states that control the competitiveness of its electric markets.
Compared to the other 15 regulated states, Michigan had the fifth- or sixth-lowest rates in the residential, commercial and industrial sectors, the report said.
When compared to the 10 largest states in the nation, Michigan had the fourth-highest average electric rates for residential customers, the third-highest rates for commercial customers and the fifth-highest rates for industrial customers, the report said.
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