Mackinac: Senate energy bill would end electricity choice

electric-lines

There has been a lot of talk in Michigan about “electricity choice” and a Senate energy bill that is supposed to solve many of the state’s energy challenges. A few of the big players in the discussion have suggested Michigan will face a dire future if that legislation, and their take on the issue, isn’t implemented.

For example, DTE chairman and CEO Gerry Anderson said, “The lights aren’t out yet, but we need to move. The people who understand this (issue) … are worried.”

Continuing on that theme, Citizens for Michigan’s Energy Future, supported by DTE and Consumers Energy – the state’s two big electric utilities – has reported spending approximately $7.4 million on TV, radio, and print advertising in 2015. Their ads warn that there will be an “energy shortfall” unless legislation like Senate Bill 437 is passed.

Unfortunately for Michigan residents, that bill would end electricity choice in the state and give DTE and Consumers even more control over the electricity system here.

Senate Bill 437 is sponsored by Sen. Mike Nofs, a Republican from Battle Creek who chairs the Senate Energy and Technology Committee. Nofs and both major utilities contend that Michigan’s limited program in electricity choice is not threatened by this legislation. Nofs even went so far as to reassure Michigan residents that, ”Under my bill, those who are currently on electric choice can stay on it forever."

But forever is a long time, and one very close observer of the energy industry suggests the senator's assessment may not be completely accurate. In April 2015, UBS Financial Services discussed the likely impacts of the House version of this energy legislation on DTE and Consumers stock in two April 2015 newsletters. UBS reported that it expected Michigan’s electricity choice system, which is also called Retail Open Access, “to whither organically under the law.” UBS also told readers if electricity choice were to end, per-share earnings of the two utilities were likely to increase by 5 to 6 percent in this new, supportive environment.

So the big utilities stand to make a substantial profit if choice “withers.” But Michigan energy users have repeatedly stated in public polling that they value electricity choice and would like to see it expanded. In one 2013 poll, 82 percent of Michigan residents supported electricity choice. A 2016 poll showed that 66 percent supported expanding electricity choice beyond the current 10 percent limit.

The state government’s annual “Status of Electricity Competition In Michigan” report lends support to the polling data. It describes how, in December 2015, over 11,000 electricity customers were on the waiting list to join the choice program. Furthermore, if the 10 percent cap on choice were lifted, the report notes that one in four Michiganders would choose to buy electricity from an alternative supplier.

Those who do not support choice also argue consistently that if generation capacity is not located within Michigan’s boundaries, system reliability will be lessened. But additional generation capacity exists outside the state. In fact, DTE has invested in generating capacity in neighboring Ohio, a state with electricity choice. Its actions contradict the notion that big utilities in Michigan will find new investments worthwhile only if the Legislature passes laws that remove the small sliver of choice Michigan residents currently have.

To make matters more frustrating, Michigan’s residents have actually already paid to have new capacity constructed in Michigan. Both DTE and Consumers benefited from a $2.2 billion windfall in 2004. They received state-backed loans meant to cover the costs of building new generation and to compensate the two for the switch from a fully regulated to deregulated system in 2000. The costs of those loans were covered by the people of Michigan over the following 11 years through electric surcharges on their monthly bills.

However, that $2.2 billion was not returned to the people of Michigan in 2008, when the state Legislature took away most of Michigan’s choice by re-monopolizing, or giving back to DTE and Consumers, a 90 percent guarantee of retail electricity sales with Public Act 286.

It’s ironic that the utility solution to an alleged upcoming shortage is to bar anyone else who wants to supply electricity. If there really is an impending shortage, the answer is not to give the big utilities their full monopoly back. Instead, it’s to let in the suppliers who are kept out of the market by the 10 percent cap.

Bridge welcomes guest columns from a diverse range of people on issues relating to Michigan and its future. The views and assertions of these writers do not necessarily reflect those of Bridge or The Center for Michigan.

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Comments

Barry Visel
Tue, 10/25/2016 - 10:54am
If utility stock values rise then wouldn't their shareholders also benefit?, not just the company? Lots of people invested through IRA's and 401k's like to see corporate value rise. How does this factor into this regulated vs deregulated conversation?
Stephen C Brown
Tue, 10/25/2016 - 12:03pm
Dear Barry Visel-Do you really believe that shareholder value can be founded on regulatory capture? This is the road to decline.
Larry Socie
Tue, 10/25/2016 - 11:26am
Electricity Choice is a rich mans game. As a residential customer, five or ten dollars a month up or down is really just a Big Mac while the owner of ELM Plating (Jackson) has a five-digit bill. Why can't we have an equal cost for all industrials? Why are we setting up a competition with someone choosing winners and losers. Why set up a system to screw Jackson in order to advance Oxford. Why is the legislature setting up a winners and loser system?
***
Tue, 10/25/2016 - 2:47pm
I had someone coming around trying to sell me on electricity choice, I'm highly skeptical, it sounded like a con game to me.
Anna
Tue, 10/25/2016 - 3:43pm
The simple answer is that as the EPA's Clean Power Plan forces coal-fired power plants to close, there will be shortfalls of generation capacity, especially at times of peak demand. Right now, many of those "choice" power providers are buying excess power from baseline power plants in Michigan and elsewhere in the Midwest. Seventeen of those plants are slated to shut down within the next 3 years due to the Clean Power Plan. DTE and Consumers are both among those planning to close plants; they will be replacing only about 60% of the capacity they shut down because the last 10 years have shown much slower growth in electricity usage than had been expected when those older power plants were built. I have no objection whatsoever to Energy Provider Choice that operates on a level playing field. Let anyone provide power in Michigan's market, up to the amount of power they can demonstrate that they have contracted for at least 3 years in the future, or better yet a minimum of 5 years into the future as our regulated utilities are required to do. Month by month, every month they do business in Michigan, let these "choice" providers prove they have a guaranteed stable source of power, and forecast a price, so that those who want to choose can be fully informed of the longer-term impacts of their choices. . We do NOT want to end up like California did, when unlimited electricity choice allowed Enron and others to manipulate the market to the point of BOTH outrageously high consumer prices and brownouts. What I do object to is the bait-and-switch tactics of some electricity "choice" providers, and the natural gas "choice" providers. Their rates are low for a month or two, and skyrocket without notice during times of high usage, and therefore high demand.
John
Wed, 10/26/2016 - 9:57am
Thankfully, Anna, our regional grid operator, the Midcontinent Independent System Operator (MISO) has already established "level playing field" protocols that require all electric providers to guarantee sufficient capacity to meet their customers' peak demand plus reserve margin demand. Currently, this is done on an annual basis, but they are now moving to a three-year forward demonstration. What DTE and Consumers have advocated, and what I assume you are also supporting, is something to "level the playing field a bit more"...by instituting additional restrictions just within Michigan's boundaries that try to regulate a competitive supplier more like a traditional monopoly utility. But that playing field can never be truly level since: 1) DTE and Consumers receive a fully-guaranteed rate of return on their investments, whereas competitive suppliers take a market risk 2) DTE and Consumers,as noted, have already received full compensation from ratepayers for their existing generation fleet, whereas competitive suppliers must foot their own bill 3) DTE and Consumers are guaranteed 90% of the market within their territories, while competitive suppliers are artificially capped at 10%, thus limiting their potential return on investment If you really want to talk "level playing field", then let's go! But I imagine your interest more likely coincides with the utilities' pitch to their investors for an increased profit margin...
Wed, 10/26/2016 - 6:33am
How dare the Republicans now in power in Lansing once more side with the Greedy Self Serving Energy Monopolies. DTE and Consumers Power want to squeeze every million's of dollars of profit possible on the backs of Michigan citizens. Every Michigan School District will lose up to millions of savings each currently afforded them by current Michigan law to have the right to choose where they buy their required electricity at the lowest price possible. The greed of DTE and Consumers Power will force schools to cut teachers and services for our children. Of course that will force schools to try to pass local millage's to recover lost operating revenue which the Republicans in Lansing have turned into profit for their financial supporters the energy companies. Sounds familiar right! Lansing once more shifts avoidable school costs onto Michigan citizens rather than finacially support our schools as they are required to do by law. Every Michigan citizen needs to ask their Lansing Senator and Representative why they intend to avoid the responsibility we voted them in to properly represent their constituents wants and needs. Why instead do they hurt us and our school systems by favoring the Energy Monopolies instead of Michigan Citizens? Listen to their answer or more likely their silence then take it out on them with your November Voting responsibility to change this political scene that has hurt us for years. Snyder and his minions haven't done one positive thing to help solve the problems facing all Michigan citizens.
Mary
Wed, 10/26/2016 - 1:42pm
My Term Limited Rep. Brad Jacobsen seems to hate electricity Free Market competition just as much as DTE and Consumers Power because he is supporting similar horrific and horrendous bill that have been presented in the Michigan House by Rep Aric Nesbitt. The public truly needs to be informed of the stranglehold that the lobbyists for the Monopolies known as DTE Energy and Consumers Power are truly going full bore to kill any possibilities of our rightful freedom to have Electric Choice or any Free Market competition from ever existing in Michigan. I am absolutely sick and tired of our Lansing politicians having their Campaign Finance coffers padded and filled by manipulative monopolistic lobbying Special Interests such as DTE Energy and Consumers Power to the detriment and expense of the taxpayers who voted them into office. Our electric bills have been horrifically and continuously increasing for almost a decade. Senator Mike Nofs Senate Bill 437 is meant to put up a complete and permanent barrier to any and all outside electric energy competition. The homeowners, renters, schools and businesses in Michigan will be completely beholding to and dependent on living with the monopolies DTE and Consumers Power increasingly costly and adverse electric rate increases if our state representatives vote in favor of passage of SB 437. SB 437 should not be allowed passage.
Eric
Sun, 10/30/2016 - 7:54am
To more easily understand Michigan's complex energy issue, I suggest enlisting the help of a kid or grandkid. Ask them to bring you an ordinary latex balloon. The long, skinny hot-dog shaped versions or the kind used for twisting animal sculptures will work best. Have them blow it up until halfway full. Help the child tie a secure knot in the end without releasing too much air. Then, using a soft tipped indelible marker, have them carefully write “Fixed Energy Expenses” horizontally across the side of the inflated balloon. At the top of one end write RIS, the abbreviation for “Regulated Industry Supplier”; at the other end write AES, the abbreviation for “Alternative Electric Supplier”. Next ask your youngster to carefully wrap their hands around the AES end about 10% up the side and squeeze gently. Now ask them to explain what caused the shape of the balloon to change to make the RIS side grow larger. This is essentially what happens to unsuspecting and/or uninformed taxpayers when users of non-asset alternative electric suppliers, energy brokers and out-of-state resellers squeeze their “hundreds of thousands of dollars” of savings out of the fixed energy expenses that individual customers like you and me pay for electricity.
Rick
Sun, 10/30/2016 - 11:13am
We need to return to the 'public utilities' (including the internet) model where serving our needs are first and foremost - not corporate shareholders and corporate CEOs. All our utilities do now is to maintain their monopolies at whatever cost and the public has to pay what they want, not what they need. When you look at how the utilities handle solar (you pay to set it up and we pay you a pittance). They must be terrified at the prospective of the new Tesla roof shingles and energy banks. They're probably discussing right now how to 'craft' legislation to prohibit even the potential of competition. They don't want any competition and the right to charge whatever they want. Comcast and AT&T are just the same thing and rip us off mercilessly. And work / bribe legislators the same way as our utilities to keep their monopoly intact.
Mary
Thu, 11/03/2016 - 12:23pm
For decades in the State of Michigan electricity Fair Market competition has not at all been highly practiced. Because, DTE and Consumers Power have been granted to have extensive monopolies for far too long they have born the costs for their electricity generating and generators. That's on them and their heads, ....and, on the legislators who have favored their powerful monopoly lobbying. We formerly lived under the same circumstances with the former monopoly Michigan Bell/AT&T. Obviously we are no longer all held hostage in a non-competitive telephone provider circumstance as we all once were. Thankfully, we no longer are because the consumer has a vast amount of choices.