Performance standards can rein in electricity costs for 2016 ratepayers

2016 will be a critical year for energy in Michigan. Our clean energy policy sunset at the end of last year, and the Michigan legislature has a true opportunity to set us on a path toward a more affordable energy future by passing performance standards for Michigan utility companies.

Michigan has the highest electricity costs in the Midwest; that hits families’ pocketbooks and makes our businesses less competitive. Every additional dollar spent to keep the lights on means less money spent at local businesses, and less investment in Michigan workers.

Do we get better-than-average service or better outcomes for these high costs? No.

According to Gary Wolfram, director of economics at Hillsdale College, we pay more for electricity that is less reliable and more polluting that than the electricity our neighbors have in the Midwest.

On top of that, Michigan’s utility companies make guaranteed generous profits – some of the highest in the nation.

Thanks to another rate hike approved last November, Consumers Energy will now receive a 10.3 percent rate of return – the highest profit granted by regulators in the entire U.S. in 2015, according to the Association of Businesses Advocating Tariff Equity.

In December, DTE Energy increased residential rates 11.3 percent – making some of the highest bills in the nation even more expensive while profits for shareholders soar. In the company’s latest report to investors, they predict further profits for shareholders, partially due to the pro-utility regulatory structure in Michigan.

We agree with Wolfram: It’s time for the legislature to step in on behalf of ratepayers, and finally put them ahead of utility shareholder profits.

The legislature must protect ratepayers by passing legislation that holds utilities accountable and keeps costs down. Performance standards to increase our use of renewable energy and energy efficiency can do just that.

Last March, Gov. Snyder set a goal of of meeting 40 percent of our energy needs through expanded renewables and energy efficiency, which will lower electricity bills for families and businesses. By requiring utilities to reduce energy waste and purchase low-cost renewable energy, the legislators can rein in rising electricity costs.

The cheapest energy is energy we don’t use, and that’s why expanding Michigan’s energy efficiency standard is critical to make sure common-sense programs to help families and businesses reduce energy waste are available and accessible. No company wants to sell less of its product, and our utilities are no different. That’s why the legislature must require expanded energy efficiency standards to empower residents and business owners to take their energy consumption into their own hands.

Advances in technology have dramatically changed the market for renewables. A recent report by Lazard found that renewable energy, for the first time, is now cheaper than natural gas. What’s even better is that utilities are able to lock in 20- to 30-year contracts for affordable renewable energy, a price guarantee that’s simply unheard of when it comes to natural gas. We need the legislature to intervene because utilities don’t get the same guaranteed profits on renewable energy that they do when they build big, expensive power plants. Requiring them to purchase more low-cost renewable energy will mean finally putting ratepayers first.

As lawmakers rewrite Michigan’s energy policy this year, they must seize this opportunity to bring down costs for families and businesses by setting performance standards and holding utilities accountable. If the state is going to rubber stamp record-setting, guaranteed rates of return in excess of 10 percent, we ought to hold the utilities accountable for serving the ratepayers of Michigan in the most affordable way possible. Jobs, economic opportunity and quality of life for all Michiganders are all on the line.

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Comments

Jim Danielski
Tue, 02/02/2016 - 10:31am
Great article - Don't think ratepayers are fooled: With the new meters and variable rates, it's "open season" on our wallets. :-o
REB
Tue, 02/02/2016 - 12:12pm
This is the first I've heard renewables were less expensive than natural gas -source please. Usually Bridge authors affiliations are shown???
Rick
Tue, 02/02/2016 - 2:26pm
DTE and Consumers own our legislature and regulators. They do what they want - period. Look into solar and you'll find DTE is blocking it as much as they can - they're happy to charge us if DTE builds it (from our rates); all to keep their monopoly on power generation and our joke legislature is happy to let them do that.
Mark Muhich
Tue, 02/02/2016 - 5:09pm
And the most expensive way to generate electricity is nuclear power. If DTE and ENTERGY, owner of Palisades nuclear plant, were not receiving premiums allowed by the PSC, they would close their nuclear plants in Michigan very soon.
Charles Richards
Tue, 02/02/2016 - 5:36pm
Mr. Ward says, "The cheapest energy is energy we don’t use, and that’s why expanding Michigan’s energy efficiency standard is critical to make sure common-sense programs to help families and businesses reduce energy waste are available and accessible." Why should families and businesses need programs to reduce their energy use? Isn't saving money sufficient incentive? He says, " We need the legislature to intervene because utilities don’t get the same guaranteed profits on renewable energy that they do when they build big, expensive power plants." Why not just guarantee them the same percentage profits on renewable energy as they get on fixed capital? That would give them the proper incentive to buy renewable energy if it is in fact cheaper. That would eliminate the need to require them to buy renewable energy. We are far better off using incentives than heavy handed regulation.
Charles Richards
Tue, 02/02/2016 - 6:19pm
I'm a little skeptical about Lazard's report about the price of renewable energy. The marginal cost of solar and wind power is almost zero when the sun is shining or the wind is blowing, but that doesn't take into account their capital costs. Nor does it take into account the back up power plants they require when the sun isn't shining and the wind isn't blowing. And I'm a little put off by Mr. Ward's pandering.
Barry Visel
Tue, 02/02/2016 - 11:32pm
I was going to write a longer response, but Mr Richards already hit my points...specifically, if it's cost effective to implement energy efficiency ideas then why are incentives needed beyond the cost savings, and, is the cost of backup power included in the alleged low cost of wind and solar? Perhaps Bridge should consider "fact checking", or at least solicit opposing opinions, when you allow these guest commentaries. Otherwise, it appears you support what these guest opinions have to say.
jim
Wed, 02/03/2016 - 12:32pm
Wind power is very cost effective and its intermittency can easily and inexpensively be addressed using power from grid as outlined in this NREL report. http://www.nrel.gov/analysis/re_futures/ Natural gas while inexpensive right now will eventually increase in price so we need to add more renewables into our portfolio of energy sources to help inoculate rate payers from the inevitable fossil fuel cost increases to come. Here is a short video that explains how grid operators help to keep the lights on. https://www.youtube.com/watch?v=gSiCRZcJnfE&feature=plcp
Phil
Wed, 02/03/2016 - 3:34pm
There's no comparative data here. I'm not denying the authors premise, but how about some data on comparative states, shareholder return and their respective public service commission makeup and mission? What makes Michigan different and to what degree is it different?
MWh
Thu, 02/04/2016 - 10:19am
I have worked in the competitive retail electricity market for over seven years and have helped business through out the PJM territory reduce cost/provide budget certainty. I recently moved back to MI and I can not believe how much rate payers are paying compared to OH & IL. I believe the first step is to align our transmission services with PJM and away from MISO. Second step is to fully deregulate both Consumers & DTE utilities. Deregulated states have some of the toughest laws protecting commercial businesses and residential customers. It seems the words are completely backwards when describing the two, as Consumers and DTE have a monopoly and the groups that are suppose to be able to protect the consumers have no voice in the matter. Basically, pointless. We need a governor who wants utilities to compete for our business. MISO, PJM, etc has plenty of reliability, so don't let that type of advertising fool you. DTE and Consumers, keep your transmission and generation, but give us the choice on our supply!
Jim
Thu, 02/04/2016 - 12:29pm
MWH - "It seems the words are completely backwards when describing the two, as Consumers and DTE have a monopoly and the groups that are suppose to be able to protect the consumers have no voice in the matter." That is not completely true. While limited in its scope and funding, The Michigan Utility Consumer Participation Board http://www.michigan.gov/lara/0,4601,7-154-28077_46646---,00.html and its grantees have saved rate payers hundreds of millions of dollars in electric and gas utility costs over the past 5 years. Unfortunately, most people don't even know this residential ratepayer advocacy group exists. The Michigan Conservative Energy Forum is working to help change this.
JD
Thu, 02/04/2016 - 10:48am
"Every additional dollar spent to keep the lights on means less money spent at local businesses, and less investment in Michigan workers" DTE is a LOCAL, publicly traded business, and it employs more then 10,000 people, AND it did NOT lay off people during the recession. And it chosoes local companies to contract out with whenever possible (as does Consumers Energy). I would say hiring and KEEPING 10,000 employees IS an investment in Michigan workers. What other local companies can say that?
Doreen
Fri, 02/05/2016 - 8:12am
Larry Ward has so much information on this subject, great job Mr. Ward