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Bridge Michigan
Michigan’s nonpartisan, nonprofit news source

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.

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. Bridge does not endorse any individual guest commentary submission. If you are interested in submitting a guest commentary, please contact Ron French. Click here for details and submission guidelines.

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