Michigan debates energy deregulation
LANSING — Some of Michigan’s biggest companies and school districts are fighting bills that would alter rules that govern competition in a partially deregulated electricity market.
The debate, fueled by a high-stakes lobbying fight between two major utilities and their competitors, is intensifying this fall and is among a number of big energy issues facing lawmakers.
Some questions and answers about the issue:
What is electric choice? State law guarantees DTE Electric, Consumers Energy and smaller utilities at least 90 percent of power sales in their regions. Michigan fully deregulated the market in 2000 but set the 10 percent cap in 2008.
Who benefits? About 6,500, or 0.5%, of customers — almost all of them commercial and industrial — were in the “choice” program in 2014. They include Dow Chemical, furniture maker Herman Miller and Amway. An estimated 40% of public schools participate. So do places such as Oakland County and Saginaw Valley State University. Huron Valley Schools said the district saves $400,000 a year by buying electricity elsewhere.
Who’s waiting? Because the 10% limit has been reached, more than 11,000 Consumers and DTE customers are in a queue waiting to buy from competitors. If the cap did not exist, 28% of Consumers’ sales and 22% of DTE’s sales could hypothetically go away, according to the Michigan Public Service Commission.
What’s the problem? Utilities, their competitors and others say the current law is unfair for different reasons.
Those favoring full regulation contend the “hybrid” system does not work, impairing long-term capacity and reliability planning at a time coal-fired plants are set to close in Michigan and throughout the entire regional market, and forcing utility customers to subsidize customers of alternative suppliers to the tune of $300 million a year. They say if market conditions change and the competition is less able to buy excess capacity power to sell, their customers enjoying a “free ride” in the 10 percent group could switch back without utilities having enough time to generate more electricity.
Those favoring deregulation say competition works — slowing rate increases in regulated states compared to states without choice and saving $1.1 billion over 15 years — and those on the waiting list could save $230 million annually if not for the cap. They argue that concerns about capacity issues in 2020 and beyond are overblown and utilities were handsomely compensated long ago for lost market share.