LANSING – The electric restructuring legislation passed this year in Michigan provided little for alternative electric providers and their customers to like. They predicted throughout the process that the bills as structured would mean substantially higher electric rates and little actual development of alternative energy. Legislators can expect to hear from them if those predictions come to pass over the next year.
Barry Cargill and David Waymire with the Customer Choice Coalition told Gongwer News Service they would benchmark rates and costs for Consumers Energy and Detroit Edison over the next year, expecting to be able to show that Michigan has faster rate increases and less alternative energy development than surrounding states.
“We’re going to be able to show that the information (legislators) were given was not accurate,” Cargill said. “I think we’ve got a fairly easy story. I think we need to make the case relative to the benchmarks.”
So over the next year, the coalition will watch the price of power in Michigan relative to other states and to the wholesale market. It will also be tracking development of alternative energy, and the cost of that power, in Michigan and other states. Cargill and Waymire said they expect to see the prices higher, and rising faster, in Michigan while alternative power development continues to languish.
The two, representing alternative electric suppliers and their customers, said current rate filings by Consumers and Edison show at least an effort to increase the pace of rate hikes in the state. They said the presence of alternatives, and the ability for at least commercial and industrial customers to seek those alternatives, has held rates down.
“Michigan historically had very high electric rates,” Cargill said. “We’ve been able to be the most competitive in terms of rate increases (under the prior regulatory scheme).”
“We need to get rates down to the Midwest average if we don’t want to be a failure,” Waymire said.
“We believe with limited competition the utilities are going to come in and raise rates,” Cargill said. And any significant rate increases are unwarranted given recent declines in the wholesale price of power, he said.
Predicted rate increases will also generate the pressure needed to increase, or eliminate, the current cap on customer choice, Cargill said. “It won’t be long and we’ll be up to 10 percent,” he said.
But the implementation of the cap has made it more difficult for those seeking an alternative provider, Cargill said. “We do have competitive companies providing power,” he said, but many have closed their Michigan offices and consolidated to neighboring states.
That will mean the first companies able to take advantage of choice to avoid utility rate increases will be those larger companies with someone charged with seeking out the best utility rates, he said.
Another industry that appears tied to competition is schools, Cargill said. Despite a new rate specifically for schools designed to bring their power costs down, he said schools are still seeing lower rates through alternative providers. “Schools really won in this legislation,” he said.
The prime driver behind the legislation, and particularly the cap on choice, was ensuring the major utilities could obtain financing to build needed new power plants. But Cargill argued new projections show new power is not needed in the state, at least in the short term. “We’re just not going to need as much power as they thought,” he said. “We need to make sure the utilities don’t build it anyway.”
What power is built also should, to the extent possible, be from renewable sources, Cargill said. But he said the legislation is structured to make renewable power more expensive than traditional baseload, such as coal.
“With the regulations it’s hard for renewables to compete head to head,” he said. “We’ve got two utilities that want to build plants.”
The coalition will be presenting the Legislature with figures showing where Michigan ranks in developing new alternative energy under the new regulations. “We need to measure it: how much renewable power does Michigan have relative to other states and at what price?” Waymire said.
The two also continued to raise concerns, buoyed by experience, that the plants built by the utilities would end up costing more than initially projected and ratepayers would be forced to cover those overruns.
Waymire also questioned how many businesses would actually be able to exempt themselves from the energy efficiency charges that are part of the package, noting that the bills require verification, within 90 days of the effective date of the legislation, that the business has an energy efficiency plan in place. “The PSC doesn’t have any process in place to get third party verification,” he said.
Waymire said the Public Service Commission may be overall unprepared to deal with the new electric regulations. “How will they deal with the speeded up, accelerated rate process without enough staff?” he said.
One fear the two raised under the new structure is more companies seeking tax exemptions for power costs like Hemlock Semiconductor did recently. “Hemlock Semiconductor is a fairly big company that can get the state’s attention,” Cargill said. “They said the state’s electric prices are not competitive.”
Cargill said he expected the coalition would have enough ammunition by the end of 2009 to come back to the Legislature seeking changes.
This story was provided by Gongwer News Service. To subscribe, click on Gongwer.Com
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