LANSING – Michigan residential customers would see rate increases of as much as 28 percent and commercial and industrial customers as much as 9 percent under the House package that restructures electric regulation and requires energy efficiency and renewables.

That message came from Senate Fiscal Agency Director Gary Olson told the Senate Energy Policy and Public Utilities Committee. But he said fuel costs would drive prices up regardless of what the Legislature does.

The increases Olson projected from the legislation (HB 5524 , HB 5525 , HB 5548 , HB 5549 ) included maximum charges for providing additional renewable energy and energy efficiency programs, as well as rate increase requests pending before the Public Service Commission. They did not include expected increases in fuel prices or potential increases from construction of new power plants, he said.

For residential customers, Olson projected Consumers Energy would increase rates between 23.2 percent and 25.2 percent and Detroit Edison would jump 28 percent over the next five years.

Much of that increase is from the deskewing provisions, which remove a subsidy commercial and industrial customers pay to keep residential rates lower. For Consumers that subsidy is about 9.2 percent and for Edison about 15.2 percent, he said.

The renewable energy provisions in the package would allow rates to increase 4.6 percent and 4.4 percent respectively for the utilities to cover the increased costs of obtaining power from the new sources. And each utility would charge 1.4 percent to operate an energy efficiency program.

Olson also included pending rate cases into his estimate. He said, based on discussions with the Public Service Commission, that Consumers Energy was expected to get between 8 percent and 10 percent, while Edison was seeking 7 percent. He said he did not have information to know how close the PSC would come to those numbers.

For commercial customers, the energy efficiency and renewables charges would be less, .8 percent and .5 percent respectively for both utilities. Assuming the same increases for the pending rate cases, Olson said Consumers’ customers would see rates rise between 4.2 percent and 4.6 percent, while Edison’s customers would see cuts of .3 percent. The deskewing provisions would cut Consumers’ rates by 5.1 percent and Edison’s by 8.6 percent.

Industrial customers would likewise see a cut from Edison and a smaller increase from Consumers, he said. He anticipated renewables charges of 2.7 percent for Consumers and .3 percent for Edison and expected industrial customers would generally be exempt from the energy efficiency charge. With the deskewing cutting rates 3.8 percent for Consumers and 10.8 percent for Edison, the resulting rates would be a 6.9 percent to 8.9 percent increase for Consumers and a 3.5 percent cut for Edison, he said.

But he said fuel costs alone could mean similar increases in energy costs to what residential customers are experience across the customer types. Coal, the primary target fuel for new baseload generation in the state, has seen prices double in the past year and natural gas has increased 45 percent, he said.

“Fuel costs are skyrocketing,” he said. “These fuel costs will eventually be passed on to customers.”

New power plants would also mean higher rates, Olson said. He estimated that a new baseload plant would cost $1.5 billion, which would mean annual rate increases of 7 percent for Consumers and 5 percent for Edison.

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