Why Michigan Has Some of the Midwest’s Highest Electric Rates—And Why Your Bill Isn’t Even Higher

Independent review by the Citizens Research Council largely agrees with state regulators on why Michigan’s electric rates remain high—but says policymakers should focus on lowering the cost per kilowatt-hour rather than average monthly bills.

LANSING – Ask Michigan homeowners whether electricity has become more expensive and most won’t hesitate with the answer.

Absolutely.

In one respect, they’re right. Michigan residents pay some of the highest residential electric rates in the Midwest, averaging 19.3 cents per kilowatt-hour in 2024—well above neighboring Indiana, Ohio, Illinois and Wisconsin.

But here’s the surprise.

Despite those higher rates, the average Michigan household actually pays less each month for electricity than customers in Ohio and Indiana and remains below the national average.

How can both be true?

According to testimony before the Michigan Senate Energy and Environment Committee by Michigan Public Service Commission Chair Dan Scripps, written responses provided by the MPSC to MITechNews, and an independent review by the Citizens Research Council of Michigan, the answer lies in decades of manufacturing decline, changing electricity demand, billions of dollars invested in rebuilding an aging electric grid and the economics of recovering those costs.

While the Citizens Research Council largely agrees with the MPSC’s explanation, it argues policymakers should focus less on average monthly bills and more on lowering the cost of each kilowatt-hour delivered to Michigan customers.

Michigan Electricity By The Numbers

Source: U.S. Energy Information Administration and Michigan Public Service Commission.

High Rates Don’t Always Mean High Bills

At first glance, Michigan’s electricity numbers appear contradictory.

The state’s residential electric rate ranks among the highest in the Midwest. Yet Michigan’s average monthly residential electric bill of $119.31 is lower than Ohio’s $135.16 and Indiana’s $133.06.

The difference comes down to how much electricity Michigan households actually use.

The MPSC says Michigan residents generally consume fewer kilowatt-hours than customers in many other states because they rely less on air conditioning than much of the country and relatively few homes use electricity as their primary source of heat.

“The most direct impact customers feel is the overall monthly bill, not the electricity rate on its own,” the Commission said in written responses to questions from MITechNews.

The Citizens Research Council generally agrees with that explanation.

Research Associate Eric Paul Dennis cited research from Lawrence Berkeley National Laboratory showing that states experiencing electricity load growth generally have lower retail electricity prices because utilities spread their fixed operating costs across more electricity sales.

Michigan’s relatively flat demand has had the opposite effect.

“Load growth at the state level has tended to depress retail electricity prices,” Dennis wrote, noting Michigan’s stagnant electricity demand contributes to higher per-kilowatt-hour rates.

Manufacturing’s Legacy Still Shapes Today’s Electric Rates

Michigan’s electric system was built for a different economy.

In testimony before the Senate committee, Scripps said the state’s transmission and distribution system was designed decades ago to serve a much larger manufacturing base filled with auto plants, steel mills and other energy-intensive industries.

Many of those large industrial customers either closed or dramatically reduced electricity consumption over the past several decades.

The substations, transformers, transmission lines and neighborhood distribution circuits, however, still require maintenance.

Those fixed costs must now be recovered from fewer kilowatt-hours sold than when Michigan manufacturing dominated the state’s economy.

Dennis agreed that the loss of manufacturing demand remains one of the primary reasons Michigan’s electric rates are higher than many neighboring states.

Aging Infrastructure Adds New Costs

Michigan’s manufacturing history explains only part of today’s electric rates.

Utilities across the country are also confronting dramatically higher prices for transformers, electrical steel, utility poles, wire and other equipment needed to rebuild aging infrastructure.

According to Scripps’ legislative testimony, Michigan utilities are replacing transmission and distribution equipment that has reached or exceeded its expected service life while investing billions of dollars to strengthen the electric grid following years of severe storm-related outages.

The Citizens Research Council agrees those investments have become necessary.

Dennis said increased spending on tree trimming, replacing aging equipment, strengthening local distribution systems and improving emergency response procedures has improved reliability, but those investments inevitably increase electric rates because utilities recover those costs through customer bills.

What’s Driving Higher Electric Rates?

According to the Michigan Public Service Commission and the Citizens Research Council, today’s electric rates reflect several major cost drivers:

• Aging transmission and distribution infrastructure

• Rising prices for transformers, electrical steel and utility equipment

• Higher labor and construction costs

• Flat electricity demand following decades of manufacturing decline

• Investments to improve reliability after major storms

• Rising regional capacity market costs

• Compliance with Michigan’s clean-energy and reliability requirements

The Research Council has also proposed creating a state-level infrastructure coordinator to better align utility work with road, sewer and water construction projects.

Dennis said such coordination could allow utilities to bury electric lines while streets are already under construction, reducing costs compared with excavating roads solely for electric projects. While he believes the proposal would have only a modest impact on electric rates, it could improve long-term reliability and reduce costs for taxpayers and utility customers.

Electric bills also include far more than poles and wires.

Dennis noted customer rates reflect generation costs, transmission expenses, local distribution charges and regulatory requirements, including renewable energy standards, electric capacity requirements and energy-efficiency programs. Determining exactly how much each contributes would require a detailed review of individual utility rate cases—something the Citizens Research Council has not undertaken.

Energy Efficiency Helps Hold Down Monthly Bills

The MPSC also credits Michigan’s nationally recognized Energy Waste Reduction programs with helping keep monthly electric bills below what they otherwise would have been.

According to the Commission, energy efficiency investments made in 2024 are expected to save Michigan customers approximately $1.4 billion over time while avoiding the need to build the equivalent of two large fossil-fuel power plants.

The MPSC also said residential electric rates increased 5.3 percent between 2020 and 2025, compared with cumulative inflation of 22.5 percent during the same period.

The Citizens Research Council urges caution in interpreting those savings estimates.

Dennis said the Research Council has not independently evaluated the MPSC’s Energy Waste Reduction analysis and therefore cannot verify the projected customer savings.

Renewable Energy Presents Both Costs And Benefits

Michigan’s transition to cleaner sources of electricity also affects customer rates.

Dennis said renewable energy projects generally require substantial upfront investments in wind farms, solar arrays, battery storage and supporting transmission infrastructure. Those capital costs can place upward pressure on rates in the short term.

Over the longer term, however, renewable energy can reduce operating costs because wind and solar facilities require little or no fuel once they are built.

He noted that Michigan’s climate is generally less favorable for solar and wind generation than many other parts of the country, making the economics somewhat more challenging. However, improving technology, battery storage and additional regional transmission investments should improve those economics over time.

Reliability Has Improved, But Customers Still Expect More

The billions of dollars utilities have invested in Michigan’s electric grid have been aimed not only at replacing aging infrastructure but also at reducing outages.

According to the MPSC, Michigan has made significant improvements in electric reliability since 2019.

The Commission said DTE Electric ranked in the industry’s top quartile nationally this year using the all-weather System Average Interruption Duration Index, while Consumers Energy reported customers experienced fewer outage minutes in 2024 than the previous year.

Those improvements have come through expanded tree trimming, replacement of aging equipment, stronger distribution circuits and faster storm response.

Still, many customers continue to question whether reliability has improved enough to justify continued rate increases, particularly after several years of widespread storm-related outages.

Dennis said utilities and regulators face a continuing challenge of balancing affordability with reliability, noting that additional investments generally improve service but also place upward pressure on customer rates.

Why Rates Are Unlikely To Decline

Consumers hoping electric rates will eventually fall may need to adjust their expectations.

Dennis said the more realistic goal is slowing future rate increases rather than reducing rates outright.

“Historically, electricity rates have tended to increase with the rate of inflation,” he wrote. “What we’re really talking about is mitigating future increases.”

He noted that average residential electric rates in both Michigan and nationally increased approximately 6 percent between December 2024 and December 2025—roughly twice the general inflation rate—reflecting continued increases in equipment costs, infrastructure investment and other utility expenses.

For Michigan policymakers, Dennis believes the challenge is finding ways to modernize the electric grid while limiting the impact on homeowners and businesses.

Looking Ahead

Although Michigan’s electric rates remain among the highest in the Midwest, both the Michigan Public Service Commission and the Citizens Research Council generally agree on the primary reasons why.

Both point to the loss of large manufacturing customers, relatively flat electricity demand, aging infrastructure, higher equipment and labor costs and the ongoing need to strengthen the electric grid against increasingly severe storms.

Where the two organizations differ is in emphasis.

The MPSC argues that average monthly electric bills provide the best measure of affordability because they reflect what customers actually pay.

The Citizens Research Council believes the more meaningful benchmark is the price of each kilowatt-hour delivered to homes and businesses, arguing that Michigan should continue working to narrow the gap with neighboring states over the coming decade.

One issue that could reshape that discussion is the rapid growth of large AI data centers and other energy-intensive industries.

Both the MPSC and the Citizens Research Council believe those facilities could play an important role in slowing future electric rate increases if structured properly and if existing protections continue to prevent residential customers from subsidizing industrial users.

How those projects could affect future electric bills—and why independent researchers believe they may ultimately benefit Michigan ratepayers—will be the subject of a follow-up MITechNews report.

Coming Next on MITechNews

Can AI Data Centers Actually Help Lower Future Electric Rate Increases?

State regulators, DTE Energy, Consumers Energy and the Citizens Research Council all believe the answer may be yes—but only if Michigan maintains strong protections for residential customers. We’ll examine the evidence in our next report.