MPSC Plan Would Reshape How DTE, Consumers Energy Recover Costs As Michigan Electricity Prices Rank Second Highest In Midwest
LANSING — Michigan’s utility regulator wants lawmakers to end the cycle of annual electric rate cases that allows DTE Energy and Consumers Energy to seek new increases soon after previous increases are approved.
The Michigan Public Service Commission on Monday proposed potentially sweeping changes to the state’s utility regulatory system aimed at lowering household energy costs, improving electric reliability and changing financial incentives that can encourage utilities to build expensive new infrastructure.
The proposals come as Michigan residents confront a fact that can be obscured by the state’s relatively modest average monthly electric bills:
Michigan now has the second-highest residential electricity price in the Midwest.
Michigan residential customers paid an average 22.01 cents per kilowatt-hour in May, according to the latest state-by-state figures from the U.S. Energy Information Administration. Only Illinois, at 23.85 cents, was higher among the 12 Midwestern states.
Michigan’s price also was higher than neighboring Wisconsin at 19.74 cents, Ohio at 19.52 cents and Indiana at 18.15 cents. The national residential average was 18.44 cents.
Think of a kilowatt-hour as the electricity equivalent of a gallon of gasoline: it is the unit consumers buy and utilities charge for.
So why aren’t Michigan’s monthly electric bills among the highest in the country?
Michiganders simply use less electricity.
A $119 Bill Could Be $136 At Today’s Electricity Price
In 2024, the average Michigan household used about 618 units of electricity a month. Residential electricity averaged 19.30 cents per unit that year, according to federal energy data.
Multiply the two together and the average household’s electricity cost comes to about $119 a month — almost exactly the $119.31 average monthly Michigan electric bill reported by the federal government.
Michigan’s cooler climate helps explain the relatively low consumption. Residents generally run air conditioning for fewer months than households in hotter parts of the country, while natural gas heats many Michigan homes.
In other words, Michigan’s electric bills look relatively affordable partly because residents don’t use as much electricity — not because electricity itself is cheap.
And the underlying price has continued climbing.
Michigan’s average residential electricity price reached 22.01 cents per unit in May 2026, up from an average 19.30 cents in 2024.
If a household used the same 618 units per month at the May 2026 statewide average price, its electricity cost would be about $136 a month — roughly $17 more a month, or about $200 more a year, than at the 2024 average price.
That is an illustration rather than an actual 2026 average bill. Household electricity use changes by season and year, while individual bills depend on the utility, rate plan and other charges.
But it translates an abstract electricity rate into something consumers can understand: money coming out of the household budget.
DTE, Consumers Keep Coming Back For More
The MPSC recommendations arrive amid mounting frustration over repeated rate increases from Michigan’s two largest electric utilities.
The Commission approved a $242.4 million DTE Electric rate increase in February.
Just two months later, DTE filed another case seeking approximately $474.3 million more annually, which would increase residential rates by an estimated 9.7% if approved as requested.
Consumers Energy customers face a similar cycle.
The MPSC approved a $276.6 million Consumers Energy electric rate increase in March, effective May 1.
Consumers then returned to regulators in June seeking approximately $456 million more annually. If approved in full, the request would increase residential electric rates by another estimated 9.8%.
Michigan Attorney General Dana Nessel has repeatedly criticized the frequency of utility rate filings, describing the process as a “never-ending cycle of rate hikes.”
The MPSC now wants the Legislature to change that system.
MPSC Wants To End Annual Rate Cases
Among the Commission’s biggest recommendations is replacing annual rate cases with multi-year rate cases.
The goal is to prevent utilities from returning with another major increase shortly after a previous increase is approved while giving households and businesses greater predictability over their electricity costs.
“Affordability is always a top priority of the MPSC, and we’re committed to keeping energy costs reasonable even as we tackle the need to invest in modernizing and strengthening the power grid to improve reliability,” MPSC Chair Dan Scripps said.
“We look forward to working with partners in the Legislature, the Whitmer administration and others on ways the state can do more to bring down utility costs.”
The recommendations came in response to a June request from Gov. Gretchen Whitmer asking the MPSC to identify legislative reforms that could improve affordability and grid reliability.
But ending annual rate cases is only part of what the Commission is proposing.
Potentially more significant is changing how Michigan utilities make money.
Change The Incentive To Keep Building
Michigan’s investor-owned utilities earn an authorized return on capital investments such as power plants, substations, poles, wires and other infrastructure.
The MPSC says that traditional regulatory structure can encourage utilities to favor capital expenditures over potentially less expensive alternatives.
Put more simply: utilities can make money by building things.
That can create an incentive to replace or expand infrastructure rather than first pursuing alternatives that might cost customers less.
The Commission wants utility earnings tied more closely to cost efficiency and improved performance for customers, including reliability.
It also wants utilities required to get more out of infrastructure customers have already paid for before regulators approve expensive new construction.
That could include expanded tree trimming, advanced electrical conductors and technologies allowing more electricity to flow through existing transmission lines.
For distribution systems operated by DTE and Consumers Energy, the MPSC wants authority to consider how efficiently existing equipment is being used when utilities ask customers to pay for additional capital investments.
Data Centers Must Pay 100% Of Their Costs
Another recommendation could have enormous implications for Michigan’s rapidly growing data-center industry.
The MPSC wants the Legislature to require large data centers to pay 100% of the costs they impose on Michigan’s electric system, including transmission upgrades.
The principle is straightforward:
Michigan households and existing businesses shouldn’t have to subsidize the electric infrastructure required to power enormous new data centers.
That issue is becoming increasingly important as artificial intelligence drives construction of computing facilities requiring unprecedented amounts of electricity.
Some proposed Michigan data centers could eventually require hundreds — or even more than 1,000 — megawatts of electricity.
For perspective, a 1,000-megawatt data center represents an electric load comparable to the power demand of a sizable city.
Serving facilities of that scale can require new substations, transmission lines, generation and other infrastructure.
The MPSC already has begun establishing protections through individual utility proceedings designed to prevent existing customers from being stuck with costs associated with enormous new loads.
The Commission now wants lawmakers to codify those protections, including requiring data centers to cover transmission upgrades attributable to their electricity demand.
Use The Grid Michigan Already Paid For
The MPSC also wants utilities required to examine less expensive ways of increasing grid capacity before customers are asked to finance major new construction.
The concept is simple:
Get more out of the electric system Michigan customers already paid to build.
Transmission utilities could be required to use grid-enhancing technologies, higher-capacity conductors and existing rights-of-way before constructing entirely new infrastructure.
The Commission also wants long-term utility planning to better compare generation and transmission alternatives and stronger competitive bidding requirements designed to drive down costs.
Customers could also get greater opportunities to participate in distributed-energy programs, including rooftop solar, home batteries and virtual power plants.
Those recommendations take on added significance as Michigan prepares for potentially much greater electricity demand from data centers, electric vehicles, advanced manufacturing and increased electrification.
More Help For Lower-Income Families
Not all of the Commission’s proposals involve restructuring utility regulation.
The MPSC also wants Michigan to expand eligibility for energy assistance programs.
The proposal would align eligibility for low-income utility rates and credits with the Michigan Energy Assistance Program, whose income threshold was increased in 2024 to 60% of state median income — roughly equivalent to 200% of the federal poverty level.
The Commission also recommends expanding eligibility for the annual Home Heating Credit and State Emergency Relief programs.
Another proposal would increase funding to weatherize lower-income homes and create a residential program offering credits for energy-efficiency improvements.
Weatherization can permanently reduce consumption through better insulation, sealing air leaks and other improvements, reducing both household bills and pressure on Michigan’s power system.
Legislature Gets The Next Move
The recommendations released Monday don’t themselves end annual rate cases, change how utilities earn money or guarantee that data centers will pay every dollar of the infrastructure costs they create.
The Legislature has to act.
But controlling utility spending presents another challenge Michigan cannot avoid: much of the electric grid customers depend on is already decades old.
An independent audit commissioned by the MPSC found nearly 40% of DTE’s older 4.8-kilovolt substation transformers were installed between 1924 and 1960, while about 40% of its circuit breakers and reclosers were installed between 1930 and 1960.
Some equipment still operating on Michigan’s electric system therefore dates to before World War II.
That leaves policymakers confronting two potentially conflicting goals: How does Michigan hold down electric rates while replacing aging infrastructure needed to keep the lights on?
Later this week, MITechNews will examine the condition of Michigan’s electric grid, what it could cost to modernize it and what those investments could mean for customer bills and electric reliability.
